Q1 2020 Earnings Call

Hello, and welcome to like and first quarter of 2020 financial results and business update conference call. My name is Catherine then I'll be horrified specialist today, all lines and play some you prevent any background noise and please note. The today fluff cast as being recorded during the ended the presentation will have a question answer session you can ask.

Catherine: Hello, and welcome to Ligand's first quarter of 2020 Financial Results and Business Update conference call. My name is Catherine, and I will be your event specialist today. All lines have been placed on mute to prevent any background noise, and please note that today's webcast is being recorded. At the end of the presentation, we'll have a question and answer session. You can ask text questions or questions over the phone by pressing star one on your phone keypad.

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Patrick O'brien: It is now my pleasure to turn today's program over to Patrick O'Brien, SVP, Investor Relations at Ligand Pharmaceuticals. Patrick, the floor is yours. Thank you, Kev.

That is now my pleasure to turn today's program Oh for depressed Patrick O'bryan SBP Investor Relations at like ends Pharmaceuticals, Patrick the floor is yours.

Thank you Catherine and welcome everyone consistent with recommendations for social distancing over speakers for today's call or in separate locations. So we apologize in advance for any background noise or technology difficulties, so that we might run into.

Patrick O'brien: and welcome everyone. Consistent with recommendations for social distancing, all of our speakers for today's call are in separate locations.

Patrick O'brien: We apologize in advance for any background noise or technological difficulties that we might run into. Speaking for Ligand today will be John Higgins, CEO; Matt Fore, COO; and Matt Korenberg, CFO. We will be using slides to guide our discussion today. We will also use non-GAAP financial measures, and some of our statements will be forward. Additional information concerning risk factors and other matters concerning Ligand can be found in our Ligand Earnings Press Release, slides, and periodic filings with DSM. Ligand undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this meeting.

We can for like you know today will be John <unk>.

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You will be using slides together discussion today will also use non get financial measured in some of our statements will be forward looking.

Additional information concerning risk factors another matters concerning like and can be found in or lie games earnings press release slides and periodic filings with P.L.P.C. login to undertake snow obligation to revise interrupted any statements to reflect events or circumstances. After the data. This conference call I would now like turn the called Overdrawn.

John Higgins: I would now like to turn the call over to John Higgins. Thank you, Patrick, and good afternoon, and thanks for joining our call. These past few months have been an extraordinary period, unlike anything any of us have ever seen in business. The COVID-19 pandemic has created some extreme challenges for companies, yet, all things considered, I am pleased to report that Ligand is doing well. We have a set of slides to go with our presentation today, and I'd like to start with slide four, which is just the backdrop.

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Thank you Patrick and good afternoon, and thanks for joining our call.

These past few months had been an extraordinary curious unlike anything anybody has ever seen in business.

Decoded 19 pandemic has created some extreme challenges for companies yet all things considered I'm police report that like end is doing well.

We have.

Set of slides to go with aren't presentation today, and I'd like to start with that slide forests circuit that crap.

John Higgins: We talk about Ligand and how our innovation is driving value. There are three main focuses of our business, or elements of our business we focus on, technologies that underlie our partnership, our portfolio, and financial growth. We believe we can run a successful business by being dedicated to extraordinary customer service. And in times like these, that could not be more true, and finally, our team. We've got a fantastic team, and I'm so proud of what they are doing.

We talk about like in in How're innovation is driving balance.

The main focus is about business.

Or Albuquerque folks on.

Technologies.

That underlined our partnership to our portfolio and financial grown.

We believe we can run a successful business by being dedicated to extraordinary customer service in times like these.

Cannot be more true.

Finally, our key we've got a fantastic team.

I'm so proud of what they are dealing.

John Higgins: Before going any further, I just want to make a few remarks, given the current environment. Our Ligand team is highly talented, they're deeply committed, and a team that has adapted very well to the current business environment. We're making good progress with our internal programs and advancing new licensing deals, and we recently closed an important new acquisition, Icogen. Notably, we are devoting an intense amount of time and work to support our partners' needs for the scale-up in manufacturing of REMDEF. I'm proud of our team and am very inspired by their efforts at going above and beyond in all they do.

Before going any further I just want to make it through remarks, given the current environment.

Maggie a team is highly talented deeply committed.

In the team that has adapted very well to the current business environment.

Making good progress with our internal programs vehicle licensing deals and we recently closed in important new acquisition like a gym.

Notably, we're devoting an attempt amount of time to work with support our purchase need for the scale up in manufacturing <unk>.

I'm proud of our team and and beer inspired by your effort for going a button beyond in all they do it is great coming our company in an otherwise very difficult period.

John Higgins: It is strengthening our company in an otherwise very difficult period. As for my business commentary, I will frame my remarks in the context of the pandemic. We're in uncertain times, and we're operating in a world defined by restrictions no one planned for or even thought possible.

As for my business commentary I will clean my remarks in context of the pandemic.

Curtain time, and we're operating in the world defined by restrictions no one plant for or even thought possible on balanced we're very pleased with the financial report we have today and believe we are relatively well positioned.

John Higgins: On balance, we are very pleased with the financial report we have today and believe we are relatively well positioned. First, I'll provide a summary of our ongoing operations and work at the company. Then, I will cover our partner programs, our assessment of how our programs and our partners are holding up, and finally, I will briefly touch on our contributions to Remdesivir. I would now like to turn to the business highlights of this past quarter, and we'll take a look at slide five. Our internal operations and ongoing programs have been mostly unaffected by the pandemic.

First I'll provide the summary about our ongoing operations and work at the company.

Then I will cover our partner programs are suffering for Howard programs and our partners are holding up.

Finally, I will briefly touch on her contributions to death of here.

I would now like current for the business highlights this past quarter.

Take a look at five five.

Our internal operations, an ongoing programs are mostly unaffected by the pandemic.

John Higgins: We decided to delay the start of our Phase II Iohexyl clinical study after consulting with our experts and advisors, but we still expect to report data next year. As I mentioned, we advanced internal research programs, we closed an important new acquisition of Icogen, and completed several new licensing agreements with our new R&D partners. On all these fronts, business productivity feels like any regular quarter of operations.

We decided to delay the start of her face heckle clinical study after consulting with our experts in advisors, but we still expect to record data next year.

As I mentioned, we'd be its internal research programs, we close to an important new acquisition of Micatin and completed several new licensing agreements with our new R. and D. partners.

And all the front the business productivity feels like any regular quarter of operation. We are pleased to have kept the momentum moving forward.

John Higgins: We are pleased to have kept the momentum moving forward. Now, when we look to slide six, just some general remarks in light of the current virus. First and foremost, we have a very strong balance sheet and strong cash flow, and we do not foresee any COVID-19-related layoffs. As Matt Korenberg will discuss, our revenue mix will change with an expectation now for lower royalty and contract revenue that is more than offset by higher capital revenue. As he'll discuss, we are raising our 2020 guidance for total revenues and diluted earnings per share.

Now when we look disliked six.

Just in general remarks in light of the current environment.

First and foremost we have a very strong payment sheet and former cash flow.

Not for any cope with 19 related layoff.

Korber, we'll discuss our record mix will change within expectation now for love or one from contract revenue, that's more than offset by higher capstone revenue and still discuss we are raising 2020 guidance Dakota Weber included earnings per share.

We expect to emerge from these challenging times with our long term profitability in equal or better standing.

John Higgins: We expect to emerge from these challenging times with our long-term profitability in equal or better standing. Rich revenues should recover as patients are able to more freely access their important treatments again. And while we see delays and postponements to some of our contract payments, we generally do not see them as lost payments. At this time, it seems more the case that they are simply pushed out a couple of quarters. Now, we'll turn to slide seven.

Revenues should recover its patients are able to more freely accessible important treatments again.

And while we see the label postpone that some of our contract payments generally do not see them as los payment.

Time, it seems more the case, there simply pushed out a couple of porters.

Now what kind of flight seven the fact that we believe why can't put American as strong.

Extort business model, we're committed to innovation and disturbing the industry our customers are farmer in biotech companies in more than ever the world is learning the value in the pre provide.

John Higgins: The fact that we believe ligand can emerge in a strong position speaks to our business model. We're committed to innovation and to serving the industry. Our customers are pharma and biotech. And more than ever, the world is learning the value this industry provides. Medical research is not a luxury; it's a necessity for modern civilization.

Medical research is not a luxury it's a necessity for a modern civilization like m. people important part.

We help assist the bottle research or partners are pursuing ticket answer and make drugs possible.

When we look to wash flight eight this is a diagram.

John Higgins: Ligand is an important part. We help assist the vital research our partners are pursuing to get answers and make drugs possible. When we look to slide 8, this is a diagram we introduced a couple of months ago. It's a simple chart; we call it a bullseye diagram, but it shows on our technology platform how our partner programs, our shots on goal are arrayed. Each white dot represents a fully funded program by one of our partners. As you can see in the app, the antibodies segment of our business is the largest segment. We have a very substantial portfolio of partners in our capsule unit, and we have several other technologies that have come through acquisitions in the last year or two that are also driving partners. Obviously, the outer ring, that defines the pre-clinical segment.

Couple of months ago.

Oh, what a both I diagram.

Why aren't technology platform.

How are partnered programs are shots on goal or a raid each white dot represents a fully funded program by one of our partners.

Yeah, the antibody segment of our business in the market segment.

We have a very substantial portfolio partners in our Capitol you Mutt and we have several other technologies that have come through acquisition for the last year, We've got all for dragging partners.

Obviously, the outer ring that defines the Greek clinical segment.

About half of our program for early stage.

A lot of surprise.

Discovery programmed or referred concepts that are being tested early stages, but he can move Cork. The center, we have a knife migration of assets that are but circulating a defeat 123 and now the largest <unk>.

30 to Mark the programs in our history.

John Higgins: About half of our programs are early stage, that's not a surprise; these are discovery programs or research concepts that are being tested in early stages. But as you move towards the center, we have a nice migration of assets that are matriculating into phase 1, phase 2, phase 3, and now the largest concentration of NDA-stage or marketed programs in our history. We're excited about this diagram and believe it illustrates the breadth and the substance of our portfolio. Now, as we look to slide 9, I would now like to turn to some specific comments about our pipeline. Ligand is focusing on investing in research and technology to support our programs. And again, we have over 125 partners who are funding over 200 fully funded programs.

