Q1 2021 Ligand Pharmaceuticals Inc Earnings Call

Yeah.

Good afternoon, and thank you for standing by and welcome to the ligand pharmaceuticals for tier one earnings call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star and and the number one on your telephone keypad.

If you require any further assistance. Please press star zero and I would now like to hand, the conference to oversee our speaker today, Mr. Simon Let me share the floor is yours.

Thanks, Rachel and welcome to ligand and first quarter of 2021 financial results and business update conference call. All of our speakers for today's call are and separate locations speaking today for ligand will be John Higgins, CEO, and Matt for CLO, and Matt Kornberg and CFO.

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

Additional information concerning risk factors and other matters concerning ligand can be done and our earnings press release, and our periodic filings with the SEC. We undertake no obligation to revise or update any statements to reflect events or circumstances. After the date of this conference call.

A reconciliation between the non-GAAP financial measures, we discuss and the closest GAAP financial measure can be found in our earnings release issued today I'd now like to turn the call over to John Higgins.

Good afternoon.

Noon and thank you for joining our first quarter 2021 earnings call.

This year is off to an excellent start for ligand and both operationally and financially.

It feels great to be well into 2020. One it's now we're really beginning to leverage our acquisitions from last year typically and the U S. It is advancing into a better phase of the pandemic.

And if the health environment improves and the U S. We are seeing an uptick in business activity and why.

And team across the board has done an excellent job managing the business. This past year and now we see increasing interest for licensing our platforms and expanding work with partners, including with new and existing Big Pharma partners, who see the value our technology and spring.

Also I'm very pleased to report business travel is coming back for the leadership at ligand, it's invigorating to be able to interact directly with our scientists once again across our multiple laboratories and the U S, especially since we added many new members to our team through acquisitions during the pandemic.

Matt for and we'll give an update on the business and I know that each of our major tech platforms is performing very well.

We've rebranded our protein expression platform from Phoenix to Pelican and the team of scientists we brought on board with that company is outstanding and we see promising opportunities for new deals later this year and good progress and some early stage internal programs are.

Or I could you and I and channel unit, it's firing on all cylinders and again the team driving that platform is a plus they are brilliant scientists with great instincts for partner support that fits so well with our business model, our Ikea and team closed a major new deal with GSK for few months ago and <unk>.

Continues to deliver superb support to our partner Roche for multiple targets the outlook for Ikea and its very promising as we've been investing in internal in and internal program that we believe may be up for licensing and the coming months.

Our Omnia platform has been a big success over the past five years and is trying to really flourish and now over the next couple of years more licensing deals coming on line. The most advanced late stage calendar of clinical and regulatory news and expectations for our first Omnia based product royalties beginning later this year.

Five years ago, we started to build our antibody platform today I can say, we are very pleased to be a market leader in the space and a body of research is a primary focus for R&D investment by pharma and big biotech significant amounts of money are being allocated to antibody discovery programs for promising metal medical targets.

We have and into and integrated discovery platform with a deep tech stack built on artificial intelligence and a rich history and foundation of biological intelligence.

Our partners get access to what we believe is the world's most advanced antibody repertoires and screening technology to enable unparalleled discovery of next generation therapeutics.

And for Captisol, we expect that 2021 will be our largest year ever in terms of sales and <unk>.

For stepping up to support Gilead and the rent that severe consortium last year, our manufacturing work with radically rescale to provide many fold higher quantities of captisol to support demand the.

The claims with the pandemic are shifting rapidly and forecasting is challenging at this time, Matt Kornberg will go into that more and the factors driving and flex to our planning, but nonetheless, we are proud to be serving and vital role supporting this major COVID-19 treatment and we will be there to support our global partners for whatever they require.

Our thoughts are with those and India and other countries, who are now facing the worst of the pandemic.

We acquired Captisol 10 years ago, and it has been and amazing and important success on many levels. In addition to run that severe we are proud of and know the capsule is an integral and proprietary ingredient and many lifesaving medicines.

The outlook for the rest of the year is promising and who we see as many as for new royalty bearing partnered products being approved and getting launched two are from our army business and tours from our Pelican unit.

And as we look to next year, we are growing anticipation for the potential approval of sparse Stanton from severe given the quality of clinical data trivia announced in Q1, along with the market need and the size of our royalty. We believe this product has the potential to become one of our largest royalty bearing assets.

And with that I will turn the call over to Matt Kornberg for a more detailed review of our financial performance Matt.

Thanks, John.

The first quarter of 2021 provided a strong start to the year for ligand <unk>.

Total revenue for the quarter was $55 2 million up from $33 2 million a year ago with.

With respect to royalties royalty revenue increased to 7.1 million from 6.6 million a year ago.

The pandemic negatively impacted sales for many pharmaceutical products and Q1, including amgen's.

Amgen reported $251 million sales for Kyprolis, our largest royalty bearing assets.

These sales were lower than we expected Amgen.

Excuse me Amgen commented on their earnings call last week that they experienced negative.

Pressure, specifically on your oncology business due to the impact of the pandemic on patient treatments and Q1.

We've read that Amgen and the industry overall expect oncology sales to ramp back up later this year with the success of COVID-19, vaccinations and as pandemic trends improve and major commercial markets.

Captisol sales were 31.3 million and the quarter and this is up 48% from $21 1 million a year ago.

Q1 capsule revenue came in a bit lower than we expected as the business was impacted by the extreme cold weather and the southern United States, where one of our new Captisol manufacturing sites is located as.

As a result of the weather the site paused manufacturing for an extended period of time and February pushing out production of approximately $12 million of Captisol finished goods.

Our contract revenue in Q1, 2021.

Was $16 8 million compared with 5.5 million a year ago. The 'twenty 'twenty. One quarter include strong contract revenue from all our technologies with approximately $4 million from omni add $3 million from Pelican 4 million from <unk> 3 million from for and Alice and 2 million for various new chemical.

<unk> Captisol and other technologies.

Well Q1 might be higher than the average we expect for the year and illustrates the diversity and robustness of our contract revenue line.

Adjusted diluted EPS for Q1, 2021 was $1.41 compared with 89 cents last year or an increase of 58%.

The strong earnings performance. This quarter was in part driven by a large volume of contract milestone payments, which are typically 100% gross margin.

We exited the quarter with approximately $339 million of cash cash equivalents and short term investments. This cash balance reflects the repurchase of 100 and for $5 million of convertible bonds. During Q1, we.

We now have about $391 million of face value of convertible bonds outstanding.

Turning now to financial guidance, we're leaving our guidance for 2020, one revenue and adjusted diluting diluted EPS unchanged.

While we're guiding for total revenues of approximately $291 million, we expect the mix of revenue and expected revenue level may fluctuate significantly from our initial expectations, mostly due to evolving demand for captisol related to Rem death severe.

The outlook for Captisol sales will likely fluctuate as the year progresses, given the highly unpredictable nature of the pandemic, both in the United States and globally.

And the U S successful vaccine rollout was better than expected and when combined with the higher.

The high vaccine efficacy.

As a result, it and a reduction and hospitalizations debt.

Led to lower demand for EM debt severe.

In addition, based on and have discussions with external experts, we now estimate minimal government stockpiling of from Decimeter around the world. Our initial expectations for 2020. One included government stockpiling as we described at our analyst day last year.

And the flip side, the urgent need and India has significantly increased demand from the consortium partners that are manufacturing room distributor for that region.

And given us highly highly dynamic environment, we've seen rapid changes and evolution of demand signals and accordingly, we may update total revenue guidance as the year progresses, either higher or lower.

Despite these uncertainties we are closely monitoring all of our revenue expenses and income and we plan to work to adjust accordingly under the various scenarios.

We believe we can deliver our outlook for adjusted diluted EPS of approximately $6.15 and these scenarios.

With respect to quarterly pacing as discussed on our call. Our last call. We expect our royalty line will follow the typical trend, but a lower Q1 and and increasing each subsequent quarter through Q4.

Our expected pacing for Captisol quarterly revenue has evolved from previous guidance.

Q2 looks to be significantly higher than Q1, as a result of the extreme weather issues I mentioned.

We currently expect Q2 capsule sales will be approximately $50 million and depending on production timing export logistics and deliveries sales for the quarter have the potential to be even higher.

Between Q3 and Q4, we expect the second half of the year will be more heavily weighted to Q4, but we should have greater clarity on that when we report our second quarter results.

Lastly, our contract revenue for the remainder of the year is expected to be realized about 25 per cent and each of Q2, and Q3 and 50% and Q4.

This is largely driven by the expectation that the 6 million dollar trivia NDA milestone will be earned in Q4.

Regarding strategic M&A, we continue to maintain and active evaluation of M&A opportunities as well as our cap our capital deployment strategy overall.

Our main focus now is on assets and technology that will further further bolster our best in class omni edge antibody platform.

Just before I turn the call over to Matt for all direct listeners to review our Q1 earnings press release issued earlier today and available on our website for reconciliation for adjusted financial results with GAAP financial results.

