Q2 2021 Ligand Pharmaceuticals Inc Earnings Call
Yeah.
Good day, and thank you for standing by and welcome to the ligand Pharmaceuticals second quarter 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 this session you will need to press star 1 on your telephone.
Operator: Good day, and thank you for standing by. Welcome to Lagan Pharmaceuticals' second quarter earnings call. At this time, all participants are in a listen-only mode.
Operator: After the presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone.
Telephone if.
If you require any further assistance. Please press star zero and I would now like to hand, the conference over to your first speaker today, He's the head of Investor Relations. Mr. Simon Latimer. Please go ahead Sir.
Operator: Press Star 1 on your telephone. If you require any further assistance, please press Star Zero. I would now like to hand the conference over to your first speaker today, the head of investor relations, Mr. Simon Latimer. Please, go ahead.
Thank you welcome to ligand second quarter of 'twenty, 'twenty, 1 financial results and business.
Simon Latimer: Thank you. Welcome to Ligin's second quarter of 2021 financial results and business update conference call. Our speakers for today's call are in separate locations. Speaking today for Ligon will be John Higgins, CEO, Nat 4, CLO, and Matt Cornberg, CFO. We will use non-dap financial reporting.
Update conference call our speakers for today's call are and separate locations speaking today for ligand will be John Higgins CEO, Matt for CLO, and Matt Kornberg CFO.
These 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.
Simon Latimer: 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
<unk> 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 discussed and and closest.
Simon Latimer: and other matters concerning LIGN 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-gap financial measures we discuss and the
GAAP financial measures can be found in our earnings release issued earlier today I would now like to turn the call over to John Higgins.
Simon Latimer: Closest Got Financial measures can be found in our earnings release.
Simon Latimer: Measurements can be found in our earnings release issued earlier today. I'd now like to turn the call over to John Higgins.
Good afternoon, and thanks for.
For joining our second quarter 'twenty, 1 earnings call outs.
John Higgins: Good afternoon, and thanks for joining us for our second quarter 2021 earnings call. Outstanding financial performance and operating execution are the themes of our call today. We are very pleased with the business and how the company is doing. In Q2, Ligand posted one of the highest quarterly revenues in the company's history.
Outstanding financial performance and operating execution are the themes of our call today, we're very pleased with it.
The company is growing.
And Q2 ligand posted 1 of the highest quarterly revenues from the company's history.
Along with that strong top line performance. We're also enjoying robust earnings and strong cash flows.
John Higgins: Along with that strong top-line performance, we are also enjoying robust earnings and strong cash flow. While most of our revenue is currently driven by Captisol, we are very pleased to see the business flourishing across all technology platforms, as Capsol sales are expected to diminish later this year and next with lower demand for RIMDESAvere and the evolution of the COVID-19 medical landscape. We're delighted with the turnout for the call today. We've got a number of new investors who are beginning to look at the story. And for those who are new to lying again, just a quick background.
While most of our revenue is currently driven by Captisol. We are very pleased to see the business flourishing.
Across all technology platforms as Captisol sales are expected to diminish later this year and next with lower demand for Endesa beer and the evolution of the COVID-19 medical landscape.
We are delighted with the turnout for the call today, we've got a number of new investors, who are beginning to look at the story and.
Those who are new to like and just a quick background and our company offers integrated drug discovery services and our service offerings are broad and the number and our partner achievements with R&D and clinical success had been outstanding These past few months.
John Higgins: Our company offers integrated drug discovery services, and our service offerings are broader than numbers, and our partner achievements with R&D and clinical success have been outstanding these past few months. The value of our services and the technology and inventions we provide result in significant milestone revenue along with royalty economics on high-value medical treatments. Over the past two years, we have increased our investments in our laboratories and expanded our R&D team to provide more customized services to our partners. Our investments are paying off.
And the value of our services and the technology and inventions, we provide.
<unk> result in significant milestone revenue along with royalty economics on high value medical treatments.
Over the past 2 years, we have increased our investments and our laboratories and expanded our R&D team to provide more customized zone.
Through our partners.
Our investments are paying off.
Driving.
Having our investments is a shift in the industry, we are witnessing and evolution and how pharma and biotech partners tackle their R&D projects increasingly they are looking to well fitted highly qualified partners like ligand to help answer their needs and a more and to end fashion.