We're excited about this diagram unbelievable.

Illustrate the breath and the subsequent of our portfolio.

When we look dislike nine.

Now like the purpose some specific comments about our pipeline.

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We have over 120 Clyde partners core funding over 200 fully funded programs now when the pandemic hit we knew it could possibly have a major impact on our partners. So we reached out to every one of them to assess the impact on their business and more specifically the impact on our partner programs to see if we could offer any assistance.

And the underground a little bit better if there would be delays or an impact to our programs now we would need to respond from almost every company and we are very pleased with our findings.

Thought as we have a range of partners.

Public and private large and small.

Investing could follow with no that good portfolio. It it largely reflects the industry.

You can see here, we have about 40, 43% or more.

One of the company.

A third or start a private.

And then about 15% to 18% or art format or biotech the ownership about half or private enhance our public.

John Higgins: Now, when the pandemic hit, we knew it could possibly have a major impact on our partners, so we reached out to every one of them to assess the impact on their business, and more specifically, the impact on our partner programs, to see if we could offer any assistance and to understand a little bit better if there would be delays or any impact on our programs. Now, we have received a response from almost every company, and we are very pleased with our findings. For starters, we have a range of partners, public and private, large and small. Investors who follow us know that this portfolio largely reflects the... As you can see here, we have about 40-43% are small biotech pharma companies, about a third are start-up private companies, and then about 15-18% are large pharma or biotech. The ownership, about half are private and half are public.

When we.

When we look.

Slide 10, and 11 difference, where we can get into a little more of the substance of refining.

We found that overall.

Impact appears to be minimal reported out we have to buy impact on employees is is going to be down sizing or operating staff closures laboratories or facilities impact business and all you have said no impact in another quarter said a minimal impact.

We were very pleased to hear that because we know when certain industries, even certain companies within our industry.

Updating a lot though.

We're thing.

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Have what they're reading today is a significant impact.

But in conversation, we're here that that impact may recall itself over the next couple of quarter.

The capital.

Quarters, our very strong the Republic companies, the well capitalised, yeah, <unk> or a clear a line of sight on Capitol about one quarter after that they'll have the company into the next 12 to 18 months.

Recovered and go through this we can get their access to capital will retail.

Right 11, just a final comment about this survey.

John Higgins: When we look to slides 10 and 11, this is where we can get into a little more of the substance of our findings. We found that overall, the impact appears to be minimal, reported out.

It is our.

Into the industry and we think it it's helpful not only for us in a company to plant, but also to our investors in terms of understanding how large portfolio might be represented dislike 11 shows.

John Higgins: We asked about the impact on employees if it was going to be a downsizing or an operating staff reduction, or if it was going to be a closure of the laboratories or facilities impact on business, and fully a half said no impact, and another quarter said minimal impact. We were very pleased to hear that because we know in certain industries, even certain companies within our industry, there has been a devastating loss of continuity of business. We're seeing 5% to 10% have what they are rating today as a significant impact. But in conversation, we're hearing that that impact may resolve itself over the next couple of quarters. In terms of capital position, nearly three quarters are very strong. They're public companies, they're well-capitalized, they have a strong financial reserve or a clear line of sight on capital. About one quarter estimated that they'll have a need to raise funds in the next 12 to 18 months.

The impact on development stage programs and again this is going beyond the operations and impact unemployed structure. This is specifically our current again half of the companies have reported no impact unlikely and funded programs at all in another 20% have only a small impact.

As we look at the small slices of this pie there's a few flights.

In the 5% range has got to make ring, either a suspension or a significant impact obviously, we're monitoring go but in the overall portfolio, our some foods that at most 5% to 15%.

Of our programs will have a material impact that could delay to programming up by a couple of quarters on balance all things considered.

Please.

Climbing.

Now, we'll just turned to slide 12, as a backdrop, we have a lot more to discuss in this call, but I would like to offer weren't about our cope with 19 related programs first as investors know when you're not in any viable company.

John Higgins: As the economy recovers and moves through this, we think that their access to capital will improve. On slide 11, just a final comment about this survey, and again, it is our window into the industry, and we think it's helpful, not only for us as a company to plan, but also for our investors in terms of understanding how a large portfolio might be represented. This slide 11 shows the impact on development stage programs. And again, this is going beyond the operations and impact on employee structure. This is specifically our programs. As we look at the small slices of this pie, there are a few slices in the 5% range that are measuring either a suspension or a significant impact. Obviously, we're monitoring those, but in the overall portfolio, our sense is that at most 5 to 15% of our programs will have a material impact that could delay the programming by a couple of quarters. On balance, all things considered, we are very pleased and relieved by these results. Now, we'll just turn to slide 12 as a backdrop.

But given our drug enabling capsule technology.

Now involved in one of the most important any by roles in developed.

It's our focus on research and innovation that provides cutting edge technology, either to help discover drugs or to make drugs possible.

The fact, we're deeply involved with programs targeting covert 19 is not a surprise companies are coming to us to make their drugs possible. We're living in what is arguably the biggest health crisis in the past century lie again can help.

So what follows that companies will come to us for solutions.

Over the past two decades, we've been involved in some of the most important medicine on the planet correct precursor drugs that Bruce platelets Super potent antibiotics and <unk> and.

And now we're providing technology to kill yet for their important new anti viral per coby 19.

Some of the assets how does this come to be.

This is like again, we're there to help make drugs possible or to make them work better.

Goldie partners like Juliet to come to like it because we have the capacity.

Consistency.

Quality.

And F.D.A. certified safety record for an equipment that is required to formulate chemical make them a viable drug.

No. Other company provides captisol, we stand out among all other cyclodextrin suppliers.

John Higgins: We have a lot more to discuss on this call, but I would like to offer a word about our COVID-19 related program. First, as investors know, we are not an antiviral company, but given our drug-enabling capsule technology... we are now involved in one of the most important antivirals in development. It's our focus on research and innovation that provides cutting-edge technology either to help discover drugs or to Make Drugs Possible. The fact that we're deeply involved with programs targeting COVID-19 is not a surprise. Companies are coming to us to make their drugs possible. We're living in what is arguably the biggest health crisis of the past century.

You see without Captisol soundtracks would not be possible. They are not soluble insoluble not dissolve in water for subsequent used by the human body put into water without dissolving the active ingredients result in a cloudy mixture. This is the case with her death of your as it is with many of our partners drugs, but capital addresses that it elegantly.

Solubilized says the drug into a crystal clear solution, it becomes a compound or ready to be tested for human years.

Not for we'll discuss the more the chemistry insert the <unk>.

As background Gilliatt reported data last week, but out of clinical trials two things were learn want that regressive your appears to short time to recovery.

Two when treating patients with severe disease, a five day treatment courses potentially as effective as 10 days.

John Higgins: Ligand can help. And so it follows that companies will come to us for solutions. Over the past two decades, we've been involved in some of the most important medicines on the planet. Drugs to treat cancer, drugs to boost platelets, super potent antibiotics, and antifungals. And now we're providing technology to Gilead for their important new antiviral for COVID-19. Some have asked us, how did this come to be.

The announcement of top aren't <unk> you have to get very quickly issued an emergency use authorization for red disappear as the first new treatment for Kobe nineties.

Gilliatt is now ramping up production, we are closely aligned with them and we will make it a top priority to ensure we can provide everything they need to meet their production requirements.

Corporate we'll discuss we expect capsule reckless to be higher in 2020 in our original outlook given gilliatt stated production goals.

John Higgins: And the answer is simple; this is Ligand. We're there to help make drugs possible or to make them work better. Global partners like Gilead come to Ligand because we have the capacity. The Consistency, Unknown Speaker 05, an FDA-certified safety record for an recipient that is required to formulate chemicals to make them a viable drug. No other company provides captosol.

And if the ongoing trials conclude to support you sort of <unk> as a treatment.

And gilliatt achieves the production goals they have publicly stated for 2021.

And we expect in order to meet that continued production ramp that like in will supply additional type of Salt Lake 2020, and also into 2021.

John Higgins: We stand out among all other cyclodextrin suppliers because without capsosol, some drugs would not be possible. They are not soluble. They are insoluble. They do not dissolve in water for subsequent use by the human body. When put into water without dissolving, the active ingredients result in a cloudy mixture.

This would be amount above the levels already included in or out work today, and we will require political definitely capital equipment.

Applied to allow us to meet the increased demand.

We will follow gilliatt lead.

Ready to supply more captisol as they need it we will monitor the situation and seek more clarity uncertainty on production requirements as time moves on.

We moved to fly 13, with a quick comment when acknowledge our board of directors.

Hey, we recently added boy he.

He can director.

John Higgins: This is the case with rindesivir, as it is with many of our partner's drugs. But capsosol addresses that. It elegantly solubilizes the drug into a crystal clear solution. It becomes a compound ready to be tested for human use.

They have outstanding site.

Working.

Closely with management to help drive.

We are former leader stuff some of the world's largest pharmaceutical companies on our board we have antibody expert.

Business operators, either people, who understand the challenges and risk.

And I've been Gary helpful and supportive as we planned and managed through the current environment.

John Higgins: Matt Foer will discuss some more of the chemistry and share some photos. As background, Gilead reported data last week that out of two clinical trials, two things were learned. One, that remdesivir appears to shorten time to recovery. And two, when treating patients with severe disease, a five-day treatment course is potentially as effective as ten days.

There's a last comma close by so we know there was a boss humanitarian need due to the current virus and we are humbled to be able to contribute to that we are redirecting or people are capital and other resources to rise to the challenge.

Yeah, it's working <unk>, given the world a beacon the Pope.

Against teams there to supporting them.

John Higgins: Following the announcement of top-line trial results, the FDA very quickly issued an emergency use authorization for remdesivir as the first new treatment, for COVID-19. The Gilead is now ramping up production. We are closely aligned with them and we will make it a top priority to ensure we can provide everything they need to meet their production requirements. As Matt Korenberg will discuss, we expect capsule revenues to be higher in 2020 than our original outlook, given Gilead's stated production goals, and if the ongoing trials continue to support use of the remdesivir as a treatment, and Gilead achieves the production goals they have publicly stated for 2021, then we expect in order to meet that continued production ramp, that Ligand will supply additional Tafasol in late 2020 and also into 2021.