With that I'll turn the call over to Matt for some comments on our portfolio and pipeline Matt.

Thanks, Matt.

This afternoon I'm going to review the status and plans and recent developments involving a couple of our core technology platform starting with Anya.

I will then provide updates on certain partner programs with major events expected later this year and also update plans for our Captisol enabled <unk> program.

<unk> is our most valuable platform technology and it continues to offer a powerful combination of advanced antibody discovery tools.

Partners, who license our Omnia and technologies are supported by our team of respected scientists and a track record of quickly discovering high quality antibodies.

Two omni AD partners have submitted applications for approval and we expect both regulatory decisions. This year, which if approved we believe will be the first of many for the platform.

Specifically C stone pharmaceuticals announced recently that their investigational omni abderite anti PDL, one antibody tsuga mile and Nab has been granted breakthrough therapy designation by the China and MPA for the treatment of patients with relapsed or refractory extra Donald natural killer T cell lymphoma.

Shook them all and that has also been granted orphan drug designation for the treatment of T cell lymphoma, and breakthrough therapy designation by the U S. FDA back in October of last year.

And NDA pursue come Allomap is under review at the and MPA for stage for non small cell non small cell lung cancer and Keystone has said they expected determination with respect to this NDA and the second half of this year.

As a reminder, Keystone and Pfizer formed a strategic alliance around the development and commercialization of supermodel and map in China.

The other Omnia program I'll highlight briefly today is and barrel and App, which is an investigational omni abderite anti PD, one monoclonal antibody that was discovered using on Iraq.

Gloria Pharmaceuticals filed its and MPA and China for recurrent refractory classical Hodgkin's lymphoma with approval also expected this year.

In addition to the pre commercialization regulatory work Lorie is doing ARCUS biosciences is conducting phase II studies, including and barrel and Nab and first line metastatic non small cell lung cancer and combo with an anti <unk> antibody and and adenosine receptor antagonist and also phase three work that started in recent months and.

Asian with and anti ticket in PDL, one positive locally advanced or metastatic non small cell lung cancer and an open label setting.

ARCUS and Gilead formed a 10 year partnership last year to co develop and co commercialize <unk> product candidates, including and barrel and map.

We continue to actively innovate and invest in our omni AD platform with internal R&D and technology development through collaborations with leading academic centers like scripts and Wistar Institute and through targeted bolt on acquisitions.

Our partners placed considerable value on the work, we do and they understand the importance of quickly and efficiently discovering fully human antibodies and a variety of formats.

Our <unk> technology is differentiated by leveraging artificial intelligence or AI capabilities combined with our deep history of novel genetic engineering, and the biological intelligence or be eye of our proprietary transgenic animals.

The <unk> elements allow us to operate a highly efficient business model and serving our broad partner base are best in class technology stack is enabling our omnia business team to secure new license agreements with expanded economic terms.

We see a trend forming in the industry towards more end to end discovery partnerships and believe that the tech stack, we have assembled and developed is ideally suited to meet those needs.

We have and updated and aggressive investment plan for <unk> and 2021 given exciting opportunities that our recent acquisitions have presented.

We're adding staff and plan to increase our laboratory footprint at our facility in Emeryville, California, as we look to consolidate our Menlo Park and Emeryville operations into a single facility here in Emeryville.

We're making these investments in the technology for the long term and and preference to single asset types of investments that we generally invested and previously.

As John mentioned during the quarter, our team rolled out new branding for the protein expression technology platform that we gained through the Phoenix acquisition last year and this platform is now known as the Pelican expression technology.

Our Pelican expression technology, which is a differentiated platform and the industry Leverages proprietary strength of Sudan, monus fluorescence to express complex antibody derivatives and other engineered next generation protein modalities.

Known and understood as a technology that makes the manufacturing of complex drugs possible. These complex drugs have the potential for greater specificity improved side effect profiles and ultimately successful therapeutic outcomes.

And these characteristics make this an area of substantial biopharmaceutical development.

We're leveraging and rich history with the platform and with high throughput screening technologies and proprietary computer driven automation to identify robust production strength very quickly, we believe that our CMC development prowess and our state of the art analytical capabilities position us very well to be a leader in this space for <unk>.

Time to come.

We believe the Pelican expression technology delivers significant competitive advantages to our partners, including the speed with which they enter into clinical production increase product quality and lower cost of goods.

Our platform is our success rate and more than 80% in producing proteins that have failed and traditional health systems like those that are based on E coli or chose cells.

For anyone looking to get a deeper understanding of the technology I'd encourage you to visit our new Pelican expression Dot com website.

Pelican and supported by our robust patent portfolio and the areas of Biosimilars microbial toxins and vaccine antigen production as well as a growing number of patents that cover the technology itself, including promoters secretion leader sequences methods for high throughput screening protein expression strain engineering and marker systems.

Together there are more than 200 issued patents worldwide and nearly 50 pending applications related to the Pelican and technology.

We were pleased to see Merck's updates last week on the V. One one and for program and expect approval. This year for that program. The one for US and next generation pneumococcal vaccine utilizing pelican and CRM 197, and containing 15 serotypes, which is two more than pfizer's prep and our 13th.

We're also excited about jazz pharmaceuticals, recombinant erwinia, asparaginase, which beautifully illustrates the value of the Pelican technology.

For those who may not know the space, there's been a history of shortages of <unk>, which is an important part of the treatment regimen for patients with Al L.

And our partners at jazz sought to develop a recombinant or wynia asparaginase to provide reliable and high quality supply and the Pelican technology facilitated exactly that.

Jazz submitted a BLA to the FDA and December with potential approval and launch later this year and we look forward to further updates from them.

I also want to highlight one other promising late stage asset and our portfolio and that spar suntan with trivia.

And the first quarter, <unk> announced that percentage and achieved its pre specified interim focal segmental glomerular sclerosis partial remission of proteinuria endpoint or F. P. R E. In the duplex phase III study after 36 weeks of treatment.

Spar suntan demonstrated a statistically significant response on FTE Ari compared with the active control irbesartan and with a P value of 0.009 for.

<unk> also indicated that preliminary results from the interim analysis suggested that percentage was generally well tolerated and showed a comparable safety profile to irbesartan.

Operator: Good afternoon, and thank you for standing by. Welcome to the Ligand Pharmaceuticals quarterly earnings call.

Operator: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press the star and then the number one on your telephone keypad. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Mr. Simon Latimer. Sir, the floor is yours.

Based on the data from the interim analysis and <unk> intends to pursue submission for accelerated approval of <unk> for <unk> and the second half of this year.

Additionally, in the first quarter of the European Commission granted orphan designation disbursed Santana for the treatment of Iga nephropathy, which is a rare kidney disorder and a leading cause of end stage kidney disease.

<unk> is conducting an ongoing global pivotal phase III clinical trial called the protect trial to evaluate the safety and efficacy of spar Santana and for the treatment of Iga Nephropathy and true here has stated that and anticipate top line interim efficacy data coming up fairly soon in the third quarter of this year.

Simon Latimer: Thanks, Rachel. Welcome to Ligand's first quarter of 2021 Financial Results and Business Update conference call. All of our speakers for today's call are in separate locations.

Simon Latimer: Speaking today for Ligand will be John Higgins, CEO, Matt Fore, COO, and Matt Korenberg, CFO. We will use non-GAAP financial measures, and some of our statements will be forward-looking, including those related to our financial condition, results of operations, financial guidance, and the impact of the COVID-19 pandemic. Additional information concerning risk factors and other matters concerning Ligand can be found in our earnings press release and our periodic filings with the SEC. We undertake no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. A reconciliation between the non-GAAP financial measures we discuss and the closest GAAP financial measure can be found in our earnings release issued today. I'd now like to turn the call over to John Higgins. Good afternoon,

And I'll finish off this afternoon with an update on our internal Captisol enabled <unk> program.

We've had inbound partnering interest and this program and as we've assessed that interest we recently decided to take a pause on the start of the clinical trial that we plan to run this year as we realize the potential partner might have their own views as to specific elements of the design of the trial and other components of later stage label, enabling product development.

We don't plan to initiate the trial at this time as we assess the potential partnering or future partner involvement and any downstream clinical work and will plan to update more as plans for them around this asset.

John Higgins: Thank you for joining us on our first quarter 2021 earnings call. This year is off to an excellent start for Ligand, both operationally and financially. It feels great to be well into 2021, as we are now really beginning to leverage our acquisitions from last year scientifically, and the U.S. is advancing into a better phase of the pandemic. As the health environment improves in the U.S., we are seeing an uptick in

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

Great.

Sure. Thank you and as a reminder to ask a question you will need to press Star and then the number one on your telephone keypad and again, just press star and the number one on your telephone keypad and so we draw your question press the pound key please standby, while we compile the Q&A roster.

John Higgins: The Ligand team across the board has done an excellent job managing the business this past year. And now we see increasing interest in licensing our platforms and expanding work with partners, including new and existing big pharma partners, who see the value our technologies bring. Also, I'm very pleased to report business travel is coming back for the leadership at Ligand.