John Higgins: Driving our investments is a shift in the industry. We are witnessing an evolution in how pharma and biotech partners tackle their R&D projects. Increasingly, they are looking to well-fitted, highly qualified partners like Ligand to help answer their needs in a more end-to-end fashion. Ligand, again, enjoys a premier spot in the industry as a technology licensee.
And I get and enjoys a premier spot and the industry.
As a technology license or.
Now with our expanded services, particularly with our <unk> antibody business and with the lender.
John Higgins: Now, with our expanded services, particularly our on-the-ab antibody business and our protein expression platform, we provide both access to what we believe is best-in-class technology and also expert customer service and partner support. Our investments are fueling our success, as we've been closing more and bigger deals than ever before. In a moment, Matt Ford will walk through our roster of new and expanded. In addition to internal investments to expand our offerings, we continue to leverage M&A to build and strengthen our business.
Teen expression platform, we provide both access to what we believe is best in class technology and.
And also expert customer service and partner support.
History, our investments are fueling our success as we learn more and bigger deals than ever before.
And a moment, Matt form will walk through our roster of new and expanded deals.
In addition to internal investments to expand our offerings, we continue to leverage M&A to build and strengthen our business.
Last year, we closed 4.
And the actions and all 4 are driving our dealmaking, expanding our patents and generating revenue from license fees and royalty payments to.
John Higgins: Last year we closed four transactions, and all four are driving our deal, expanding our patents and generating revenue from licensed fees and royalties. Two excellent examples are the major partnerships with Jazz and Merck we gained through our acquisition of Phoenix less than a year ago. Both companies recently received regulatory approvals for medicines partnered with Ligand that will compete in global billion-dollar markets. Well, again, we'll soon start to earn royalties from both products.
2 excellent examples are the major partnerships with jazz and Merck, we gained through our acquisition of Phoenix less than a year ago. Both companies recently received regulatory approvals of medicines.
For Transco with ligand that will compete and global billion dollar markets.
And again, we will soon start to earn royalties from both products.
This past quarter, we relocated our corporate headquarters to our Emeryville site and the San Francisco Bay area, we've expanded our facilities and operations and Emeryville as we invest more to build.
John Higgins: This past quarter, we relocated our corporate headquarters to our Emeryville site in the San Francisco Bay Area. We've expanded our facilities and operations in Emeryville as we invest more to build our On-the-App business. We still have a strong and proud center of robust R&D and administrative operations in San Diego.
And our omni App business, we still have a strong and proud center of robust R&D and administrative operations and San Diego.
And yet the move of our principal offices to the Bay area is supported by the location of many of our partners and access to R&D services and talent to support our work we.
John Higgins: Yet the move of our principal offices to the Bay Area is supported by the location of many of our partners and access to R&D services and talent to support our work. We look forward to hosting you at our new headquarters when you travel to South Francisco. As a final topic, after the close of the second quarter, we expanded and further diversified our board of directors with the appointment of Jennifer Cox. Jennifer is a tremendous addition to the Ligand board with impeccable credentials in bioengineering combined with a fantastic track record of building businesses and translating research into practical applications. She also has great intuition for where the industry is heading. We met Jennifer about a year ago during our acquisition of Excela, where she was a co-founder.
We look forward to hosting you at our new headquarters.
When you travel and San Francisco.
As a final topic after the close of the second quarter, we expanded and further diversified our board of directors with the appointment of Jennifer Cochrane Gen.
Jennifer is a tremendous addition to the ligand board with impeccable credentials and bioengineering combined with a fantastic track record of building businesses and track.
<unk> and research and the practical applications.
She also has great intuition for where the industry is heading.
We met Jennifer about a year ago during our acquisition of Excel up where she had been a cofounder and.
In addition to our entrepreneurial acumen and for the past 15 years, Jennifer has been on the faculty at Stanford University.
John Higgins: In addition to her entrepreneurial acumen, for the past 15 years, Jennifer has been on the faculty at Stanford University, where she is the chair of the Department of Bioengineering, a faculty member of the chemical engineering and bioengineering departments, and a member of the Cancer Biology, Biophysics, and Immunology Program. She has published nearly 100 research papers and is named on more than 50 patents and invented a number of small molecule drugs, including one that is in phase three trials now for ovarian cancer.
Translate where she is the chair of the department of Bioengineering.
A faculty member.
The chemical engineering, and Bioengineering Department and a member of the cancer Biology, Biophysics and immunology programs. She has published nearly 100 research papers and is named and more than 50 patents and invented the numbers.