Despite the pandemic, we have reasonable clarity it toward the future by sticking to innovation staying focused on excellent execution and partner support and but <unk> by relying on people. We believe we have a well balanced business and our position to meet our partners need and continue to build value for shareholders.

<unk> to comment about our financial performance.

Thanks.

The first quarter of 2020.

Strong financial performance.

Material sales.

For the quarter.

33.2 million with significant growth of our continuing royalties.

Sizable increasing capsule material sales.

Similar to our queue for report three months ago.

Nicely 23%.

Q1 2020.

19, excluding promacta.

89 cents 40 cents higher than 212019, excluding promacta.

In addition, we generated about 17 million and casual from operations.

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Casual generation exceeded expectations.

In addition to the strong.

John Higgins: This would be amounts above the levels already included in our outlook today, and we will require significant investments in capital equipment and the supply chain to allow us to meet the increased demand. We will follow Gilead's lead and stand ready to supply more capsosol as they need it. We will monitor the situation and seek more clarity and certainty on production requirements as time moves on. We'll move to slide 13.

The first quarter.

She to close one acquisition into Opportunistically repurchase stock.

Yeah.

On a convertible.

Over 234 million of.

Bonds for approximately 203 million.

Thereby saving about 31 million of cash.

I have been required.

In may of 2023.

John Higgins: As a quick comment, I want to acknowledge our board of directors. It's a diverse team. We recently added Sarah Boyce as our A to E team director. This team has outstanding scientific and business experience, working closely with management to help drive our business. We have former leaders of some of the world's largest pharmaceutical companies on our board. We have antibody experts.

On the common stock.

We spent.

Share repurchase.

Additional.

8000 shares.

We currently have about 253 million remaining on the 500 million dollar share repurchase authorization that we have in place.

16 million shares outstanding.

John Higgins: We have strong business operators. These are people who understand the challenges and risks this industry faces and have been very helpful and supportive as we plan and manage in the current environment. As a last comment, I will close by saying we know there is a vast humanitarian need due to the coronavirus, and we are humbled to be able to contribute to that. We are redirecting our people, our capital, and other resources to rise to the challenge. Gilead's work on remdesivir has given the world a beacon of hope, and Ligand's team is there too, supporting it. Despite the pandemic, we have reasonable clarity about our future. By sticking to innovation, staying focused on excellent execution and partner support, and by relying on our people, we believe we have a well-balanced business and are positioned to meet our partners' needs and continue to build value for shareholders. With that, I'll turn it over to Matt Korenberg to comment on our financial performance.

Stock prices about 16, and a half to 17 million.

Outstanding.

We finished.

A million dollars of cash cash.

From investments.

To the capital structure and capital return.

Focused on identifying acquisitions across several types of target companies.

Q1 performance on revenue.

For the first quarter of 2020 or 33.2 million included 6.6.

21.1 million of Captisol sales 3.4 million of service revenue.

Contract revenue.

Spectrum.

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Drove the 23%.

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Sales increase was driven by sales.

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New service wine.

On the next slide performs in line with our expectations for the corridor.

Matthew E. Korenberg: Thanks, John. The first quarter of 2020 was a fantastic quarter for Ligand, with strong financial performance driven by our Capsosol material sales. For the quarter, total revenues were $33.2 million, with significant growth in our continuing royalties and a sizable increase in capital expenditures. Similar to our Q4 report three months ago, royalties again grew nicely, up 23% year-over-year in Q1 2020 versus Q1 2019 excluding ProMAC. Adjusted EPS was $0.89, or $0.40 higher than Q1 2019, excluding per match.

Lastly, the contract revenue line.

20 included the typical.

Fees and smaller milestones.

2019 included significant milestones.

Oh.

Several clinical trial starts.

Just touched on.

17.

Reporting.

Instead of three.

Putting out a milestone a license fee line into two buckets service revenue represented in the burnt orange color on the grass.

Contract revenue represented in a brighter orange color.

Yeah.

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It was important to share with investors a substantial portion of the.

Matthew E. Korenberg: In addition, we generated about $17 million in cash flow from operations in Q120. Our revenue and cash flow generation exceeded our expectations. In addition to the strong business performance in the first quarter, we used our balance sheet to close one acquisition and to opportunistically repurchase both stock and convertible bonds. On the convertible front, we retired over $234 million of face value bonds for approximately $203 million, thereby saving about $31 million of cash that we otherwise would have been required to repay towards the principal amount of the notes in May of 2023. On the common stock side, in Q1, we spent $73 million on share repurchases, retiring an additional 878,000 shares.

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Predictable line.

Service revenue.

As you can see from Mcgrath.

Over the past several years with her acquisitions of Crystal Bio science for now.

Well include the majority of the near term revenue related to these business lines in this line.

What's a program is fully turned back over to our partners.

No.

Any future revenue generated will fall into the contract.

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Historically, we've discussed her portfolio of more than 3 billion potential milestones.

And investors that not all of the revenue.

Not all of that.

Realized.

Very challenging in most but not all programs fill in the clinic.

However, even accounting for anticipated failures, we expected the new milestone.

The result in an average of 20 to 40 million per year.

Term.

Seen in that line over the longer term.

Matthew E. Korenberg: We currently have about $253 million remaining on the $500 million share repurchase authorization that we have in place. As we'll disclose in the 10-Q when it is filed, we now have about 16 million shares outstanding, and at recent stock prices, about 16.5 to 17 million fully diluted shares. We finish the quarter with $739 million of cash, cash equivalents, and short-term investments. In addition to the capital structure and capital return, we remain focused on identifying acquisitions across several types of targets.

Matures.

Milestones are realized.

Well not always be in this range some years could be higher.

Yeah.

Fact.

So the next slide you'll see that we're now expecting below 20 million and 2020.

19 impact.

No quickly oh quickly dig deeper into each.

Describing our most recent previous guidance.

Packed we're estimating from covert 19.

Estimated contribution to guides.

Starting with the.

Original guides for 2020 was 38 million.

After seeing reports from our partners.

Matthew E. Korenberg: Digging now a little deeper into the Q1 performance on revenue, total revenues for the first quarter of 2020 were $33.2 million, and included $6.6 million of royalty revenue, $21.1 million of capital sales, $3.4 million of service revenue, and $2.1 million of contract revenue. With respect to royalties, Kyprolis and Evomella drove the 23% year-over-year growth that I mentioned. A capital sales increase was driven by sales principally related to Remdesivir, and our new service line, which I'll discuss on the next slide, performed in line with our expectations for the quarter. Lastly, the contract revenue line in Q1 2020 included the typical flow of annual license fees and smaller milestones, while Q1 2019 included significant milestones related to an improvement in financing and several clinical trial starts.

About 15% lower royalty, we're 32 million.

We estimate the largest negative impact.

<unk>.

Teen will be our contract revenue.

Started the year, we estimated about 30 million for this line item.

18 million or down 40% partner clinical progress.

[noise] service revenue remains largely unchanged I'm going into the year, we saw about 25 million, including the.

Of service revenue across the tree business lines.

After.

We still expect about the same.

These contracts with our customers tend to be longer in nature and more predictable despite stayed home.

Oliver facilities are labs are able to stay open.

Basis to allow important scientific work to continue.

Lastly, Ah.

Original estimate for the year was 35 million.

65 million of capsule.

For the year as John already mentioned in his mat for will give some more.

Matthew E. Korenberg: As I just touched on on slide, now looking at slide 17, we're now reporting our revenue in four line items instead of three. We're now splitting out the milestone and license fee line into two buckets, service revenue represented in the burnt orange color on the graph, and contract revenue represented in the brighter orange color. Upon the consummation of our Icogen Acquisition, we felt it was important to share with investors the substantial portion of the old milestone line that comprises this very visible, predictable line item we are now calling Service Rip.

Our ultimate capsule revenue for the year will be highly dependent on the ability of.

And the rest of the supply chain to make progress on the estimates for production.

For courses of treatment produces here.

I'm turning this flight 19.

I just went through all translate to 140 million of total revenue for 2020 up from our previous kinds of 133 million.

On the expense side, we expect an overall corporate gross margin of approximately 85% to 90%.

For R. and D., we now expect 50 to 54 million of total expenses for the year excluding stock.

Charges, we expected.

Matthew E. Korenberg: As you can see from the graph, the line has grown significantly over the past several years with our acquisitions of Crystal Bioscience, Pernalis, and now Ica, and will include the majority of the near-term revenue related to these business lines in this slide. Once the program is fully turned back over to our partners, and Ligand has no further involvement, any future revenue generated will fall into the contract revenue line and eventually the royalty. Historically, we've discussed our portfolio of more than $3 billion in potential milestones. We always remind investors that not all of the revenue, not all of that revenue will be realized as drug development is very challenging in most, but not all programs fail in the clinic. However, even accounting for anticipated failures, we expect that the new milestone and license fee line will result in an average of $20 to $40 million per year in the near term, with growth seen in that line over the longer term as the portfolio matures and later stage milestones are realized. However, it will not always be in this range. Some years could be higher, and some could be lower.

Expenses will be 33 to 35 million.

Oh for G.N.A., we expect total expenses of 37 to 39 million.

Noncash charges and stock up we expect G.N.A. cash expenses to be approximately 21 to 23 million.

Together, we expect cash operating expenses for 2020 of 55.

Into 58 million.

Cash expense estimates factor in about 2 million of cash expense savings we've identified as a result of coping 19.

Related to interesting come in other income we continue to maintain our cash and highly liquid short term investments.

Interest rates continue to fall.

Environment, given the lower expected yield any reduction or a cash balance from retiring some debt, which is offset by the interest expense saved.

Cash it.

Income of about 13 to 15 million down from our original guidance of 17 to 19 million and 2020.

These revenue and expensive components, all translate to full year 2020 adjusted earnings per diluted share of approximately $3 in 65 cents, which is up 45 per cent.