Our first question comes from the line of Joe <unk> from H C. Wainwright, Sir your line is open.

Hey, guys good afternoon, and thanks for taking the question.

Couple of questions first and.

Matt Thanks for the clarity on the Captisol and everything Thats going on.

John Higgins: It's invigorating to be able to interact directly with our scientists once again across our multiple laboratories in the U.S., especially since we added many new members to our team through acquisitions during the pandemic. Matt Foer will give an update on the business, and I note that each of our major tech platforms is performing very well. We have rebranded our protein expression platform from Phoenix to Pelican.

With that.

So with that said I just wanted to let's go back to the core aspect of the business.

As you've been seeing significant growth, even before the rem density or opportunity. So how can you sort of describe your ongoing business development and the types of new deals that you might be able to bring in to continue the growth that <unk> seen.

John Higgins: The team of scientists we brought on board with that company is outstanding, and we see promising opportunities for new deals later this year and good progress on some early stage internal programs. Our iKOGEN Ion Channel Unit is firing on all cylinders, and again, the team driving that platform is A+. They're brilliant scientists with great instincts for partner support that fit so well with our business model. For example, our iKOGEN team closed a major new deal with GSK a few months ago and continues to deliver superb support to our partner Roche for multiple targets.

Yes, Joe.

And from a Youre speaking from a captisol perspective, I think candidly the interest and Captisol.

In terms of inbound interest and sample request, new licensing has really never been higher.

The visibility of a product like that Corey and the impact of Captisol has had.

It's clearly extremely important right.

<unk> is playing a critical role as a standard of care.

Treated approximately 4 million patients and the course of about a year.

John Higgins: The outlook for iQGEN is very promising as we've been investing in an internal program that we believe may be up for licensing in the coming months. Our OmniApp platform has been a big success over the past five years and is primed to really flourish now over the next couple of years.

And that sort of scientific visibility.

Drives a lot of interest from the scientific community and and we see.

A number of new partners, reaching out to us who are interested and captisol.

Largely driven by one its global reach and the validation of the science the intellectual property portfolio, we built up over many years, the drug Master files, which have been enhanced substantially over the last year not only from a safety database perspective, but also from a.

John Higgins: More licensing deals coming online, the most advanced late-stage calendar of clinical and regulatory news, and expectations for our first OmniApp-based product royalties beginning later this year. Five years ago, we started to build our antibody platform, and today, I can say we are very pleased to be a market leader in the space.

John Higgins: Antibody research is a primary focus for R&D investment by Pharma and Big Biotech. Significant amounts of money are being allocated to antibody discovery programs for promising medical targets. We have an end-to-end integrated discovery platform with a deep tech stack built on artificial intelligence and a rich history and foundation in biological intelligence.

<unk> perspective, now that we have for manufacturing sites spread around the globe, including including one here in the U S for.

For final step manufacturing and it's really that reproducibility quality scale all of those things continue to create a lot of visibility for that for the platform.

Got it that's helpful and then Matt I'll just stay with you then hopefully I'm not getting too much into the weeds here, but another one of your partners.

John Higgins: Our partners get access to what we believe is the world's most advanced antibody repertoires and screening technologies to enable unparalleled discovery of next-generation therapeutics. As for Capsosol, we expect that 2021 will be our largest year ever in terms of sales. After stepping up to support Gilead and the Remdesivir Consortium last year, our manufacturing work was radically rescaled to provide many times higher quantities of Capsosol to support demand. However, the trends with the pandemic are shifting rapidly, and forecasting is challenging at this time.

It's really starting to gain visibility with it with their programs and that's <unk>. So I was just curious if you could just give a brief update on that because the Fox a fee and obviously was developed for something different originally but now has a cancer program. I was just curious if you could give an update on the status and maybe two seconds.

And on the mechanism by which efficacy could be seen and our cancer setting.

Yeah.

Yeah, Yeah, Thanks, Joe Youre right to highlight it.

John Higgins: Matt Korenberg will go into that more, and the fact is driving flex in our planning. But nonetheless, we are proud to be serving a vital role supporting this major COVID-19 treatment, and we will be there to support our global partners for whatever they require. Our thoughts are with those in India and other countries who are now facing the worst of the pandemic.

Laser Fox Athene is a program that really.

<unk> has a rich heritage at ligand.

Back to our early discovery days.

And has a large database and data behind it we partnered with <unk>.

Very nice licensing deal largely because of the rich heritage and the data that's been generated over many years.

John Higgins: We acquired Capsol 10 years ago, and it has been an amazing and important success on many levels. In addition to remdesivir, we are proud to know that Capsol is an integral proprietary ingredient in many life-saving medicines. The outlook for the rest of the year is promising as we see as many as four new Royalty Bearing Partner products being approved and getting launched. Two are from our Omniad business, and two are from our Pelican unit.

And just as background, it's a potent.

Selective estrogen receptor modulator or <unk>.

And the team at <unk> has been making fantastic progress progressing that quickly through trials and in metastatic breast cancer and they all.

<unk> announced a partnership with Lilly and and so they're progressing some trials with Lilly as well. So we're continuing to keep an eye on that and cheering them on and you're right to bring it up because it's a program that our science team is actually very excited about.

Matthew E. Korenberg: And as we look to next year, we have growing anticipation for the potential approval of Sparsantan from Trevere. Given the quality of clinical data Trevere announced in Q1, along with the market need and the size of our royalty, we believe this product has the potential to become one of our largest royalty-bearing assets. And with that, I will turn the call over to Matt Korenberg for a more detailed review of our financial performance. Thanks, John.

And sees a lot of potential promise and and looks forward to the pending data got it I appreciate the update guys.

Thank you. Our next question comes from the line of Larry Solow from CJS Securities. Sir Your line is open.

Matthew E. Korenberg: The first quarter of 2021 provided a strong start to the year for Ligand. Total revenue for the quarter was $55.2 million, up from $33.2 million a year ago. With respect to royalties, royalty revenue increased to $7.1 million from $6.6 million a year. However, the pandemic negatively impacted sales for many pharmaceutical products in Q1, including Amgen. Amgen reported $251 million in sales for Kyprolis, our largest royalty-bearing asset. However, these sales were lower than we expected.

Great. Thanks, and good afternoon everybody.

Okay.

Clearly a bunch of moving parts can you maybe just Tom just on the outlook for it.

It sounds like just just to clarify so.

Captisol and it sounds like the narrative just maybe moving.

And directions, a little bit up and down but overall are you still confident and sort of hitting that $200 million number or does it seem like we're reading out the range could be.

Matthew E. Korenberg: Amgen, excuse me. Amgen commented on their earnings call last week that they experienced negative pressure specifically on their oncology business due to the impact of the pandemic on patient treatments in Q1. But we've read that Amgen and the industry overall expect oncology sales to ramp back up later this year with the success of COVID-19 vaccinations and as pandemic trends improve in major commercial markets. Capital sales were $31.3 million in the quarter, and this is up 48% from $21.1 million a year ago.

And much lower the 200 or maybe over 200 and seems like Theres, just more volatility around that and the short run is that fair to say.

Yes, Larry I'll add a comment and then that kornberg and can double back and some of his remarks from her.

It is correct.

And the last.

Really six weeks or so has been.

And that partly enormous success for the vaccine rollout the efficacy range.

Now I'll say the abundance of vaccine availability.

Matthew E. Korenberg: Our Q1 capsule revenue came in a bit lower than we expected as the business was impacted by the extreme cold weather in the southern United States, where one of our new capsule manufacturing sites is located. As a result of the weather, the site paused manufacturing for an extended period of time in February, pushing out production of approximately 12 million capsules of capsaicin-finished goods.

And it's it's really a positive for getting this pandemic under control at least and.

And in the U S and some other.

A major markets.

That is impacting.

Decisions, what we are hearing we're talking to experts at this.

Impact from the decisions around stockpiling and while stockpiling for Antivirals is absolutely strategy. We've seen are deployed in other cases here. If there is an abundance of vaccine efficacy is that high.

Matthew E. Korenberg: Our contract revenue in Q1 2021 was $16.8 million compared with $5.5 million a year ago. The 2021 quarter includes strong contract revenue from all our technologies, with approximately $4 million from Omniab, $3 million from Pelican, and $4 million from Icogen.

And the focus is more on treatment on and treating.

And and what we're seeing is lower stockpiling outlook right now and that's offset by India. A few other markets, where frankly, the incidence rate is skyrocketing and and.

Matthew E. Korenberg: $3 million from Vernalis and $2 million from various new chemical entities, Captosol, and other technologies. While Q1 might be higher than the average we expect for the year, it illustrates the diversity and robustness of our contract revenue. Adjusted diluted EPS for Q1 2021 was $1.41 compared with $0.89 last year, or an increase of 58%. The strong earnings performance this quarter was in part driven by a large volume of contract milestone payments, which are typically 100% gross.

And we are seeing a very very meaningful and.