Number of small molecule drugs, including 1 that is in phase III trials now for ovarian cancer.
And ligand, we are committed to excellence throughout the organization and to diversity and inclusion and we are delighted that Jennifer is the third woman to be serving on our board.
John Higgins: At Ligand, we are committed to excellence throughout the organization and to diversity and inclusion. And we're delighted that Jennifer is the third woman to be serving on our board. I will now turn the call over to Matt Corber to discuss our finances. Thanks, John.
I will now turn the call over to Matt <unk> to review our financials.
Thanks, John.
The second quarter of 2021 was another strong quarter for ligand and across the business total revenues for the quarter were $84.7 million up from $41.4 million a year ago.
Matthew E. Korenberg: The second quarter of 2021 was another strong quarter for Ligand across the business. Total revenues for the quarter were $84.7 million, up from $41.4 million a year ago. With respect to royalties, royalty revenue increased to $8.6 million from 7.2 million a year ago.
With respect to royalties royalty revenue increased to $8.6 million from $7.2 million a year ago royalty.
Royalty revenues.
And was comprised principally of Kyprolis and even mellow royalties, but we look forward to increasing contribution from our from the 4 recently approved programs that are backed by our Pelican expression technology, including Riley's from jazz Vacs and advanced from Merck numerous sales from the serum Institute of India, and Tara <unk> from Allergan.
Matthew E. Korenberg: Royalty revenues comprise principally of Kyprolos and Eva Mela royalties, but we look forward to increasing contribution from the four recently approved programs that are backed by our Pelican expression technology, including Rilays from Jazz, Baxnevance from Merck, Numeril from the Syram Institute of India, and Terra Paratide from AlbaJ. Capticall sales were $62.5 million in the quarter, and this is up from 155% from $24.5 million Our Q2 capticol revenue exceeded our expectations as we experienced significant and urgent demand from India for capticel for use in the manufacturing of resins.
Captisol sales.
$62.5 million and the quarter and this is up from 155% from the $24.5 million a year ago.
Our Q2, Captisol revenue exceeded our expectations as we experienced significant urgent demand from India for Captisol for use and manufacturing of readiness severe.
Our contract revenue in Q.
Q2, 2021 was $13.6 million compared with $9.8 million a year ago, the 2020.1 quarter. Once again included strong contract revenue from all of our technologies with significant contributions from Omnia Pelican, Ikea Gin and E N E portfolio of products.
Matthew E. Korenberg: Our contract revenue in Q2, 2021, was 13.6 million compared with 9.8 million a year ago. The 2021 quarter once again included strong revenue from all of our technologies, with significant contributions from Omniab, Pelican, Icagen, and the NCE portfolio of products. We expect the diversity and robustness of our contract revenue line to continue for the remainder of the year, with Q3 off to a great start driven by the $5 million milestone earned upon the launch of Riley.
We expect the diversity and robustness of our contract revenue line.
Sales were seeing for the remainder of the year with Q3 off to a great start driven by the $5 million milestone earned upon the launch of release.
Adjusted diluted EPS for Q2, 2021 was $1.63, compared with 1 dollar.
Dollar, even last year or an increase of 63%.
Our GAAP EPS for the quarter was $1.79, and included a onetime gain of approximately $34 million related to the CVR or contingent value right, we structured with our Phoenix acquisition last year.
Matthew E. Korenberg: Adjusted Deluded EPS for Q2 2021 was $1.63 compared with a dollar even last year, or an increase of 63%. Our GAF EPS for the quarter was $1.79 and included a one-time gain of approximately $34 million related to the CVR, or contingent value right, we structured with our Phoenix acquisition list. We now believe that Terra-paretide TE approval is unlikely to happen in 2021, and therefore, we will not be obligated to pay the contingent payment tied to that regulatory event.
We now believe the Terra paratype CE approval is unlikely to happen in 2020, 1 and therefore, we will not be obligated to pay the contingent payments tied to that.
And to continue our event occur.
Accordingly, we have reduced the expected liability associated with the CVR then given the payment is triggered by a T approval happening prior to December 31 and 2021.
The 1 time gain is excluded from our adjusted earnings and adjusted diluted EPS as well as from our financial guidance.
We exited.
Did the quarter with approximately $302 million of cash cash equivalents and short term investments.