Matthew E. Korenberg: In fact, as we turn to guidance on the next slide, you'll see that we're now expecting below $20 million in 2020 due to COVID-19. Now, I'll quickly dig deeper into each of the four revenue line items describing our most recent previous guidance, the impact we're estimating from COVID-19, and our new estimated contribution to Guy's. Starting with the royalty line, our original guidance for 2020 was $38 million. After seeing Q1 reports from our partners, we now expect about 15% lower royalty, or $32 million. We estimate the largest negative impact to ligand revenue from COVID-19 will be our contract revenue. At the start of the year, we estimated about $30 million for this line item, and we now estimate approximately $18 million, or down 40% as partner clinical progress is delayed. Service revenue has largely remained unchanged.

19 number of $2.52. If you just for the Promacta sale and then also represents an increase my previous guides for $3 and 62 sets.

Oh My final slide before I turn the.

Oh touch quickly on Capitol deployed in front.

Scene I will continue to evaluate opportunities.

We have been will continue to evaluate opportunities to augment our operational financial results by evaluating ways to return capital to our stock holders.

And strategic transactions.

Focused on identifying acquisitions across four areas of investment.

Shopping list includes some larger names.

Technology platforms as well as revenue in partner programs.

Also are evaluating a number of technology tuck instead.

Platforms, and several product financing ideas that could contribute to the story in the near term.

739 million of trend cash, we believe we have sufficient funds to execute on our strategy.

Finally, I just direct listeners to review.

Press release, it shoot earlier today and available on our website for reconciliation adjusted financials to gap.

Matthew E. Korenberg: Going into the year, we saw about $25 million, including the IQIGEN acquisition, of service revenue across the three business lines. After Q1, well, we still expect about the same. These contracts with our customers tend to be longer in nature and more predictable. Despite stay-at-home orders impacting all of our facilities, our labs are able to stay open on a modified basis to allow important scientific work to continue. Lastly, on captus also

Adams.

With that.

For for some comments on our portfolio in pipeline.

Thanks, Matt So I'll start with a slide 22, and slide 22 shows a a traditional snapshot of a portion of our our partner pipeline that is John already described just diverse and growing.

It's our technologies that form the foundation of the portfolio.

Matthew E. Korenberg: Our original estimate for the year was $35 million. We're now including $65 million of capital sales in our guidance for. As John already mentioned and as Matt Fore will give some more detail on, our ultimate capsule revenue for the year will be highly dependent on the ability of Gilead and the rest of the supply chain to make progress on the estimates for production that Gilead has given for courses of treatment produced. I'm turning to slide 19.

And this afternoon I'll review some of our technology, specifically highlighting different Alice design platform or V.D.P. and.

Our Omniab platform and then our Captisol technology.

Starting with V.D.P. and.

Our team in the U.K. joint just 18 months ago, and we've been very pleased with their progress and their productivity.

We recently entered a license deal with a start up called Neurotech therapeutics for E.V.D.P. molecule called V. 158866.

Matthew E. Korenberg: These revenue components that I just went through all translate to $140 million of total revenue for 2020, up from our previous guidance of $133 million. On the expense side, we expect an overall corporate gross margin of approximately 85 to 90 percent. For R&D, we now expect $50 to $54 million in total expenses for the year. Excluding stock compensation and other non-cash charges, we expect that R&D cash expenses will be $33 to $35 million. For G&A, we expect total expenses of $37 to $39 million, and excluding non-cash charges and stock comp, we expect G&A cash expenses to be approximately $21 to $23 million. Together, we expect cash operating expenses for 2020 of $55 million to $58 million. And these cash expense estimates factor in about $2 million of cash expense savings we've identified as a result of COVID. As regards interest income and other income, we continue to maintain our cash and highly liquid short-term investments. Our realized interest rates continue to fall with the overall market environment.

866 is a novel oral selecting fatty acid m. at hydro or far inhibitor.

Plans to develop the drug for post traumatic stress disorder and other C.N.S. diseases.

We received <unk> license fee.

Legible to receive a financing related milestone development and commercialization milestones of more than $240 million and cheered royalties on sales ranging from 6% to eight per cent.

At the end of Q1, Neurotech announced it had secured approximately 27 million and capital commitment from the gym group, which we think positions in well for entering your face to trial in P.T.S.D. within the next few quarters.

<unk> also currently pursuing a public listing in Europe.

It's also been a busy time as we've welcomed an integrated our new colleagues from Mike again, following the closing of that acquisition in early April.

We're pleased to say that the integration to bike agenda has gone extremely well and that's a testament to both to lie again and I could just teams.

Well.

Fantastic new colleagues with unique expertise along with great technology and high value partnerships with rose to cystic fibrosis Foundation, and a number of others and we expect that the I. and channel technologies.

Helped drive new deal, making in the future.

Slide 23 gives a summary of how we see these technologies fitting together.

The culture and the team it I couldn't fit seamlessly into.

The Ryan Channel technologies, Mary perfectly with for analysis expertise in fragment based drug discovery as well as with downstream elements of Omniab when partners are pursuing high value and complex I am channel targets.

Matthew E. Korenberg: Given the lower expected yield and the reduction in our cash balance from retiring some debt, which is offset by the interest expense saved, we expect other cash income of about $13 to $15 million, down from our original guidance of $17 to $19 million. These revenue and expense components all translate to full year 2020 adjusted earnings per diluted share of approximately $3.65, which is up 45% from the 2019 number of $2.52 if you adjust for the ProMACTA sale and also represents an increase from our previous guidance of $3.65. On my final slide, before I turn the call over to Matt, I'll touch quickly on the capital deployment front. As we've seen, we'll continue to evaluate opportunities, as we have been, to augment our operational financial results by evaluating ways to return capital to our stockholders and other strategic transactions.

Moving now onto slide 24, Omniab continues to be the best in class of cutting edge antibody discovery tools.

Our team of scientists continues to further innovate.

Platforms, and R.M. and 18 continues to make omniab, even more valuable through Bolton acquisitions.

As a shown on slide 24, there are now more than 80 omniab related shots on goal in life against pipeline in various stages of discovery or development.

The number of active or recently completed in clinical trials include and Omniab derived antibody reached 43 recently with new clinical trial starts in Q1 that included two new phase one or phase one b. trials three new phase two trials and two new phase three trials.

We also saw a new I.M.D.'s file as well as Ami ABS first regulatory filing for commercial approval.

Partners understand Omniab as best in class status and the value of collaborating with our science team as they work to discover novel antibodies.

I will note that as John generally mentioned, we've been working with global multinational partner on a program for antibodies derived from our omni chicken platform for treating covert 19.

Matthew E. Korenberg: We remain focused on identifying acquisitions across four areas of investment. Our shopping list includes some larger names that add major technology platforms, as well as revenue and partner programs. We also are evaluating a number of technology tuck-ins that augment our leading platforms and several product financing ideas that can contribute to the story in the near term. With $739 million of current cash, we believe we have sufficient funds to execute on our strategy. Finally, I'd just direct listeners to review our Q1 earnings press release issued earlier today and available on our website for reconciliation of our adjusted financials to GAAP-reported items. With that, I'll turn the call over to Matt Foer for some comments on our portfolio and pipeline.

We obviously highly prioritize that programs activities and Q1 and the works very early but it's progressing very well.

And now I'll update on Captisol.

Before discussing captisol his role in support of Gilly ads drug <unk> I Wanna call attention to the upcoming virtual ASKO meeting and mentioned that we are expecting to see data on many life partner programs at this year's meeting specifically three captisol programs that will have clinical data add ASKO, including <unk> captisol.

Formulation.

Innovative bite molecule and G. 330.

<unk>.

The latter program will have new date in patients with higher risk Milo just plastic syndromes chronic milo motto, siddiq leukemia, or low blast acute myeloid Janus leukemia.

We look forward to seeing these and other presentations of data from life partners.

And now more generally about Captisol, one slide 25.

We've seen steady growth and kept.

Matt Foer: Thanks, Matt. So I'll start with slide 22, and slide 22 shows a traditional snapshot of a portion of our partnered pipeline that, as John already described, is diverse and growing. It's our technologies that form the foundation of the portfolio at Ligand, and this afternoon, I'll review some of our technologies, specifically highlighting Vernalis Design, our Omniab platform, and then our CaptiFill technology. Starting with VDP and Icogen, our team in the U.K. joined Ligand just 18 months ago, and we've been very pleased with their progress and their productivity. We recently entered a license deal with a startup called Neurotech Therapeutics for a VDP molecule called V158866. 866 is a novel oral selective fatty acid amide hydrolase, or FAW, inhibitor, and Neurotech plans to develop the drug for post-traumatic stress disorder and other CNS disorders.

And as Matt reviewed we project significant growth in 2020.

We've invested in our drug Master files in the U.S., Canada, Japan, and China, and those investments have been important to our partners.

Slide 26 summarizes Captisol key differentiating features which include our global reach our know how our intellectual property to drop master file.

<unk> and our manufacturing quality and scale.

Partners also appreciate the Captisol now has a five year shelf life.

[noise] moving to slide 27, I note that we've invested significantly in supply chain integrity for kept us all over the years qualifying to manufacturing plants and distributing out of five facility strategically located around the world.

We've invested in the supply chain in a comprehensive way going all the way back to our source materials, including keeping safety stock of raw materials qualifying multiple vendors with whom we have had excellent and longstanding relationships.

That approach to our supply chain position to us to be able to respond to very quickly to large orders in the first quarter and to further ramp up production, which has an ongoing process.

Matt Foer: We received an upfront license fee and are eligible to receive a financing-related milestone, development and commercialization milestones of more than $240 million, and tiered royalties on sales ranging from 6% to 8%. At the end of Q1, Neurotech announced that it secured approximately $27 million in capital commitment from the GEM Group, which we think positions them well for entering a Phase 2 trial in PTSD within the next few quarters. Neurotech is also currently pursuing a public listing in Europe.

Captisol is a highly complex technology yet it is a proven technology platform that is used any number of life saving medicines that are helping patients globally.

Capsules generally used at concentrations far in excess of the active ingredient as is highlighted on slide 28.

And it's.

Described in our partners product labels because of that we've always taken our role as a high quality and reliable partnering supplier very seriously.