And I pick up of <unk>.

Demand from our consortium partners.

And so these are these are a bit of and offset theyre happening at the same time going over the last six weeks or so since the end of last quarter into April.

Profit from that as Matt said, our guidance is unchanged.

And we feel good about the business Q1, and royalties a little below expectation, we think it's going to come back.

Partnering revenue is meaningfully higher for Q1, and we see that trend continuing and capsule again and I think we need more time to really square up on exactly where we'll land this year, but debt.

Matthew E. Korenberg: We exited the quarter with approximately $339 million of cash, cash equivalents, and short-term investments. This cash balance reflects the repurchase of $104.5 million of convertible bonds during Q1. We now have about $391 million of face value of convertible bonds.

That is our outlook right now.

Alright, Okay, and it sounds like just to touch on that it sounds like on the flipside your contract revenue, although hard I know some of that clearly is timing and I know you don't guide for the quarter.

Matthew E. Korenberg: Turning now to financial guidance, we're leaving our guidance for 2021 revenue and adjusted diluted EPS unchanged. While we are guiding for total revenues of approximately $291 million, we expect the mix of revenue and the expected revenue level may fluctuate significantly from our initial expectations, mostly due to evolving demand for capsaicin-related remdesivir. The outlook for capsule sales will likely fluctuate as the year progresses, given the highly unpredictable nature of the pandemic both in the United States and worldwide.

That seems like maybe that's ahead of the pace.

Net.

Yeah, Matt you want to comment yeah, Yeah, that's right Larry.

We as we said on.

And these calls generally that theres a portfolio of contract payments and events that are happening at any one time and were always trying to.

Give you and investors win.

A window into what we think is going to happen and this year and probability adjusted view of that and.

Matthew E. Korenberg: In the U.S., the successful vaccine rollout was better than expected and, combined with the high vaccine efficacy, has resulted in a reduction in hospitalizations that has led to lower demand for remdesivir. In addition, based on our discussions with external experts, we now estimate minimal government stockpiles of remdesivir around the world.

Early on this year, we've had a lot more success than.

And the averages would say and so.

First quarter came in a little higher and the rest of the year looks like it's still on track so.

At the moment it does look like there's some nice upside from contract payments, but.

And it's offsetting a little bit some of the.

Matthew E. Korenberg: Our initial expectations for 2021 included government stockpiling, as we described at our Analysts' Day last year. On the flip side, the urgent need in India has significantly increased demand from the consortium partners that are manufacturing remdesivir for that reason. Given this highly dynamic environment, we've seen rapid changes in the evolution of demand signals, and accordingly, we may update total revenue guidance as the year progresses, either higher or lower. Despite these uncertainties, we are closely monitoring all of our revenue, expenses, and income, and we plan to work to adjust accordingly under the various scenarios. We believe we can deliver our outlook for adjusted diluted EPS of approximately $6.15.

Comments that John made about the other business other parts of the business but.

Right now overall the package still looks quite strong.

And with Kyprolis and obviously the main drive of royalties I think down 10%.

And just less multiple myeloma and patient starts I guess, but and.

Unfortunately, these patients don't go away right. So.

Not like Youre missing a haircut.

And tough to.

Either right.

Essentially hopefully for their sakes would get back and get back to the doctors and you would think that we'd start to ramp up, especially with most of a lot of other medical things are coming back and kind of.

Kind of upon the strength that that piece, where you would think it would be one of the most important one for patients is not coming back from Kraft and any thoughts yet.

Matthew E. Korenberg: With respect to quarterly pacing, as discussed on our call, our last call, we expect our royalty line to follow the typical trend with a lower Q1 and then increasing each subsequent quarter through Q4. Our expected pacing for capital quarterly revenue has evolved from previous guidance. Q2 looks to be significantly higher than Q1 as a result of the extreme weather issues I've mentioned.

Yeah, no good comments and the last five days.

And it has been very helpful. I think honestly for analyst for for US. We are monitoring this closely but a lot of earnings call.

And our observation and currently we got the royalty report when they announced for Manson, but big pharma and big oncology drugs.

Matthew E. Korenberg: We currently expect Q2 capsule sales to be approximately $50 million, and depending on production, timing, export logistics, and deliveries, sales for the quarter have the potential to be even higher. Between Q3 and Q4, we expect the second half of the year will be more heavily weighted to Q4, but we should have greater clarity on that when we report our second quarter results. Lastly, our contract revenue for the remainder of the year is expected to be realized about 25% in each of Q2 and Q3, and 50% in Q4.

Last week and at the Analyst report their earnings call.

It really surprised from Baxter.

Right right.

The performance off of these these major products was considerably lower than the street expected.

It is.

Peers to be uniformly explained by low patient visits in January and February the worst days of the pandemic for the U S and other major markets and so there's a lot of consistency.

And Amgen and these other companies were following other analogs that might rebound and the markets are saying Q1 was soft here's why but to your point the disease. It persists.

Matthew Gregory Hewitt: This is largely driven by the expectation that the $6 million Travir NDA milestone will be earned in Q4. Regarding strategic M&A, we continue to maintain an active evaluation of M&A operations, as well as our Capital Deployment Strategy Overview. Our main focus now is on assets and technology that will further bolster our best-in-class OmniAbAnybody platform. Just before I turn the call over to Matt Fore, I'll direct listeners to review our Q1 earnings press release issued earlier today and available on our website for a reconciliation of our adjusted financial results with GAAP financial results. With that, I'll turn the call over to Matt for some comments on our portfolio and pipeline. Thanks, Matt.

The life threatening the ex the cancer and these patients do need their therapies. The markets are recovering restrictions are being lifted and those markets are coming back so while it was.

And surprised a bit of a disappointment last week, where all processing the market seems to be now recovering very nicely. Those stocks are coming back and people realize this is really a blip.

And at least that's kind of the react and what we're monitoring so.

Accordingly, while we may have given up a bit of revenue in Q1, we can see our current coming back and partly the growth of the core brands, even mellow to Poland, but also the potential launch of new products by year and I can all debt we feel good about.

Matthew Gregory Hewitt: This afternoon, I'm going to review the status, plans, and recent developments involving a couple of our core technology platforms, starting with OmniApp. I'll then provide updates on certain partner programs with major events expected later this year, and also update plans for our Capsosol-enabled Iohexol program. Omniab is our most valuable platform technology, and it continues to offer a powerful combination of advanced antibody discovery. Partners who license our Omniab technologies are supported by a team of respected scientists and a track record of quickly discovering high-quality antibodies.

Got you and then if I just missed that and one more question. Thanks for the update on the on Phoenix for Pelican, and Merck and jazz two large partners any update on <unk> and the <unk>.

Similar to it for Teo.

And here are some news about during 2021 yeah.

Yeah Larry.

So with regard to tear paratype so alvin.

Elvidge and generated positive human factors data for the last remaining true.

File that needed to be run.

Matthew Gregory Hewitt: Two Omniad partners have submitted applications for approval, and we expect both regulatory decisions this year, which, if approved, we believe will be the first of many for the platform. Specifically, Seastone Pharmaceuticals announced recently that their investigational omniab-derived anti-PDL-1 antibody, Sugamalumab, has been granted breakthrough therapy designation by the China NMPA for the treatment of patients with relapsed or refractory extrad Sugamalamab has also been granted orphan drug designation for the treatment of T-cell lymphoma and breakthrough therapy designation by the USFDA back in October of last year. An NDA for Sugamalamab is under review at the NMPA for stage 4 non-small cell lung cancer.

That was submitted to the FDA and January.

And.

We obviously are in close contact with Allergan.

And have a very collaborative relationship with them. The FDA has confirmed that the review is in progress and that they will quote endeavor to complete the review and a timely manner unquote again Theres no could do for date for this but it's actively under review at the FDA.

Got it fair enough great. Thanks, guys I appreciate it.

Thank you. Our next question comes from the line of Jacob Johnson from Stephens incorporated Sir Your line is open.

Hey, guys. This is mason on for Jacob just one or two quick ones from me here.

First looking at Phoenix were now Pelican for the $33 million and revenue that was expected to come from this platform and 2023. If you could is there any color you could give us in terms of their top for products call. It color on maybe if you had to rank order these top for products.

Matthew Gregory Hewitt: And Seastone has said it expected a determination with respect to this NDA in the second half of this year. As a reminder, Seastone and Pfizer formed a strategic alliance around the development and commercialization of Sugamala Mab in China. The other Omniab program I'll highlight briefly today is Zimbarilumab, which is an investigational Omniab-derived anti-PD-1 monoclonal antibody that was discovered using Omnirat. Gloria Pharmaceuticals filed its NMPA in China for recurrent refractory classical Hodgkin's lymphoma, with approval also expected this year.

Which was going to contribute the most down to the smallest and now.

Yeah, Hey, thanks.

Thanks for the question.

We continue to think that the pelican.

<unk> business is going to be a significant contributor both this year and long term.

The breakdown of that we didn't give those numbers specifically, but generally speaking you can think debt the.