Matthew E. Korenberg: Accordingly, we have reduced the expected liability associated with the CVR event, given the payment is triggered by TE approval happening prior to December 31st, 2021. The one-time gain is excluded from our adjusted earnings and adjusted diluted EPS, as well as from our financial guidance.
This cash balance reflects the repurchase of $45 million of convertible bonds during Q2.
We now have about $345 million of face value of convertible bonds outstanding.
Turning now to financial guidance, we are updating our guidance for 2020.
And 1 revenue and adjusted EPS.
We now expect full year 2021, total revenues to be between $265 million and $275 million and adjusted earnings per diluted share to be between $5.80 and $6.5.
Matthew E. Korenberg: We exited the corridor with approximately $302 million of cash, cash equivalents, and short-term investments. This cash balance reflects the repurchase of $45 million of convertible bonds during Q2. We now have about $345 million of face value of convertible bonds outstanding.
This compares with our previous 2020, 1 guidance for total revenues of $291 million and adjusted.
Per diluted share of $6.15.
Matthew E. Korenberg: Turning to Financial Guidance, we're updating our guidance for 2021 revenue and Adjusted EPS. We now expect full year 2021 total revenues to be between $265 million and $275 million, and adjusted earnings per diluted share to be between $5.80 and $6.50. This compares with our previous 2021 guidance for total revenues of 291 million and adjusted earnings per duly of $6.15. The reduction in revenue is entirely associated with the lower capisol sales related to remdesiv.
The reduction in revenue was entirely associated with the cat the lower captisol sales related to run that severe.
We expect our combined royalty and contract revenue to exceed our previous guidance of $91 million combined.
The updated outlook for cap sell reflects our current view of the pandemic both from the United States.
And that earning Glee captisol its role as a critical component of rent desperate or is something we're very proud of at ligand the scientific and logistical undertakings by our team are amazing and they resulted in a medical benefit to patients that was critical at a time of significant need.
And it also has a period of substantial revenue contributor contribution to.
And global <unk>.
Compared with pre pandemic levels. We believe this heightened demand for capsule and in 2021, and we generally foresee a return to pre pandemic levels and trends of Captisol revenue and 2022 and beyond.
Matthew E. Korenberg: We expect our combined royalty and contract revenue to exceed our previous guidance of $91 million combined. The updated outlook for Capsol reflects our current view of the pandemic, both in the United States and globally. Capicill's role is a critical component of Rundesphere, something we're very proud of it.
With respect to quarterly pacing for the business overall as discussed on our last call. We expect our royalty line for the second half will.
Many of the typical trend with Q3 and Q4, each increasing over Q2.
For Captisol quarterly revenue as mentioned on our Q1 call. We expect that the second half of the year will be more heavily weighted to Q4 at this time, we currently see approximately $20 million to $30 million of Captisol demand and Q3 and the balance coming in Q4.
Matthew E. Korenberg: The scientific and logistical undertakings by our team were amazing, and they resulted in a medical benefit to patients that was critical at a time of significant need. It also was a period of substantial revenue contribution to Ligand compared with pre-pandemic levels. We believe this heightened demand for Capsol will end in 2021, and we generally foresee a return to pre-pandemic levels and trends of Capticol revenue in 2022 and beyond.
A lagging as we frequently do I know the cap. So it can be lumpy and can shift from quarter to quarter based on a variety of factors.
Lastly, our contract revenue for the remainder of the year is now expected to be realized about 50% and each of Q3 and Q4. This is updated from our Q1 estimates largely due to the Riley's milestone that was earned early early.
And Q3.
The second half revenue components will result in adjusted diluted EPS for Q3 of 95 to $1.5.5 per share with the balance of the earnings coming in Q4.
Matthew E. Korenberg: With respect to quarterly pacing for the business overall, as discussed on our last call, we expect our royalty line for the second half will continue the typical trend with Q3 and Q4, each increasing over Q2. For Capticol quarterly revenue, as mentioned on our Q1 call, we expect that the second half of the year will be more heavily weighted to Q4. At this time, we currently see approximately $20 to $30 million of capricil demand in Q3 and the balance coming in Q4. As we frequently do, I note capsule demand can be lumpy and can shift from quarter to quarter based on a variety of factors.
Regarding strategic M&A, we continue to maintain and active evaluation of M&A opportunities as well as of our capital.
And deployment strategy overall, our main focus for M&A is on assets and technology that will further boost bolster our best in class Omni add antibody platform and our recently acquired Pelican expression technology platform.