It's also part of why supply chain integrity quality and reproducibility backed up with safety in toxicology date, and our drug Master files have been him will continue to be very important to us into our partners.

Matt Foer: It's also been a busy time as we've welcomed and integrated our new colleagues from Icogen following the closing of that acquisition in early April. We're pleased to say that the integration of ICogen has gone extremely well, and that's a testament to both the Ligand and Icogen teams. With Igogen, we added some fantastic new colleagues with unique expertise, along with great technology and high-value partnerships with Roche, the Cystic Fibrosis Foundation, and a number of others. And we expect that the ion channel technologies of Igogen could help drive new dealmaking in the future.

And you will see on the line right hand side of slide 28, the range of Captisol concentration ratios used for some of the commercial products that use captisol.

Last week with gilliatt, receiving an emergency use authorization for rent.

Formulation ratios were disclosed 30 to one for a lie awful ice powder form of their drugs and 60 to one for an injection solution form.

So there's a range of use and there's also obviously a range of doses that had been evaluated clinically.

Matt Foer: Slide 23 gives a summary of how we see these technologies fitting together. The culture and the team at Igogen fit seamlessly into Ligand, and their ion channel technologies marry perfectly with Vernalis' expertise in fragment-based drug discovery, as well as with downstream elements of Omniab when partners are pursuing high-value and complex ion channel targets. Moving now on to slide 24, Omniab continues to be the best-in-class of cutting-edge antibody discovery tools. Our team of scientists continues to further innovate our various platforms, and our M&A team continues to make Omniab even more valuable through bolt-on acquisitions. As shown on slide 24, there are now more than 80 OMNIAB-related shots on goal in Ligand's pipeline in various stages of discovery or development. The number of active or recently completed clinical trials that include an OMNIAB-derived antibody reached 43 recently, with new clinical trial starts in Q1 that included two new phase 1 or phase 1B trials, three new phase 2 trials, and two new phase 3 trials.

We can't go into finer detail than what's on the slide are already in the public domain. So it's not to disclose confidential part for partner information, but I will say that the potential scale of captisol needed for Rendez severe is larger than for any other current commercial or clinical product that's formulated with captisol.

This is triggering capital investment related to highly specialized and custom equipment on our part, but we're well positioned to make those investments throughout the year.

Are captisol partnership with Gilliatt for rent severe is a strong one.

It dates back to December of 2015 when.

Helping the drugs for Ebola.

The next couple of slides contain some data from laboratory studies or demonstrations or <unk> computer molecular modeling analyses that help illustrate on a more scientific level the role that captisol plays in formulations.

This is similar to the role that a place with many other products that are either available to patients today or are under development and you see on slide 29, a snapshot of molecular dynamics modeling show the insertion of the Rendez severe molecule in the Captisol cavity, which is shown predominantly in purple and has the more circular structure.

<unk>.

These are analyses that are commonly performed in disgust formulation and technical meetings when evaluating captisol.

Slide 30 isn't even more simple visual representation illustrating the role of a 30 to one ratio using captisol any impact it can have in dissolving 100 milligrams of Rendez severe.

Matt Foer: We also saw new INDs filed, as well as Omniab's first regulatory filing for commercial approval. Partners understand Omniab's best-in-class status and the value of collaborating with our science team as they work to discover novel antibodies. I will note that, as John generally mentioned, we've been working with a global multinational partner on a program for antibodies derived from our Omnichicken platform for treating COVID-19. We obviously highly prioritize that program's activities in Q1, and it works very early, but it's progressing very well. And now, I'll give you an update on Cactus.

These sorts of demonstrations and visuals are quite common and have been reported and documented publicly.

Finishing up now slide 31 has photos of our facilities that support our major technology platforms with eye catching there on the right being the new edition to to our technology a base.

I also want to take a moment to acknowledge the work and dedication of our employees and especially the t. managing our Captisol technology.

They've worked tirelessly day and night over recent months to ensure reliable supply of Captisol and they're also doing a lot of planning for the future. Their work is very important and they know that.

Matt Foer: Before discussing captosol's role in support of Gilead's drug remdesivir, I want to call attention to the upcoming virtual ASCO meeting and mention that we are expecting to see data on many ligand partner programs at this year's meeting, specifically three captosol programs that will have clinical data at ASCO, including Amgen's Kyprolis, which uses captosol in its formulation, Amgen's innovative The latter program will have new data for patients with higher-risk myelodysplastic syndromes, chronic myelomonocytic leukemia, or low-blast acute myelogenous leukemia. We look forward to seeing these and other presentations of data from Ligand Partners. And now, more generally, about captosol on slide 25. We've seen steady growth in Captisol in recent years, and as Matt reviewed, we project significant growth in 2020.

They work each day, when it clear sense of urgency and responsibility and I want to thank all of them for that.

And I also want to acknowledge our partners.

It's no understatement to say that their work and their progress is being watched by the world. We spent a considerable amount of time interface thing with the global supply chain team at gilliatt over recent months.

And they're professionalism their organization their efficiency there collaborative working style our second to none.

They are truly a world class organization, and we're honored to be working with them and supporting their needs for captisol.

And with that I will turn the call back over to our operator for questions operator.

As a reminder to ask the question. Please press star one on your telephone keypad.

Your first question is from the line mismatch you. It's your line is now open.

Good afternoon, and congratulations on the strong quarter and everything that you're doing but we appreciate everything else you're doing to help.

Matt Foer: We've invested in our drug master files in the U.S., Canada, Japan, and China, and those investments have been important to our partners. Slide 26 summarizes Captisol's key differentiating features, which include our global reach, our know-how, our intellectual property, the drug master files, as I just mentioned, and our manufacturing quality and scale. Partners also appreciate that Capsosol now has a five-year shelf life.

Obviously, given the the the uncertainty right now.

A couple of questions I guess related to the Captisol the the first one.

The the company has talked about.

In the past 24 hours about looking for partners internationally to help on the distribution and on the manufacturing front and I'm just curious how does your contract with Gil Yeah.

<unk> affect your ability to contract, but those partners or just kind of walk us through that that situation. Please.

Matt Foer: Moving to slide 27, I note that we've invested significantly in supply chain integrity for Captosol over the years, qualifying two manufacturing plants and distributing out of five facilities strategically located around the world. We've invested in the supply chain in a comprehensive way, going all the way back to our source materials, including keeping safety stocks of raw materials, and qualifying multiple vendors with whom we have had excellent and longstanding relationships. That approach to our supply chain positioned us to be able to respond very quickly to large orders in the first quarter and to further ramp up production, which is an ongoing process.

Yeah, Matt This is Matt for as I said, we've got a fantastic partnership with Gilly AD. We are are very aligned with them in in the global planning.

Our our relationship with them was struck back in in 2015, it is not exclusive and permits us to supply to supply others, but as I said, we're we're aligned with them as they are role this out.

Both in the U.S.

Got it alright, and then I and I don't know if this is possible but it.

Is there a way to break out the contribution from <unk> versus your other partners not <unk> not you don't need to get into the specific components other than if if we could get what the gilly a component is versus the others that would be helpful.

Matt Foer: Capsosol is a highly complex technology, yet it is a proven technology platform that is used in a number of life-saving medicines that are helping patients globally. Capsazole is generally used at concentrations far in excess of the active ingredient, as highlighted on slide 28, and as described in our partner's product label.

Yeah, I'll I'll comment and then not kornberg may want to comment as well and the financial generally we don't break down you know partner by partner, that's not something we've done a previously obviously when we yeah originally increased guidance around Captisol, we attributed that.

Matt Foer: Because of that, we've always taken our role as a high-quality and reliable partner and supplier very seriously. That's also part of why supply chain integrity, quality, and reproducibility, backed up with safety and toxicology data in our drug master files, have been and will continue to be very important to us and to our partners. And you will see on the right-hand side of slide 28 the range of captosol concentration ratios used for some of the commercial products that use captosol. Last week, with Gilead receiving an emergency use authorization for remdesivir, formulation ratios were disclosed as 30 to 1 for a lyophilized powder form of the drug and 60 to 1 for an injection solution form. So there's a range of uses, and there's also obviously a range of doses that have been evaluated clinically. We can't go into finer detail than what's on the slide or already in the public domain. So as not to disclose confidential partner information,

To supply for rent disappear.

So there's there's that and and obviously we've made those statements publicly I don't know if not cornbread may want to add as well.

I think it's fair to say that.

The increase in our guidance on a capsule side.

Originally and now are largely tied to.

Sales.

Okay. That's helpful. And then quick question on the.

<unk>, maybe you can only on the royalties side.

<unk>, obviously just from Amgen, but they came out were very strong we don't have oh, no yet, but even if that's flat you've got a really strong first quarter for that product is is the lower guidance is that a function of some of the others or or is there is some anticipation that maybe <unk>.

<unk> flat lines over the course, you're just help us understand what would the moving parts where they're.

Good question Mad and it's important to know that.

We don't have control over any of the sales.

Estimating.

Packed coven 19.

Across all of all products, but specifically with.

Matt Foer: But I will say that the potential scale of captosol needed for remdesivir is larger than for any other current commercial or clinical product that's formulated with captosol. This is triggering capital investment related to highly specialized and custom equipment on our part, but we're well positioned to make those investments throughout the year. Our Captosol partnership with Gilead for Remdesivir is a strong one. It dates back to December of 2015 when Gilead was developing the drug for Ebola.

Contributors.

What we've estimated without any input or knowledge really from our partners but.

At the impact and Q. too.

The most.

Estimating a declining Q2, and then a a return to to sort of normalcy towards the back half a year in terms of scripts, obviously as you pointed out.

This was.

Matt Foer: The next couple of slides contain some data from laboratory studies or demonstrations or computer molecular modeling analyses that help illustrate, on a more scientific level, the role that captosol plays in formulation. This is similar to the role that it plays with many of the products that are either available to patients today or are under development. And you see on slide 29, a snapshot of molecular dynamics modeling showing the insertion of the remdesivir molecule in the captosol cavity, which is shown predominantly in purple and has a more circular structure. These are analyses that are commonly performed and discussed at formulation and technical meetings when evaluating capital. Slide 30 is an even more simple visual representation illustrating the role of a 30-to-1 ratio using captosol and the impact it can have on dissolving 100 mg of remdesivir. These sorts of demonstrations and visuals are quite common and have been reported and documented publicly.