Matthew Gregory Hewitt: In addition to the pre-commercialization regulatory work Gloria is doing, Arcus Biosciences is conducting Phase II studies including Zimbarilimab and first-line metastatic non-small cell lung cancer in combo with an anti-tigid antibody and an adenosine receptor antagonist, and also Phase III work that started in recent months in combination with an anti-TIGIT in PD-L1 positives, locally advanced or metastatic non Arcus and Gilead formed a 10-year partnership last year to co-develop and co-commercialize Arcus' product candidates, including ZimberlaMap.

Serum Institute.

<unk> seen.

And India has already launched.

And so we're already generating royalty revenue from that program.

The.

Jazz program that Matt for talked about on the call already.

<unk>.

We've got some milestones coming in from that program through.

The BLA filing but also.

If and when it gets approved.

And then similar on the Merck vaccine program.

The jazz and Merck program, both companies have said they intend to try and launch this year.

In addition.

Matthew Gregory Hewitt: We continue to actively innovate and invest in our Omniab platform through internal R&D and technology development through collaborations with leading academic centers like the Scripps and Wistar Institute and through targeted bolt-on acquisitions. Our partners place considerable value on the work we do, and they understand the importance of quickly and efficiently discovering fully human antibodies in a variety of formats. Our OmniAb technology is differentiated by leveraging artificial intelligence, or AI, capabilities combined with our deep history of novel genetic engineering and the biological intelligence, or BI, of our proprietary transgenic animals. The AI elements allow us to operate a highly efficient business model in serving our broad partner base.

Two successful approvals this year, so we'll get some royalty contribution there and then lastly on the.

And the Allergan Terror Paratype program.

Without a T approval they'll continue to ramp their sales and prescriptions there.

But with a T approval would accelerate both.

And the pace of revenue on the royalty side, but also there are some milestones tied to the approval there so.

Those are big for contributors, but theres a lot of work being done on behalf of partners.

Other than those for us well, that's generating contract revenue for us.

So it's kind of a mix of all of the above got.

Got it thanks for that Matt.

Matthew Gregory Hewitt: Our best-in-class technology stack is enabling our Omniab business team to secure new license agreements with expanded economic terms. We see a trend in the industry toward more end-to-end discovery partnerships and believe that the tech stack we have assembled and developed is ideally suited to meet those needs. We have an updated and aggressive investment plan for Omniab in 2021, given the exciting opportunities that our recent acquisitions have presented. We're adding staff and plan to increase our laboratory footprint at our facility in Emeryville, California, as we look to consolidate our Menlo Park and Emeryville operations into a single facility here in Emeryville. We're making these investments in technology for the long term and in preference to single asset types of investments that we generally invested in previously.

Just one more understanding that 2020 was a pretty active year for you guys on the M&A front.

As we look forward and more of the drug pipeline continues to shift towards biologics and as we think about long term capital allocation.

Would you think we'd continue to see biologics as an area of focus for capital and capital deployment.

Yeah, I think that's a good way to summarize it but I think generally speaking.

And we're focused on on.

Enhancing the technologies across the ligand platform.

But I think as I said and Matt for referenced in his comments as well.

Adding technology.

To the the already kind of industry, leading tech stack of omni app.

Matthew Gregory Hewitt: As John mentioned, during the quarter, our team rolled out new branding for the Protein Expression Technology platform that we gained through the Phoenix acquisition last year. And this platform is now known as Pelican Expression Technology. Our pelican expression technology, which is a differentiated platform in the industry, leverages proprietary strains of Pseudomonas florescens to express complex antibody derivatives and other engineered next-generation protein modalities. It's known and understood as a technology that makes the manufacturing of complex drugs possible.

Will be important for the business as we go forward and so.

Certainly our focus on that area and obviously that's directly.

Bolstering the antibody space so.

Generally speaking I think you're kind of right and you're thinking of a focus.

Got it alright, thanks, guys.

Thanks.

Our next question comes from the line of <unk> Prasad from Barclays. Sir Your line is open.

Good afternoon, everyone and thanks for the questions. So just a couple pending for me.

Matthew Gregory Hewitt: These complex drugs have the potential for greater specificity, improved side effect profiles, and ultimately successful therapeutic outcomes. These characteristics make this an area of substantial biopharmaceutical development. We're leveraging a rich history with the platform and high-throughput screening technologies and proprietary computer-driven automation to identify robust production strains very quickly. We believe that our CMC development prowess and our state-of-the-art analytical capabilities position us very well to be a leader in this space for some time to come.

Firstly on spar sent on can you help us think about the longer term and body of this program. After the after the phase III data, which came out and I still like and its footing.

<unk> 2023, and royalties are anywhere between $10 million to $20 million. One secondly on captisol a lot of color, but I just want to understand if there is any variations and economics for ligand based on whether they will sell it to gilead, our ex licensing partners on Mercury.

And the reason I'm asking is to try to understand.

Matthew Gregory Hewitt: We believe the Pelican Expression Technology delivers significant competitive advantages to our partners, including the speed with which they enter into clinical production, increased product quality, and lower cost of goods. Our platform has a success rate of more than 80% in producing proteins that have failed in traditional host systems like those that are based on E. coli or CHO cells. For anyone looking to get a deeper understanding of the technology, I'd encourage you to visit our new PelicanExpression.com website.

The upside potential for the $200 million and <unk> guided to Andrea for them now in light of.

Potential stockpiles, which could crop up based on what's happening currently thanks.

Thanks for that.

Yeah.

So on.

For sinton.

We gave some guidance on <unk> for Cynthia and on the last couple of calls and.

Nothing's really changed from our guidance post and approval.

Surveyed.

Matthew Gregory Hewitt: Pelican is supported by a robust patent portfolio in the areas of biosimilars, microbial toxins, and vaccine antigen production, as well as a growing number of patents that cover the technology itself, including promoters, secretion leader sequences, methods for high-throughput screening, protein expression, strain engineering, and markers. Together, there are more than 200 issued patents worldwide and nearly 50 pending applications related to Pelican technology. We were pleased to see Merck's updates last week on the V114 program and expect approvals this year for that program. V114 is a next-generation pneumococcal vaccine utilizing Pelican CRM197 and containing 15 serotypes, which is two more than Pfizer's Prevnar 13.

The Ah <unk>.

Our research communities views of the program and it does look like day.

Still have and that $10 million to $20 million and potential royalty and 2023 and.

2025 or so.

And number of.

Closer to four or $500 million of.

And user sales, which translates to a 35% to $45 million of royalty to us.

Ultimately I think folks see the product, peaking somewhere between 500 million and $1 billion.

On the one indication and then if both indications are approved.

<unk>, and Iga nephropathy, and potentially exceeding $1 billion over time and at a 9% royalty that so that's upwards of $100 million of royalty for ligand and so.

Obviously, a very important product and we're excited to see the continued progress there.

Matthew Gregory Hewitt: We're also excited about Jazz Pharmaceuticals' recombinant Erwinia asparaginase, which beautifully illustrates the value of the Pelican technology. For those who may not know the space, there's been a history of shortages of Irwinase, which is an important part of the treatment regimen for patients with ALL. Our partners at Jazz sought to develop a recombinant Irwinia asparogenase to provide a reliable and high-quality supply, and the Pelican technology facilitated exactly that.

Turning to Captisol.

Generally speaking, we haven't disclosed specific economics.

For any of the partners, but I think with what we've said is that on average.

The.

Economics to ligand are about the same across the.

Universe of partners that are.

Buying room desk capsule for use with whom debt severe so.

Matthew Gregory Hewitt: Jazz submitted a BLA to the FDA in December with potential approval and launch later this year, and we look forward to further updates from them. I also want to highlight one other promising late-stage asset in our portfolio, and that's Sparsentan with Treveir. In the first quarter, TREVIR announced that Parcentan achieved its pre-specified interim focal segmental glomerular sclerosis partial remission of proteinuria endpoint, or FPRE, in the duplex phase 3 study after 36 weeks of treatment.

It's really more of a question of demand and need.

And we've seen as we.

Comed it already significant increase and the demand out of India.

Matthew Gregory Hewitt: Sparsantan demonstrated a statistically significant response on FPRE compared with the active control, Urbisartan, with a p-value of 0.0094. Trevor also indicated that preliminary results from the interim analysis suggested that Barsentan was generally well tolerated and showed a comparable safety profile to Erbisartan. Based on the data from the interim analysis, Trevere intends to pursue submissions for accelerated approval of Sparsantan for FSGS in the second half of this year. Additionally, in the first quarter, the European Commission granted orphan designation to Sparsantan for the treatment of IgA nephropathy, which is a rare kidney disorder and a leading cause of end-stage kidney disease.

Over the last two or three weeks and.

And.

And the U S. The demand is going the other direction. So it's it's offsetting and.

Week to week, even it's incredibly dynamic so we are.

Honoring it very actively and we'll keep everybody updated okay. Thanks, Matt if I could get desperate and one more question I saw that recently that.