Before I turn the call over to Matt for all direct our listeners to review our Q2 earnings press release issued earlier today and.
Early on our website for a reconciliation of adjusted financial results with our GAAP financial results and with that I'll turn the call over to Matt for some comments on our technologies and partner programs and.
Matthew E. Korenberg: Lastly, our contract revenue for the remainder of the year is now expected to be realized about 50% in each of Q3 and Q4. This is updated from our Q1 estimates largely due to the Riley's milestone that was earned early in Q3. The second half revenue components will result in adjusted diluted EPS for Q3 of 95 cents to $1.5 per share with the balance of the earnings coming in Q4.
Thanks, Matt.
As John mentioned Q2 was a very productive quarter with partner product approval and followed by recent launches.
And available expanding relationships with existing partners and entering into new deals with new partners.
I'll start with Omnia, which we see as our most valuable platform technology as it continues to provide our partners with a powerful combination of advanced antibody discovery tools.
Partners, who license our technologies our support.
By a team of respected scientists and a track record of quickly discovering high quality antibodies.
2 omnia partners see stone and Gloria Pharmaceuticals have submitted applications for approvals and we expect both regulatory decisions. Later this year. If approved we believe these will be the first of many to come for the Omnia platform.
Matthew E. Korenberg: Regarding strategic MNA, we continue to maintain an active evaluation of MNA opportunities as well as of our capital deployment strategy overall. Our main focus for MNA is on assets and technology that will further bolster our best-in-class Omniab antibody platform and our recently acquired Pelican Expression Technology Platform. Before I turn the call over to Matt 4, I'll direct our listeners to review our Q2 earnings press release issued earlier today and available on our website for reconciliation of adjusted financial results with our GAAP financial results. And with that, I'll turn the call over to Matt for some comments on our technologies and partner programs. Matt?
And as Keystone's NDA has pursued them allomap, which was discovered using on the App and is under review by the and M. P. A 4 stage for squamous and non squamous non small cell lung cancer.
Keystone has stated they expect and determination with respect to the NDA This year and Keystone and Pfizer have also formed a strategic development.
And commercialization collaboration for <unk> Allomap in China.
At Gloria and barrel and map is an investigational omni app derived anti PD, 1 monoclonal antibody that was discovered using our omni rack.
Matt: Thanks, Matt. As John mentioned, Q2 was a very productive quarter with partner product approvals, followed by recent launches, expanding relationships with existing partners, and entering into new deals with new partners. I'll start with Omniab, which we see as our most valuable platform technology, as it continues to provide our partners with 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 antibiotics.
Gloria filed with China's and NPA for relapsed or refractory classical Hodgkin's lymphoma.
And with a determination also expected this year.
In addition to the late stage regulatory work Glory is doing here and the U S. ARCUS Biosciences also recently announced encouraging clinical results once and barrel and mab treatment in multiple cancer settings.
ARCUS and Gilead formed a 10 year partnership and 2020 to.
To co develop and co commercialize <unk> product candidates, including <unk> and barrel and map outside of China.
And we continue to actively innovate and invest and our Omnia platform with internal R&D and technology development expansion of our team and our labs and through targeted bolt on acquisitions.
Matt: Two Omniab partners, Seastone, and Gloria Pharmaceuticals, have submitted applications for approvals, and we expect both regulatory decisions later this year. If approved, we believe these will be the first of many approvals for Omniab Plast. C-Stone's NDA is for Sugamalimab, which was discovered using Omniab and is under review by the NMPA for stage four squamous and non-squamous non-small cell lung cancer. Seastone has stated they expect a determination with respect to the NDA this year, and C-Stone and Pfizer have also formed a strategic development and commercialization collaboration for Sugamalimab At Gloria, Zimbarylamab is an investigational Omniab-derived anti-PD1 monoclonal antibody that was discovered using our OmniRat. Gloria filed with China's NMPA for relapse or refractory classical Hodgkin's lymphoma with a determination also expected this year.
We've recently added new team members here and Emeryville and are expanding our lab operations to reinforce our position on the cutting edge of antibody discovery.
And the Omnia platform is differentiated by leveraging our increasing artificial intelligence or AI capabilities, along with our deep history of novel genetic engineering.
Biological intelligence or by of our proprietary transgenic animals.
The <unk> elements allow us to operate a highly efficient business model and serving our broad partner base as we see it our best in class technology stack is enabling our omni channel business development team to secure new license agreements and expand existing.