The best.

For had close to the best corner, they've ever had a very strong one.

So.

<unk>.

You know, it's certainly as possible.

Being conservative but.

Doing our best estimate what's gonna happen with.

Downs in state.

<unk>.

Understood. Okay, maybe one last one for me there has been talk here recently about gilliatt seeking an a additional form factors from does severe obviously the Ivy solution, it's great to have a treatment, but it's not ideal that its I.V. the.

Publicly commented I believe about seeking alternatives, maybe walk us through whether or not captisol plays a role beyond the I.V. solution. Thank you.

Yeah, not thanks, just met for you know at Captisol <unk> safety database has been built up over many years I.V. data oral solutions inhalation subcutaneous yeah, a variety of forms and and that's all been put into our <unk>.

Her file over time, when when a molecule is insoluble generally it's going to need that that's all he ability and delivery technology for other modes of delivery as well and we've got a a long history of of generating data in inhalation formats and others. So.

Matt Foer: Finishing up now, slide 31 has photos of our facilities that support our major technologies, with Icogen there on the right being the new addition to our technology base. I also want to take a moment to acknowledge the work and dedication of our employees and especially the team managing our Capasol technology. They've worked tirelessly, day and night, for recent months to ensure a reliable supply of captosol, and they're also doing a lot of planning for the future. Their work is very important, and they know that. They work each day with a clear sense of urgency and responsibility, and I want to thank all of them for that. And I also want to acknowledge our partners at Gilead. It's no understatement to say that their work and their progress are being watched by the world.

When when a molecule has solubility issues, it's going to need solubility solution like captisol and and capital as well suited to to provide those sorts of solutions.

That's great. Thank you very much.

<unk>.

Your next question is from the <unk>, you're lying is open.

No no I'm staying with questions plus let out the call note statement on the fact that you're not laying off a single employee on the backup.

So congratulations on the on that.

So I have few follow up questions on caps on it so.

Well plus B.Y. conscious of what this means.

Matt Foer: We've spent a considerable amount of time interfacing with the global supply chain team at Gilead in recent months, and their professionalism, their organization, their efficiency, their collaborative working style are second to none. They are truly a world-class organization, and we're honored to be working with them in supporting their needs for Capsosol. Operator?

<unk>.

I also want to take a step father I didn't see.

How should we think about ends of kept his own sales.

2021 or the on that.

Seeing great don't even bone cause football no seeking to to buy up adapt his own and.

And maybe it's.

<unk> well for those things.

Yeah.

I met for Ah, Yes, absolutely, we're seeing increased in down calls for Captisol.

Operator: As a reminder, to ask a question, please press star 1 on your telephone keypad. Your first question from the line is Matt Hewitt. Your line is now open.

Well established technology.

Very high profile drug, but yes. We are we are seeing yeah increased in down as we look out part of the reason why we're comfortable making a capital investment is that as we look ahead, we see see the need and that's part of the reason, we're we're making investments we are.

Matthew Gregory Hewitt: Good afternoon, and congratulations on the strong quarter and everything that you're doing. We appreciate everything that you're doing to help Gilead, obviously, given the uncertainty right now. A couple questions, I guess, related to Captosol. The first one is that the company has talked about in the past 24 hours about looking for partners internationally to help on the distribution and on the manufacturing front. And I'm just curious, how does your contract with Gilead, Unknown Speaker, affect your ability to contract with those partners? Or just kind of walk us through that situation, please?

<unk> and.

Oh This is John I'll, just add a little more color Blanche appreciate the question.

The earlier question that bad ass, but it's somewhat related.

As we've described we we are truly following gilliatt sleet.

And that's important for everybody to understand that they they really are driving the planning around this but.

We are there with them very very closely.

And over the last day or two we've seen the announcements that they are working on international coalition of partners to help them plain and put his.

Matt Foer: Yeah, Matt. This is Matt Foer. As I said, we've got a fantastic partnership with Gilead. We are very aligned with them in the global planning. Our relationship with them was struck back in 2015. It is non-exclusive and permits us to supply others. But as I said, we're aligned with them as they roll this out, both in the US and globally.

We will be with them as they coordinate that and it's not only insuring that there's drugs to manufacture but that all the elements are brought together responsibly in an organized manner. So.

We can all imagine the complexity of doing this but gilliatt is driving this and we are right there with them and and so.

Matthew Gregory Hewitt: Got it. All right. And then, and I don't know if this is possible, but is there a way to break out the contribution from Gilead versus your other partners? Not, I don't, not, you don't need to get into the specific components other than if we could get what the Gilead component is versus the others, that would be helpful.

As companies are calling us these other parties around the globe in one who participate.

Are getting those calls we're very active in those discussions but ultimately again. This this is being quarterback if you will buy buy gilliatt.

The the.

The the other element of this is that gilliatt, we think responsibly is describing the challenges, but how they reason to the challenge to deliver.

Matt Foer: Yeah, Matt, I'll comment. And then Matt Korenberg may want to comment as well on the financial side.

Matt Foer: Generally, we don't break down, you know, partner by partner. That's not something we've done previously. Obviously, when we originally increased guidance around captosol, we attributed that to supply for remdesivir. So there's that. And obviously, we've made those statements publicly.

Very substantial quantities of drug and they're trying to give a road map for what they believe they can produce this year and then in the next year, we've had a range of public statements and there's a commentary on their website.

Goal to have certain amount of course is produced by the end of this year.

And then even more multiple back quantity pretends he's 2021.

Matthew E. Korenberg: I don't know if Matt Korenberg may want to add something as well.

Given the fact, they are describing this as a six month lead time to manufacture of course, they have to get there materials in order and we have shipped them if substantial quantity of material so far.

Matthew E. Korenberg: Yeah, I think that's right, Matt. I think it's fair to say that the bulk of the increase in our guidance on the capsule side, both originally and now, is largely tied to Gilead's Remdesivir sales.

See that's baked into our guidance that we're giving today, but if the clinical data support this if they can stay under production timelines again.

Matthew Gregory Hewitt: Okay, that's helpful. And then, quick question on the royalties side, Matt Kornberg, maybe you could, on the royalty side, Kyprolis numbers, obviously just from Amgen, but they came out, were very strong. We don't have Ono yet, but even if that's flat, you've got a really strong first quarter for that product. Is the lower guidance, is that a function of some of the others, or is there some anticipation that maybe Kyprolis flatlines over the course of the year? Just help us understand what the moving parts were there.

What we are going to continue to monitor is how they can ramp up and then continue to meet that supply requirement.

As we mentioned in the late 2020 in early 2021, if gilliatt continues to ramp up at the builders International Coalition, we fully expect that we will be a shipping and selling more capital to support their campaigns.

Oh. Thank you John that's very helpful. Just sitting on that can you help us unsigned how much what can be shipped in now and also on the capacity side you had served in the Boston.

Matthew E. Korenberg: Good question, Matt, and it's important to note that we don't have control over any of the sales, so we really are estimating the impact of COVID-19 on the remainder of the year across all products, but specifically with Kyprolis and Evamelo, the two largest contributors. What we've estimated, without any input or knowledge really from our partners, but what we've estimated is that the impact in Q2 was what we felt the most, so we are estimating a decline in Q2 and then a return to sort of normalcy towards the back half of the year in terms of scripts. Obviously, as you pointed out, Q1 for Kyprolis was the best quarter they'd ever had, or close to the best quarter they'd ever had, a very strong one. So, it certainly is possible that we are being conservative, but we're just doing our best to estimate what's going to happen with the slowdown in stay-at-home orders for the rest of the year.

Goodbyes to to meet any requirements could you send them. One is you have to capacity on this also is.

On your soul contract manufacturing kept his own.

As back.

Yeah. Thanks, Yeah. So we've we've spoken in the past a lot of different ways to to calculate capacity, but well over 100 metric tons of capacity, we've been increasing that.

We've got a plans to continue to do that we have a two manufacturing plants that manufacturer captisol and and they're into Hobo network. We are we distribute out of five distribution facilities spread out around the globe.

And and we are looking at involving others in in manufacturing as well, so I think that probably summarizes it.

Great Oh, one final question on so I was certainly knew the fact that you're breaking his own. Some people you should end the bread news as a statement that there's going to be doing meaningfully going forward and.

Matthew Gregory Hewitt: understood. Okay, maybe one last one for me.

Matthew Gregory Hewitt: There has been talk here recently about Gilead seeking additional form factors for remdesivir, obviously the IV solution. It's great to have a treatment, but it's not ideal that it's IV. They've publicly commented, I believe, about seeking alternatives. Maybe you could walk us through whether or not captosol plays a role beyond the IV solution. Thank you.

<unk>.

Yeah. It's.

It's a line that will be growing as we.

Add new partners, but it's it's more stable generally speaking.

And predictable than the rest of the lines.

Contracts as I mentioned in my.

Marks tend to be multi year contracts with parties.

Matt Foer: Yeah, Matt. Thanks, this is Matt Foer.

Matt Foer: You know, Captisol, the safety database has been built up over many years, IV data, oral solutions, inhalation, subcutaneous, a variety of forms, and that's all been put into our drug master file over time. But when a molecule is insoluble, it's going to need that solubility and delivery technology for other modes of delivery as well. And we've got a long history of generating data in inhalation formats and others. So when a molecule has solubility issues, it's going to need a solubility solution like Captisol, and Captisol is well suited to provide those sorts of solutions.

So we have a good visibility on that year to year in in a large portion of it is repeat customers.

Anyone contract.

Relatively significant portion of the business, particularly on.

Sides.

Will continue to monitor it and report out to customers.

Investors I should say.

See over that.

12, or 18 month period, but it'll be a substantial portion of the.

I.

Lines for.

Will future.

Matthew Gregory Hewitt: That's great. Thank you very much. Your next question is from the line of Balaji Prasad. Your line is open.

So thanks, so much.

<unk>.

Once again to ask a question. Please press star one on your telephone keypad.