And the loop and settled a bad and straight on MLR.

And I was just trying to think of the implications there doesn't seem to any of the major patent challenges that for need to be aware of.

And from <unk> perspective, thanks.

Yes.

Yeah go ahead, yeah <unk> yeah.

Youre correct.

And the court documents disclosed at ligand and loop and settled the patent case over even MELA terms are that are undisclosed and.

Generally we will update on those.

Adams further when we file our.

File our cues as well but.

That's pretty much it.

Update we can provide there given the terms of debt settlement great.

Matthew Gregory Hewitt: TRIVIR is conducting an ongoing global pivotal phase 3 clinical trial called the PROTECT trial to evaluate the safety and efficacy of sparsantan for the treatment of IgA nephropathy. Antrovir has stated that it anticipates top-line interim efficacy data coming up fairly soon in the third quarter of this year. And I'll finish off this afternoon with an update on our internal captosol-enabled iohexol program. We've had inbound partnering interest in this program, and as we've assessed that interest, we recently decided to take a pause on the start of the clinical trial that we plan to run this year, as we realize a potential partner might have their own views as to specific elements of the design of the trial and other We don't plan to initiate the trial at this time as we assess the potential partnership or future partner involvement in any downstream clinical work.

Great. Thank you.

Thank you. Our next question comes from the line of Matt Hewitt from Craig Hallum Capital. Sir Your line is open.

Good afternoon, gentlemen, thanks for taking the questions and.

And maybe the first one and this might be best for Matt for last year was a record year for Captisol inquiries and samples and I'm. Just curious how are those discussions going and the conversations that you started having last year are you seeing some of those initial trials or samples turning.

Into clinical trials or maybe an update there.

Yeah. Thanks Pat.

No doubt the visibility that's been created around the Captisol technology as I was describing earlier.

Can use to bring new potential partners to us and folks who know they've got compounds that have solubility or stability issues.

And they take a lot of different forms right, sometimes sample requests can take a while to translate into progressing through a development program, sometimes folks know exactly what they need and can jump right into clinical trials. So there's a lot of variety and texture, there, but overall.

Operator: And we'll plan to update more as plans form around this aspect. And with that, I will turn the call back over to the operator for questions.

Operator: Sure, thank you. And as a reminder, to ask a question, you will need to press the star and then the number one on your telephone keypad. Again, just press the star and the number one on your telephone keypad. And to withdraw your question, just press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from the line of Joe Pantginis from HC Wainwright. Sir, your line is open. Hey guys, good afternoon, thanks.

We continue to see very strong inbound interest a lot of diversity.

Partners that were shipping to.

Increased diversity in the types of programs they are pursuing.

Not only just injectable drugs, but inhaled drugs and internet.

Intranasal <unk>.

Joseph Pantginis: Hey guys, good afternoon, thanks for taking the question. A couple of questions first, and Matt, thanks for the clarity on captazol and everything that's going on with that. So with that said, I just wanted to go back to the core aspect of the business, you know, as you've been seeing significant growth even before the Remdesphere opportunity. So how can you sort of describe your ongoing business development and the types of new deals that you might be able to bring in to continue the growth?

Gel caps.

And.

Topical forms a whole variety of.

<unk>.

Forms that partners are pursuing which is also really a testament to the scientific work that our teams put in and the safety database and technical database, that's been built up over time.

That's great. Thanks, and then maybe one regarding the Captisol enabled <unk>. Thank you so much for the update on that I'm curious how long do you anticipate giving these partners to make a decision obviously I think the expectation or the hope would be that if you didn't get a partnership signed you.

Unknown Executive: Yeah, Joe, from a Captosol perspective, I mean, candidly, the interest in Captosol, in terms of inbound interest, sample requests, new licensing, has really never been higher. We've, you know, the visibility of a product like Veklery, and the impact that Captosol has had, it's clearly extremely important, right? Veklery is playing a critical role as a standard of care.

Could get that through a phase II and potentially launch and and run that program yourself, but obviously, if youre going to have a meaningful dialogue with partners you give them. Some time I'm just curious how long that time might be.

Thanks.

Yeah.

Yes.

Hey.

Matt. Thanks for the question deals are always dynamic and.

Unknown Executive: It's treated approximately 4 million patients in the course of about a year. That sort of scientific visibility drives a lot of interest from the scientific community. And we see a number of new partners reaching out to us who are interested in Captosol, largely driven by, one, its global reach, the validation of the science, the intellectual property portfolio we've built up over many years, the drug master files, which have been enhanced substantially over the last year, not only from a safety database perspective, but also from a manufacturing perspective, now that we have four manufacturing sites spread around the globe, including one here in the Got it. That's helpful. And then, Matt, you know, I'll just stay with you then.

Every deal is a little different but I think generally speaking.

We would anticipate.

Sure.

A couple of months at least to figure out where the partners are going to want to go and if they're going to want to.

Move forward with a trial similar to how we designed it or different or.

Or move forward and also.

I think on the short and it's a couple of months on the long and it could drag out, but generally speaking and it gets its several months.

Understood. Thank you.

Thanks.

Thank you. Our next question comes from the line of Scott Henry from Roth Capital. Sir Your line is open.

Thank you and and good afternoon, just a couple questions.

The first two.

On the royalty line.

Would you expect.

Second quarter could be and improving quarter or all the way back to normal already and I certainly would expect second half to be at normal rates, but just curious how you think about second quarter. If you have any comments on that.

Unknown Executive: Hopefully, I'm not getting too much into the weeds here, but another one of your partners is really starting to gain visibility with their programs, and that's Sermonix. So, I was just curious if you could just give a brief update on that because Foxaphene obviously was developed for something different originally but now has a cancer program. I was just curious if you could give an update on the status. 2 seconds on, you know, the mechanism by which, you know, efficacy. Yeah, yeah, thanks, Joe. You're right to highlight it.

Yeah. Thanks, Scott.

Look it's hard for us to say exactly but the commentary that we're seeing out of many of the large pharma partners that are marketing products that are not.

Necessarily tied to our royalties and also some that are tied to our royalties. It seems that the messages are trying to deliver is.

Debt patient demand is back or getting back and that they expect it missed patient visits and Q1 and.

Unknown Executive: You know, Lazathoxazine is a program that really has a rich heritage at Ligand, back to our early discovery days, and has a large database of data behind it. We partnered it with Cermonix, a very nice licensing deal, largely because of the rich heritage and the data that had been generated over many years. Just as a background, it's a potent selective estrogen receptor modulator, or CERM. And the team at Cermonix has been making fantastic progress, progressing so quickly through trials in metastatic breast cancer.

And early Q2 should be made up and the back half for the year. So.

I think at a minimum.

And we would expect.

For a true.

And two.

Increasing quarterly numbers, but.

Some of the comments could certainly be interpreted to.

Anything mist will be made up and the back half for the year, which is.

Why you've seen a lot of these larger pharma companies perhaps.

Perhaps missing a bit on Q1, but not changing guidance for the year. So.

Unknown Executive: They also announced a partnership with Lilly, and so they're progressing some trials with Lilly as well. So we're continuing to keep an eye on that and cheering them on, and you're right to bring it up, because it's a program that our science team is actually very excited about and sees a lot of potential promise in and looks forward to the pending data. Appreciate the update.

And at the moment, that's our hope and expectation.

Okay. Thank you that's helpful. And then could could you remind me of what this for certain what amounts disbursed and milestone is in Q4.

Yes, it's very it's.

Just a smidge under 6 million and $5 $99 million.

Unknown Executive: I appreciate the updates, guys.

It was disclosed a couple of years ago, and a filing by both than retrofit and and then also us so.

Operator: Thank you. Our next question comes from the line of Larry Solow from CJS Securities. Sir, your line is open.

And it's out there specifically to the dollar.

Lawrence Scott Solow: Great, thanks, and good afternoon, everybody. Clearly, there are a bunch of moving parts. Can you maybe just give an outlook on that. And it sounds like just to clarify, so Capsosol sounds like the narrative there is, [inaudible]

Okay, Great and then a final just clarification.

The two approvals in China I believe the Keystone line is expected in the second half of 'twenty one.

And have you given any sort of I realize theres not produced for dates for these but any any target for the Gloria approvals is that also a second half 'twenty one.

Yes, Scott. It was you are correct C stone.

We anticipate it would be and the second half year Glorious NDA was accepted on February 18th of 2020.

Unknown Executive: over 200. Seems like there's just more volatility around that in the short run.

So that's when when and NPA confirmed acceptance of the NDA.

Unknown Executive: .. .. .. ...

Unknown Executive: Yeah, yeah, Larry, I'll add a comment. And then Matt Kornberg can double back on some of his remarks. Yeah, your summary is correct. The last really six weeks or so have been a period of partly enormous success with the vaccine rollout, the efficacy rate, and now, I'll say the abundance of vaccine availability. It's really a positive for getting this pandemic under control, at least in the US and some other major markets.