Sting relationships.
Specifically during the second quarter, we entered into new Omni Abbott licensing deals with Gen script as well as Amy next.
We continue to see a trend and the industry towards more end to end discovery partnerships and we believe the tech stack that we've assembled and developed is ideally.
Matt: In addition to the late-stage regulatory work Gloria is doing, here in the U.S., Arcus Bioscience has recently announced encouraging clinical results for Zembarlamab treatment in multiple cancer settings. Arcus and Gilead formed a 10-year partnership in 2020 to co-develop and co-commercialize Arcus's product candidates, including Zimbaralimab outside of China. And we continue to actively innovate and invest in our Omniab platform with internal R&D and technology development, expansion of our team and our labs, and through targeted business acquisition.
And up suited to meet those needs.
It's also been a busy and exciting period for our Pelican expression technology platform with approvals from our partners at Merck and of jazz as Matt mentioned, we now have a total of 4 programs approved that leverage the pelican expression technology.
Merck recently received FDA.
Approval for <unk> for the prevention of pneumococcal disease in adults.
Vacs and advanced was formerly referred to as V..1 4 and it's a 15 valent pneumococcal vaccine that utilizes CRM 197, and vaccine carrier protein that's produced using the Pelican expression technology platform.
We look forward to following.
<unk> progress and commercialization and further development of Vaca <unk> as an important and global medical market.
Matt: We've recently added new team members here in Emoryville and are expanding our lab operations to reinforce our position on the cutting edge of antibody discovery. The Omniab platform is differentiated by leveraging our increasing artificial intelligence or AI capabilities, along with our deep history of novel genetic engineering and the biological intelligence or BI of our proprietary transgenic animals. The BI elements allow us to operate a highly efficient business model in serving our broad partner base. As we see it, our best-in-class technology stack is enabling our Omniab business development team to secure new license agreements and expand existing relationships.
Yeah.
I'll also point out that in the second quarter, Merck announced positive results from an initial phase III pediatric clinical trial of <unk> and pneumococcal disease.
And when they announced that in May. They also indicated that plans are on track for submission of a supplementary regulatory licensure application to the FDA for use in children before the end of the year.
CRM <unk> hundred 97 made and the Pelican expression technology is also used by Merck and its investigational vaccine candidates, including <unk>.
<unk> <unk> 6.
Matt: Specifically, during the second quarter, we entered into new Omniab licensing deals with GenScript as well as Immunex. We continue to see a trend in the industry toward more end-to-end discovery partners. And we believe the tech stack that we've assembled and developed is ideally suited to meet those. It's also been a busy and exciting period for our Pelican Expression Technology platform. With approvals from our partners at Merck and at Jazz, as Matt mentioned, we now have a total of four programs approved that leverage the Pelican expression technology.
We're also encouraged that additional global big pharma and small biotech players continue to expand their use of our crem 197, and that's also referred to as pellet from which is a non toxic mutant diphtheria toxin vaccine carrier protein and that's produced using our Pelican and technology.
<unk> recently received the approval for relays as Matt described for the treatment of acute lymphoblastic leukemia or lymphoblastic lymphoma.
Right ways, which was formerly referred to as GBP 458 is a recombinant or wynia asparaginase used as a component of a multi agent chemotherapy regimen for the treatment of pediatric.
Matt: Merck recently received FDA approval for VAC's new vaccine for the prevention of pneumococcal disease in adults. Vax Nubance was formally referred to as V114, and it's a 15-valent pneumococcal vaccine that utilizes CRM-197 vaccine carrier protein that's produced using the Pelican Expression Technology Plastro. We look forward to following Merck's progress and commercialization, and further development of Axisneubance as an important and global medical market.
And adult patients with al or LVL, who are hypersensitive to E coli derived asparaginase products.
Scientists from jazz and ligand coauthored a manuscript that ran and the peer review journal pediatric blood and cancer, describing the manufacturing development of railways and it's yet another successful example case study.
Adding to a rich technical history for the platform.
While we leverage our high throughput screening technologies, and our proprietary computer driven automation to identify robust production strength very efficiently and quickly for our partners.
I'll note that jazz will be presenting the Riley as development story at the upcoming biotech.