Operator: Hi, good afternoon, and thanks for taking my questions. Firstly, I'd like to call out your statement on the fact that you're not laying off a single employee on the back of COVID. So congratulations on that.

Your next question is from the line that's very solo you're lying is open.

Yes, Hi, it's <unk> Lucas for Larry.

You guys covered a lot of the stuff just a quick one on <unk> I know you mentioned the potential estimates you had there for the impact of <unk> just wanting to know a if you can come in on when we can expect phase three data from multiple melanoma and how much you think that could cause the target market to grow.

Balaji V. Prasad: So I have a few follow-up questions on CapTrol itself. Well, firstly, while we are conscious of what this means for 2020 and Gilead, I also want to take a step further ahead and see how we should think about recurrence of captizol sales in 2021 or beyond that. Are you seeing greater inbound calls for partners seeking to look to buy up with Captizol? And, And maybe I'll stop with that and follow up further. Thanks.

Yeah. Thanks.

Referring to the additional phase three date and multiple myeloma, we where we are seeing data that is planned to come out at <unk>. There are more phase three data that will be presented that ASKO also front line data that is in progress and and engine continues to supply.

Matt Foer: Yeah, Balaji, this is Matt for, yes, absolutely, we're seeing increased inbound calls for captosol. Captosol is obviously a well-established technology, and remdesivir is obviously a very high-profile drug. But yes, we are seeing increased inbound. As we look out, part of the reason why we're comfortable making capital investments is that as we look ahead, we see the need, and that's part of the reason we're making the investments we are.

Updates for for status of those programs and we expect that data to be coming in and they actually recently just last week on their earnings call updated that they having November 15th produce a target action date for the phase three for the candor data being added to the U.S. label.

And then that labels also being under review or is also under review in the U. as well.

John Higgins: This is John. I'll just add a little more color.

A great. Thanks, and then just one more for me a a general question in terms of priorities for use of cash you mentioned in the slides business support the business and you've touched on a few M&A opportunities just wondering how <unk> share buyback so would rank in that given that you have been aggressive there, but do still leave a chunk on the.

John Higgins: Balaji, I appreciate the question on the earlier question that Matt asked, but it's somewhat related. As we've described, we are truly following Gilead's lead, and that's important for everybody to understand that they really are driving the planning around this, but we are there with them very, very closely. And over the last day or two, we've seen the announcements that they are working on an international coalition of partners to help them plan and produce. We will be with them as they coordinate that. And it's not only ensuring that there is a drug to manufacture but that all the elements are brought together responsibly and in an organized manner. So we can all imagine the complexity of doing this, but Gilead is driving it, and we're right there with them.

We purchase.

Yeah. Thanks, Pete as we've said a few times.

Couple of quarters, when we ended up with about a billion and a half of cash on the balance sheet. Our stock price was in a place where we thought it was particularly well valued we set out on a campaign to essentially return about a half a billion dollar.

John Higgins: And so as companies are calling us, these other parties around the globe, and want to participate, we are getting those calls. We are very active in those discussions, but ultimately, again, this is being quarterbacked, if you will, by Gilead. The other element of this is that Gilead, we think responsibly, is describing the challenges but how they've risen to the challenge of delivering very substantial quantities of the drug. And they're trying to give a roadmap for what they believe they can produce this year and then in the next year. They've made a range of public statements, and there's commentary on their website. Their goal is to have a certain number of courses ready by the end of this year. And then even more, a multiple of that quantity, potentially in 2021.

Two.

<unk> through share repurchase.

And basically completed that I'm, having to actually done closer to 600 million now.

What we said coming into 2020.

Markets and then Opportunistically by back shares if we felt like the trading dynamics or stock we're.

Out of whack with a where we thought the fundamental business was going clearly no one for saw it.

Impacts into on the markets or business, but we did opportunistically by some during.

Mentioned will continue to monitor as as we go forward, but our focus really has mostly shifted to.

John Higgins: Given the fact they are describing this as a six-month lead time to manufacture, of course, they have to get their materials in order, and we have shipped them a substantial quantity of material so far, and obviously that's baked into our guidance that we're giving today. But if the clinical data support this and if they can stay on their production timelines, again, what we are going to continue to monitor is how they can ramp up and then continue to meet that supply requirement, as we mentioned, in late 2020 and early 2021. If Gilead continues to ramp up, if they build this international coalition, we fully expect that we will be shipping and selling more Capstall to support their campaigns.

Yeah I'm in a front will still a modern both the stock in the bonds.

Or chances to to buy Opportunistically, but at this point the balance of the the 750 million of cash that we think is useful for for every day.

Well focus mostly on the M. and a front and other product investments.

And I guess just on top of that in terms of the emanate front. You you mentioned a few possible candidates are areas that you'd look at has <unk> impacted devaluation stare at all or anything different that you're seeing.

Yeah, I think covitz impacted evaluations across the board what typically happens.

John Higgins: Thank you, John. That's very helpful.

Balaji V. Prasad: I am just reading on that.

Crisis like this I should say it in.

Matt Foer: Can you help us understand how much or what quantities you have shipped till now? And also on the capacity side, you have said in the past that you have adequate capacity to meet any requirements. Could you give us a sense of what your total capacity is on this? Also, is Ovion your sole contract manufacturer for Captizol, or do you have anyone as backup?

Doc market decline like this is it takes a while for boards of management's to reset on their views of where current evaluation what appropriate value is so a lot of the ongoing discussion slowed down a bit.

Balaji V. Prasad: Yeah, thanks, Balaji. Yeah, so we've spoken in the past about a lot of different ways to calculate capacity, but well over 100 metric tons of capacity, we've been increasing that, and we've got plans to continue to do that. We have two manufacturing plants that manufacture captosol end to end. They're in the Jovio network. We distribute out of five distribution facilities spread out around the globe, and we are looking at involving others in manufacturing as well. So I think that probably summarizes it.

A new new discussions or slower to pick up and that's what we've seen that doesn't mean, our shopping list is any shorter.

Attempt to to have these dialogues has any slower up from our standpoint, we're ready to go but as the buyer.

Unique position.

Sellers get more accustomed to current values will start to see the activity and.

These transactions pick up a little bit more so.

Matthew E. Korenberg: One final question on service revenue, the fact that you're breaking this out separately.

Lots of activity on the financing front, our product financing effort is is.

Balaji V. Prasad: Should I interpret this as...

Quite robust right now certainly in the market like this you get a lot of companies that struggled to finance himself and end up stuck in what we've traditionally called broken biotech.

Balaji V. Prasad: statement that this

Balaji V. Prasad: and that this will be growing meaningfully going forward and will be of great significance.

Matthew E. Korenberg: Thanks, Balaji. It's a line that will be growing as we add new partners, but it's more stable, generally speaking, and predictable than the rest of the lines. The contracts, as I mentioned in my prepared remarks, tend to be multi-year contracts with parties, and so we have good visibility on that year-to-year, and a large portion of it is repeat customers. Any one contract is a relatively significant portion of the business, particularly on the Vernalis and Icogen sides. And so we'll continue to monitor it and report out to customers, to investors, I should say, on kind of what we see over the forward-looking 12 or 18-month period. But it'll be a substantial portion of the revenue lines for the foreseeable future.

Companies that have portfolios of programs that are either unpartnered and Partnerable are already partnered we're seeing a lot of activity in that space. The larger technology platform acquisition stuff. The larger public companies. Those dialogues are ongoing, but ah likely will take a little bit longer than before to materialize.

Very helpful. Thank you.

Next question, it's from the line of Dana Flanders here long he's open.

Hi, great. Thank you for the questions I got a couple of minutes okay.

<unk> Captisol first can you just speak to as the just relative weighting of Captisol sales two gilliatt <unk> increase I, just what you expect that to do to the overall kind of gross margin profile of materials sales this year and next year.

Balaji V. Prasad: Thank you so much.

Operator: Thanks, Balaji.

Operator: Once again, to ask a question, please press Star 1 on your telephone keypad. Your next question is from the line of Larry Sallow. Your line is open. Yes, hi, it's Pete Lucas on behalf of Larry.

My second question, if you could you speak to the level of investment that you're making to increase supply of kept soldiers from my cash outlay perspective.

Pete Lucas: You guys covered a lot of stuff. Just a quick one on Kyprolus. I know you mentioned the potential estimates you had there for the impact of COVID. Just wanted to know if you could comment on when we can expect phase 3 data from multiple melanoma and how much you think that could cause the target market to grow.

And then thirdly and I <unk>.

How much Captisol has go gilliatt purchase relative to that 1 billion or 1 million treatment course target that they have by year end I mean, how much more volume just kept it does guilty I need to purchase two kind of kind of get there. Thank you.

Matt Foer: Yeah, thanks. Regarding the additional phase three data in multiple myeloma, we are seeing data that is planned to come out at ASCO. There are more phase three data that will be presented at ASCO and also frontline data that is in progress, and Amgen continues to supply updates on the status of those programs, and we expect that data to be coming. And they actually recently, just last week on their earnings call, updated that they have a November 15th PDUFA target action date for phase three for the candor data being added to the US label. And then that label is also being under review or is also under review in the EU as well.

I'll start on the margin question, and then turned over to Matt for.

Some of the capital investment in supply chain stuff.

I think as investors know our our P.L. includes cost of goods line that.

Historically and going forward is tied only two capsule sales. So are a royalty income in our no or service revenue and our contract payment lines, all or 100% gross margin any of the costs associated with the service line or or actually just salaries down.

Pete Lucas: And then just one more for me, a general question in terms of priorities for the use of cash. You mentioned in the slides, business, support the business, and you touched on a few M&A opportunities. Just wondering how share buybacks would rank in that, given that you have been aggressive there, but do still leave a chunk.

Mostly salaries and.

Expenses that are down in our indeed.

Matthew E. Korenberg: Thanks, Pete. As we've said a few times over the last couple of quarters, when we ended up with about a billion and a half of cash on the balance sheet, our stock price was at a place where we thought it was not particularly well valued. And so we set out on a campaign to essentially return about a half a billion dollars to investors through share repurchase. And we've basically completed that, having actually done closer to $600 million now.

So investors can certainly track historically, where our margins have been on a capsule side, if they like and.

We don't see that changing materially.

I'm in the short term from.