And so difficult to say exactly when the timing will be but I think generally folks are anticipating and the second half of the year.

Okay, great. Thank you for taking the questions.

Thank you. Our next question comes from the line of Dana Flanders from Guggenheim.

Ma'am your line is sales.

Great. Thank you for the questions. My first one was just on the Biosimilar opportunity for you guys on for payroll and Europe, just wondering how competitive the market is that I know and the U S.

Unknown Executive: That is impacting decisions, what we're hearing, you know, we're talking to experts, this, it's impacting the decisions around stockpiling. And while stockpiling for antivirals is absolutely a strategy, we've seen it deployed in other cases. Here, if there's an abundance of vaccine, the efficacy is that high.

You have the potential to be exclusive for some time, so just trying to think of the relative.

Contribution of for Teo kind of U S versus ex U S or versus Europe and.

And then just my second question can you remind me is the generic consortium.

How tied is that to India and I'm wondering if you're.

Unknown Executive: The focus is more on treatment for treating the disease. And, what we are seeing is a lower stockpile outlook right now. That's offset by, you know, India, and a few other markets, where, frankly, the incidence rate is skyrocketing.

Captisol and from disappear is being used in other kind of emerging markets, where we're seeing a spike and cases and the potential for that thank you.

Unknown Executive: And we are seeing a very, very meaningful pickup in demand from our consortium partners. So, this is a bit of an offset, they're happening at the same time, literally the last six weeks or so, just, you know, since the end of last quarter into April, and we're processing it. As Matt said, our guidance is unchanged, we feel good about the business, Q1 royalties are a little below expectations, but we think it's going to come back, partnering revenue was meaningfully higher for Q1, and we see that trend continuing, and Capsol. Again, I think we need more time to really square up on exactly where we'll land this year, but that is our outlook right now.

Yes, Dana Hawkeye can comment on the on the consortium and Matt Kay May want to comment on that day.

Europe and for Tao.

So the consortium actually it's not only the members of the consortium and not only supply India, but.

127, and other countries as well most of which are low and middle income countries.

And that obviously includes India. So.

And they're obviously supplying other other countries as well.

In addition in addition to India.

Yeah, Thanks, Matt and Dana on the Forte or Ter peptide biosimilar opportunity.

Unknown Executive: Right, okay. No, and it sounds like just to touch on that, it sounds like on the flip side, your contract revenue, although I know some of that clearly is timely, I know you don't die to the quarter, but that seems like maybe that's ahead of the pace. Matt?

It's a good question important to point out debt.

The product rights that we hold true Pelican and now through Elvidge and and others are actually worldwide rights. So we do have the potential to generate royalty or profit sharing around the world.

Unknown Executive: Yeah, Matt, you want to comment on that? Yeah, that's right, Larry. You know, we, as we've said on these calls generally, that there is a portfolio of contract payments and events that are happening at any one time. And we're always trying to give UN investors a window into what we think is going to happen this year and a probability-adjusted view of that. And early on this year, we've had a lot more success than the averages would say.

I think as.

As folks probably know the and.

Environment outside the U S is more dynamic theirs.

Country to country and region to region, there's many biosimilars already approved.

Unknown Executive: And so the first quarter came in a little higher, and the rest of the year looks like it's still on track. So at the moment, it does look like there's some nice upside from contract payments, but it's offsetting a little bit some of the comments that John made about the other business, other parts of the business. But right now, overall, the package still looks quite strong. And with Kyprol, it's obviously the main driver of royalties, I think, down 10%; it's just less multiple myeloma.

And lots of different.

Territories in Europe, specifically.

I'd say that's probably.

A positive debt most of the territories already have approvals and our products are launching but.

The.

Competition and those markets make the opportunity for us a lot smaller.

Probably the second largest opportunity for us outside the United States is actually probably in China.

Where the product is partner there and our.

Partners is moving towards approval.

And then obviously the U S will be the largest of the three general regions.

Unknown Executive: The patient starts, I guess, but, you know, unfortunately, these patients don't go away, right? So it's not like you're missing a haircut. I mean, these patients have to either, right, eventually, hopefully, for their sake, get back and, you know, get back to the doctors. And you would think that would start to ramp up, especially with most of the other medical things coming back. I kind of find that, that piece, I would think would be one of the most

Between the U S Europe and Asia.

Yeah.

Got it thank you.

Thanks.

Thank you there are no further questions at this time presenters. Please continue.

Thank you operator appreciate it appreciate people turn out to day and questions.

It's exciting to be and 2021 and we've talked about the acquisition for the foundational.

Unknown Executive: One of the most important ones for patients is not coming back so fast. Any thoughts on that?

Unknown Executive: Douglas Goldstein, CFP®, is the director of Profile Investment Services and the host of the Goldstein on Gelt radio show. Douglas Goldstein, CFP®, is the director of Profile Investment Services and the host of the Goldstein on Gelt radio show.

Fortifying, our army business, expanding our technology offering.

And we're really pleased to see the integrations going well, we look forward to updates throughout the year. We are at a few virtual conferences coming up.

Early June we'll be at Craig Hallum, and Jefferies and then in July we will be at the debt.

Today's conference. So thank you very much we appreciate your coming up.

This concludes today's conference call. Thank you for participating you may now disconnect.

Unknown Executive: It appears to be uniformly explained by low patient visits in January and February, again the worst days of the pandemic for the U.S. and other major markets. And so there's a lot of consistency in Amgen and these other companies we're following, other analogs that might read on the markets, saying Q1 was soft, here's why. But to your point, the disease persists, the life-threatening nature of the cancer, and these patients do need their therapies.

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Unknown Executive: The markets are recovering, restrictions are being lifted, and those markets are coming back. So while it was a surprise, a bit of a disappointment, last week we were all processing, the market seems to be recovering very nicely now. Those stocks are coming back, and people realize, you know what? This is really just a blip.

And then.

And.

And.

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Unknown Executive: At least that's kind of the reaction we're monitoring. So accordingly, while we may have given up a bit of revenue in Q1, we do see our trends coming back, and partly the growth of the core brands, even Mela and Coprolis, but also the potential launch of new products by year-end. Again, all that we feel good about.

Your line.

And.

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Unknown Executive: Gotcha. And if I may slip in one more question, Thanks for the update on Phoenix or Pelican, on Merck and Jazz, your two large partners. Any update on Teraparatide and the biosimilar to Forteo? Is that something we might hear some news about in 2021? Yeah, Larry, so with regard to Terraparatide, Alvigen generated positive human factors data for the last remaining trial that needed to be run, that was submitted to the FDA in January, and we obviously are in close contact with Alvagen and have a very collaborative relationship with them.

Okay.

And it will be.

Unknown Executive: The FDA has confirmed that the review is in progress and that they will quote endeavor to complete the review in a timely manner unquote. Again, there's no PDUFA date for this, but it's actively under review at the FDA.

And Joel.

Unknown Executive: Got it. Fair enough. Great. Thanks, guys. I appreciate it.

Operator: Thank you. Our next question comes from the line of Jacob Johnson from Stephens Incorporated. Sir, your line is open.

Operator: Hey guys, this is Mason on for Jacob. Just one or two quick ones from me here.

Unknown Attendee: First looking at Phoenix, we're now Pelican, for the 33 million in revenue that was expected to come from this platform in 2023. If you could, is there any color you could give us in terms of their top four products, color on maybe if you had to rank order these top four products, which would contribute the most down to the smallest amount? Yeah. Hey, Mason.

Unknown Executive: Thanks for the question. We continue to think that the Pelican business is going to be a significant contributor, both this year and in the long term. The breakdown of that, we didn't give those numbers specifically, but generally speaking, you can think that the Serum Institute vaccine in India has already launched, and so we're already generating royalty revenue from that program. The jazz program that Matt talked about on the call already, we've got some milestones coming in from that program through the BLA filing, but also if and when it gets approved.

Unknown Executive: And then, similar to the Merck vaccine program, both the Jazz and Merck programs, both companies have said they intend to try and launch this year, in addition to successful approvals this year. So we'll get some royalty contribution there. And then lastly, on the Alvagen teriparatide program, without a TE approval, they'll continue to ramp up their sales and prescriptions there, but with a TE approval would accelerate both the pace of revenue on the royalty side, but also there are some milestones tied to the approval there.

Unknown Executive: So those are the big four contributors, but there's a lot of work being done on behalf of partners other than those four as well that's generating contract revenue for us. So it's kind of a mix of all the above. Got it. Thanks for that, Matt. Just one more.

Unknown Executive: Understanding that 2020 was a pretty active year for you guys on the M&A front. As we look forward, and more of the drug pipeline continues to shift towards biologics, and as we think about long-term capital allocation, would you think we'd continue to see biologics as an area of focus for capital deployment? Yeah, I think that's a good way to summarize it. But, generally speaking, I think we're focused on enhancing the technologies across the Ligand platform.