Side Gilead has a very favorable pricing from us and.

We continue that continue to believe that I'm going forward the margin profiled a capsule business will be in line with where it has been historically what that translates to overall corporate gross margins I'm really just depends on.

Pete Lucas: What we said coming into 2020 was we'd monitor the markets and then opportunistically buy back shares if we felt like the trading dynamics in our stock were out of whack with where we thought the fundamental business was going. Clearly, no one foresaw the COVID-19 impacts on the markets or business, but we did opportunistically buy some during Q1, as I mentioned. We'll continue to monitor as we go forward, but our focus really has mostly shifted to the M&A front. We'll still monitor both the stock and the bonds for chances to buy opportunistically. But at this point, the balance of the $750 million of cash that we think is useful for M&A, we'll focus mostly on the M&A front and other product investments.

<unk>.

Lands on the need for run disappear and ultimately therefore captisol.

I think you can do your your own math, but I think if you scale up the capsules sales too you know the different orders of magnitude that the production level security, it's talking about might imply.

You can you can sort of calculate the the margins I mentioned in my prepared remarks that based on what we see so far this year, we see the margin coming down from a 90% overall margin prior to this to somewhere between 80, 590% for.

Matthew E. Korenberg: And I guess just on top of that, in terms of the M&A front, you mentioned a few possible candidates or areas that you'd look at. Has COVID impacted valuations there at all or anything different that you're seeing?

<unk>.

In that you want to make some common sense, yeah sure yeah and on on the <unk> I'll I'll, just I'll I'll generally characterize it and say, it's it's millions of dollars, but it's an investment we're happy to make we do not see it impacting other elements of the business or other things, we we want to do in the business, but it's but it's an investment that's important.

Matthew E. Korenberg: Yeah, I think COVID's impacted valuations across the board. What typically happens in a crisis like this, I should say it in a... Unknown Attendee, Octavio Espinoza, Simon Latimer, Lawrence Solow, Scott Henry, Todd Davis, Unknown Attendee, Octavio Espinoza, Simon Latimer, Lawrence Solow, Scott Henry, Todd Davis, Unknown Attendee,

And and we're happy to make.

As as John sat in his as good. We add has has said publicly their positioning to to produce several million treatment courses in 2021, if if required. We've got you know a line of sight on what what may be needed and and as as described we would need.

Operator: Very helpful, thank you. Next question is from the line of Dana Flanders. Your line is open. Hi, great.

Dana Flanders: Thank you for the questions. I've got a couple, if that's okay, related to captosol. First, can you just speak to as the relative weighting of captosol sales to Gilead and remdesivir increases, just what you expect that to do to the overall kind of gross margin profile of material sales this year and next year? My second question is, if you could just speak to the level of investment that you're making to increase the supply of captosol, just from a cash outlay perspective. And then thirdly, and I apologize if I miss this, how much Captosol has Gilead purchased relative to that $1 billion?

The ship more material late this year and early next in order to in order to to help them do that.

Alright, thank you.

Your next question is from the line, it's caught Henry your lines open.

Hey can you guys hear me.

<unk>.

Hey.

Real quick one here.

So I'm looking at the Kyprolis estimates from the M.G.N. analyst after the quarter and they all went up.

A year.

So how are you thinking about you.

Operator: [inaudible]

Matthew E. Korenberg: by year-end. I mean, how much more volume does Gilead need to purchase to kind of get there? Thank you.

Your expectations from Kyprolis royalties.

Out of that royalty reduction so if you're reducing here five 6 million out of that how much are you assuming control is gets cut.

Matt Foer: Thanks, Dana. I'll start on the margin question and then turn over to Matt for some of the capital investment and supply chain stuff. I think, as investors know, our P&L includes a cost of goods line that historically and going forward is tied only to capital sales, so our royalty income and now our service revenue and our contract payment lines all are 100% gross margin. Any of the costs associated with the service line are actually just salaries, mostly salaries and other lab expenses that are down in R&D. So, investors can certainly track historically where our margins have been on the Capsule side, And we don't see that changing materially in the short term from the Gilead side. Gilead gets very favorable pricing from us, and, you know, we continue to believe that going forward, the margin profile of the Capsule business will be in line with where it has been historically.

Yeah, Scott, we mentioned that that we see royalties down about.

15% or so and we mentioned earlier on this year that original estimates for <unk> for the year that factored into our 38 million dollar respect for the year were included about a billion to 1.2 billion.

With sales so we've back that off by about 15% for the told a year I think you can.

Pair that to the mass you're running on your side and figure out where you you believe will land.

Okay. Thank you appreciate it.

We have time for one more question, but <unk>.

<unk>.

Hi, sorry.

So thanks, Florida, well just wanted to check with you on that although I mean, you Miss may have been not <unk> once a way forward on what milestones we need to look awful.

Matt Foer: What that translates to overall corporate gross margins really just depends on where Gilead lands and where the world lands on a need for Remdesivir and, ultimately, therefore, Capsule. I think you can do your own math, but I think if you... scale up the capsule sales to the different orders of magnitude that the production levels that Gilead is talking about might imply, you can sort of calculate the margins. I mentioned in my prepared remarks that based on what we see so far this year, we see the margin coming down from a 90% overall margin prior to this to somewhere between 85 and 90% for the overall business. Matt, do you want to make some comments on the supply chain side? Yeah, and on the CapEx, Dana, I'll just, I'll generally characterize it and say it's millions of dollars, but it's an investment we're happy to make. We do not see it impacting

Yeah. Thanks, a lot. He you know that is interesting <unk> is that a program that came to us through our acquisition for analysis in the H.P. 90 inhibitor that was previously evaluated in cancer. It came up in such a third party academic screens as Patel.

Actually having utility in encoded.

It's.

Where where we've it's post that publication, obviously had some inbound interest in the in our talking to potential collaborators a potential partners, who have an interest in in potentially taking that forward.

<unk>.

<unk>.

Mostly through a question.

Well thank you.

John Higgins and just to wrap up one thank everybody we had a great turn out today on the call, we're saying people who dialed into appreciate your time and attention today. It's obviously a very busy time for the company. We're we operate lean business to start with the very efficient corporate structure of course, the the pandemic environment.

Dana Flanders: Other elements of the business or other things we want to do in the business, but it's an investment that's important and we're happy to make. As John said, and as Gilead has said publicly, they're positioning to produce several million treatment courses in 2021 if required. We've got a line of sight on what may be needed, and as described, we would need to ship more material late this year and early next in order to help them do that.

In the changed to work flow, obviously has impacted every company and then on top of this of course, the the work that we're doing gilliatt has created <unk> additional amount of work I think.

Operator: All right, thank you. Your next question is from Scott Henry. Your line is open. Hey, can you guys hear me? Yes, Scott. Hey, just a real quick one here. So I'm looking at Kyprolus estimates from the Amgen analysts after the quarter, and they all went up for the year. So how are you thinking about your

Thank the team.

Proud of this team, we're doing outstanding work and frankly, it's inspiring to see.

Not only does the usual high level of productivity, but the team stepping up above and beyond.

We have a slide.

By the people to join it's on Twitter, It's a simple concept, but we have so much news flow coming out of partners that it is a great way to keep track of developments in of course, we often flag prominent news stories that relate to the severe program that we linked to Twitter as well so recruits you to sign up there.

Scott Robert Henry: Your expectations from Kyprolis Royalties, out of that royalty reduction.

Matthew E. Korenberg: Transcription by Transcription Outsourcing, LLC.

Transcription Outsourcing, LLC.: Yet, Scott, we mentioned that we see royalties down about 15% or so, and we mentioned earlier this year that our original estimates for Kyprolis for the year that factored into our $38 million estimate for the year were based on about a billion two, 1.2 billion of Kyprolis sales. So we've backed that off by about 15% for the total year. I think you can compare that to the math you're running on your side and figure out where you believe it will land.

Will be a two conferences. These are virtual but one is that correct count conference at the end up May and then the benchmark healthcare conference in mid June and we already have very full schedule for the both of those thank you for calling you today and we look forward to staying in touch as the week Roland.

Scott Robert Henry: Okay. Thank you. I appreciate it. We have time for one more question. Balaji Prasad, your line is open.

Thanks type of distance between us today 'cause can cause their web cast you may not disconnect half a great day.

Operator: Hi, sorry, I was muted. So thanks for the follow up. Just wanted to check with you on the role of IV luminescence in treating COVID. What's the way forward, and what milestones we need to look out for?

[noise] [noise] [noise].

[music].

Balaji V. Prasad: Yeah, thanks, Balaji. You know, that was interesting.

Matt Foer: Lumestinib is a program that came to us through our acquisition of Vernalis. It's an Hsp90 inhibitor that was previously evaluated in cancer. It came up in some third-party academic screens as potentially having utility in COVID. It's where we are now, post that publication, obviously, had some inbound interest in our talking to potential collaborators, potential partners who have an interest in potentially taking that.

John Higgins: No further questions. Well, thank you. This is John Higgins.

John Higgins: And just to wrap up, I want to thank everybody. We had a great turnout today on the call. We're seeing the people who dialed in.

John Higgins: So, I appreciate your time and attention today. It's obviously a very busy time for the company. We operate in a lean business to start with. It's a very efficient corporate structure. Of course, the pandemic environment and the change to workflow have obviously impacted every company.

John Higgins: And then on top of this, of course, the work that we're doing with Gilead has created a tremendous additional amount of work. I want to thank the team. I'm really proud of this team. We're doing outstanding work. And, frankly, it's inspiring to see not only the usual high level of productivity but the team stepping up above and beyond. We have a slide inviting people to join us on Twitter. It's simple

John Higgins: There is so much news coming out of Partners that it is a great way to keep track of developments, and, of course, we often flag prominent news stories that relate to the Remdesivir program that we link to Twitter as well. So we encourage you to sign up there. We will be at two conferences, these are virtual, but one is the Craig Helm Conference at the end of May and then the Benchmark Healthcare Conference in mid-June. And we already have very full schedules for both of those.

Operator: Thank you for calling in today, and we look forward to staying in touch as the weeks roll on. Thanks to all the participants for joining us today. This concludes the webcast. You may now disconnect. Have a great day!