Unknown Executive: But I think, as I said, and Matt referenced in his comments as well, adding technology to the already kind of industry-leading tech stack of Omniab will be important for the business as we go forward. And so there's certainly a focus on that area. And obviously, that's directly bolstering the antibody space. So generally speaking, I think you're kind of right, and you're thinking about focus.

Unknown Executive: Got it. All right. Thanks, guys.

Operator: Thank you. Our next question comes from the line of Balaji Prasad from Barclays. Sir, your line is open.

Operator: Hi, good afternoon, everyone. And thanks for the question. So just a couple of questions from me. Firstly, on Sparsantan, can you help us think about the longer-term value of this program after the phase three data which came out? And are you still, like, anticipating potential 2023 royalties of anywhere between 10 to $20 million? Secondly, on captors, there is a lot of color, but I just want to understand if there are any variations in economics for ligands.

Unknown Executive: Thanks, Balaji. Yeah.

Unknown Executive: So, on Sparsantian, we gave some guidance on Sparsantian on the last couple calls, and nothing's really changed from our guidance. Post-approval, we've surveyed the research community's views of the program, and it does look like they still have that $10 to $20 million of potential royalty in 2023. In 2025 or so, closer to $400 million or $500 million of end-user sales, which would translate to $35 million to $45 million of royalty for us.

Unknown Executive: Ultimately, I think folks see the product peaking somewhere between $500 million and $1 billion on the one indication, and then if both indications are approved, that is, FSGS and IgA nephropathy, then potentially exceeding $1 billion over time, and then a 9% royalty. That's upwards of $100 million in royalties for Ligand. So, obviously, a very important product, and we're excited to see the continued progress there. Now, I'm turning to Captosol.

Unknown Executive: Generally speaking, we haven't disclosed specific economics for any of the partners, but I think what we've said is that, on average, the economics to Ligand are about the same across the universe of partners that are buying Capsol for use with remdesivir. So it's really more of a question of demand and need. And we've seen, as we commented already, a significant increase in demand out of India over the last two or three weeks. And in the US, demand is going the other way. So it's offsetting, and week to week, it's incredibly dynamic. So we are monitoring it very actively, and we'll keep everybody.

Unknown Executive: Thanks, Matt. If I could just squeeze in one more question. I saw that Ligand and Lupin recently settled a patent suite on Evamela, and I was just trying to think of the implications of this and see if there are any other major patent challenges that we need to be aware of from Ligand's perspective.

Unknown Executive: Yes, Balaji, you are correct; the court documents disclosed that Ligand and Lupin settled the patent case over Evamela, the terms of that are undisclosed, and generally, we will update on those items further when we file our cues as well. That's pretty much the only update we can provide there given the terms of the settlement.

Unknown Executive: Unknown Speaker Yeah.

Operator: Thank you. Our next question comes from the line of Matt Hewitt from Craig Hallum Capital. Sir, your line is open.

Operator: Good afternoon, gentlemen. Thanks for taking the questions. Maybe the first one, and this might be best for Matt, because last year was a record year for captosol inquiries and samples. And I'm just curious, how are those discussions going? The conversations that you started having last year, are you seeing some of those initial trials or samples turning into clinical trials or maybe an update there? Yeah, thanks, Matt. Yeah, no doubt, the visibility that's been created around the cap to cell technology, as I was describing earlier, continues to bring new potential partners to us and folks who know they've got compounds that have solubility or stability issues. They take a lot of different forms, right?

Unknown Executive: Sometimes sample requests can take a while to translate into progressing through a development program. Sometimes folks know exactly what they need and can jump right into clinical trials. So there's a lot of variety and texture there.

Unknown Executive: But overall, we continue to see very strong inbound interest, a lot of diversity of partners that we're shipping to increase diversity in the types of programs they're pursuing, not only just injectable drugs but inhaled drugs and intranasal, topical forms, a whole variety of forms that partners are pursuing, which is also really a testament to the scientific work that our teams put in and the safety database and the technical database. That' Thanks. And then maybe one regarding the captosolenablet iohexol. Thank you so much for the update on that. I'm curious, how long do you anticipate giving these partners?

Unknown Executive: to make a decision. Obviously, I think the expectation or the hope would be that if you didn't get the partnership signed, you could get that through a phase.

Unknown Executive: to and potentially launch and run that program yourself. But obviously, if you're going to have meaningful dialogue with partners, you give them some time. I'm just curious how long that time might be.

Unknown Executive: I'm just curious how long that time might be.

Unknown Executive: Matt, thanks for the question. Deals are always dynamic, and every deal is a little different, but I think, generally speaking, we would anticipate... you know, a couple of months at least to figure out where the partners are going to want to go and if they're going to want to, YouTube or the link in the description below.

Unknown Executive: But, generally speaking, I think it's been several months.

Unknown Executive: understood. Thank you.

Operator: Thank you. Our next question comes from the line of Scott Henry from Ross Capital. Sir, your line is open.

Operator: Thank you and good afternoon. Just a couple questions. First, on the royalty line.

Scott Robert Henry: Would you expect your second quarter to be an improving quarter or all the way back to normal already? I certainly would expect the second half to be at normal rates, but just curious how you think about the second quarter. If you have any comments, Scott.

Unknown Executive: You know, look, it's hard for us to say exactly, but the commentary that we're seeing out of many of the large pharma partners that are marketing products that are not necessarily tied to our royalties and also some that are tied to our royalties, it seems that the messages they are trying to deliver are that patient demand is back or getting back and that they expect that, you know, missed patient visits in Q1 and early Q2 should be made up in the So I think at a minimum, we'd expect, you know, a trend toward increasing quarterly numbers.

Unknown Executive: But some of the comments could certainly be interpreted as, you know, anything missed will be made up in the back half of the year, which is why you've seen a lot of these larger pharma companies perhaps missing a bit in Q1, but not changing guidance for the year.

Unknown Executive: So at the moment, that's our hope and expectation. Okay, thank you. That's helpful. And then, could you remind me of what the Sparsentin milestone is in Q4? Yeah, it's very, it's like just a smidge under $6 million, $5.99 million.

Unknown Executive: It was disclosed a couple years ago in a filing by both Ben Retrophin and then also us. It's out there specifically. Okay, great. And then, just clarification, the two approvals in China. I believe that the Seastone one is expected in the second half of 21. Have you given any sort of, I realize there's not a PDUFA date for these, but any target for the Gloria approval? Is that also expected in the second

Unknown Executive: Yeah, Scott, it was, you're correct, Seastone is anticipated to be in the second half of the year. Gloria's NDA was accepted on February 18 of 2020, so that's when NMPA confirmed acceptance of the NDA. So it's difficult to say exactly when the timing will be, but I think, generally, folks are anticipating it'd be the second half. Okay, great. Thank you for taking the question.

Operator: Thank you. Our next question comes from the line of Dana Flanders from Guggenheim. Ma'am, your line is over.

Operator: Great, thank you for the questions. My first one was just on the biosimilar opportunity for you guys on Forteo in Europe. Just wondering how competitive of a market that is. I know in the U.S., you have the potential to be exclusive for some time. So they're just trying to think of the relative contribution of Forteo, you know, kind of U.S. versus XUS or versus Europe. And then just my second question, can you remind me what the generic concerns are? Georgeham, how tight is that to India? I'm wondering if your caposol and remtisivir is being used in other emerging markets where we're seeing a spike in cases and the potential for that. Thank you.

Unknown Executive: Yeah, Dana, I can comment on the consortium, and Matt K may want to comment on Europe and Forteo. So the consortium actually, it's not only the members of the consortium that supply India but 127 other countries as well, most of which are low and middle income countries, that obviously includes India. So they're obviously supplying other countries as well. In addition, in addition to India. Matt.

Unknown Executive: And Dana, on the Forteo or teriparatide biosimilar opportunity, it's a good question, and important to point out that... The product rights that we hold through Pelican and now through Alvagen and others are actually worldwide rights. So we do have the potential to generate royalty or profit sharing around the world. I think, as folks probably know, the environment outside the U.S. is more dynamic, country-to-country and region-to-region; there are many biosimilars already approved in lots of different territories.

Unknown Executive: In Europe specifically, I'd say that it's probably a positive that most of the territories already have approvals and our products are launching, but the competition in those markets makes the opportunity for us a lot smaller. Probably the second largest opportunity for us outside the United States is probably in China, where the product is partnered there, and our partners are moving towards approval. And then obviously, the US would be the largest of the three general regions between the US, Europe, and Asia.

Unknown Executive: Thank you, there are no further questions at this time. Presenters, please continue. Thank you.

Operator: Thank you, operator. I appreciate it.

Unknown Executive: Appreciate people's turnout today and questions. Excited to be in 2021. We talked about the acquisitions that were foundational in fortifying our OmniEd business and expanding our technology offering, and we're really pleased to see the integrations going well.

Unknown Executive: We look forward to updates throughout the year. We are at a few virtual conferences coming up in early June. We'll be at Craig Hallam and Jeffrey's, and then in July, we'll be at the CJS conference. So thank you very much. We appreciate you.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

Operator: transcript Emily Beynon