Matt: I'll also point out that in the second quarter, Merck announced positive results from an initial phase three pediatric clinical trial of Vax New Vance in pneumococcal. And when they announced that in May, they also indicated that plans are on track for submission of a supplementary regulatory licensure application to the FDA for use in children before the end of the year. CRM-197 made in the Pelican Expression technology is also used by Merck in its investigational vaccine candidates, including V116.
Ex US International Conference on September 22nd in this speed from gene to market segment of that conference.
And the Pelican and technology will be highlighted as being critical to that program success, we believe that our CMC development and state of the art analytical capabilities positioning the Pelican technology to be a leader in the space for some time to come.
And the second quarter. We also entered into an expansion of our Pelican expression technology agreement with our partner or sell ex to include production of additional spar ex proteins ligand is eligible to receive development funding for protein production using the Pelican expression technology platform.
Our partners value.
<unk>. The fact that the Pelican technology is 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. These included these include promoters secretion leader sequences methods for high throughput screening protein.
Matt: We're also encouraged that additional global big pharma and small biotech players continue to expand their use of our crem-197, which is a non-toxic mutant diphtheria toxin vaccine carrier protein that's produced using our pelican technology. Jazz recently received approval for Rylase, as Matt described, for the treatment of acute lymphoblastic leukemia or lymphoblastic lymphoma.
<unk> expression strain engineering and marker systems together, there are more than 200 issued patents worldwide related to the Pelican technology and nearly 50 applications are pending.
Now a couple of final remarks in June we entered into a new collaboration with practice precision medicines to discover and develop.
Matt: Rylease, which was formally referred to as JCP458, is a recombinant or winia asparogenase, used as a component of a multi-agent chemotherapeutic regimen for the treatment of pediatric and adult patients with ALL or LBL, who are hypersensitive to E- coli-derived asparogenase, Scientists from Jazz and Ligand co-authored a manuscript that ran in the peer-reviewed journal, Pediatric Blood and Cancer, describing the manufacturing development of Riley And it's yet another successful example case study, adding to a rich technical history for the platform, while we leverage our high-throughput screening technologies and our proprietary computer-driven automation to identify robust production strains very efficiently and quickly for our partner. I'll note that Jazz will be presenting the Riley's development story at the upcoming Bioprocess International Conference on September 22nd in the speed from gene to market segment of that conference, and the Pelican technology will be highlighted as being critical to that program's success.
<unk> therapies for neurological disorders, utilizing the <unk> and ion channel technology platform. The transaction includes research funding potential milestones and royalties should be should have product be commercialized.
And later in June we also expanded our collaboration with Roche to a new program, bringing the total number.
Number of acreage and technology related collaborations with Roche and 3.
This 1 is for the development and commercialization of small molecule ion channel modulators for the treatment of neurological diseases.
<unk> made an upfront cash payment to ligand and will provide research funding. In addition, ligand is eligible to receive up to 274.
And research development and commercial milestone payments as well as royalties on net sales showed a drug be commercialized from the collaboration.
And with that I will turn the call back over to the operator for questions.
Operator.
Thank you Matt.
As a reminder.
To all our participants to ask or if you wish to ask a question. Please press star 1 again Thats star 1 on your telephone.
Pos revenue objectives.
To compile the Q&A roster.
And we have now our first question from.
Matt: We believe that our CMC development and state-of-the-art analytical capabilities have positioned Pelican technology to be a leader in the space for some time to come. In the second quarter, we also entered into an expansion of our Pelican Expression Technology Agreement with our partner Arcella to include production of additional Sparex proteins. Ligand is eligible to receive development funding for protein production using the Pelican Expression Technology. Our partners value the fact that the Pelican technology is supported by a robust patent portfolio in the areas of biosimilers, microbial toxins, and vaccine antigen production, as well as a growing number of patents that cover the technology itself. These include promoters, secretion leader sequences, methods for high-throughput screening, protein expression, strain engineering, and more. Together, there are more than 200 issued patents worldwide related to Pelican technology, and nearly 50 applications are pending.
From Larry Solow CJS Securities go ahead Sir.
Hi, great good afternoon, and thanks for taking the questions.
Just first question, Matt you mentioned that the the guidance hasn't changed.
Curious it has the mix it sounds like theres going to be a little bit less on the royalty side, if I'm not mistaken it feels that way or certainly royalties were a little bit below my number this quarter and and.
And then I guess part 2 of that question is.
I don't I thought Amgen hasn't reported yet so how do you have the kyprolis expectations are out of your numbers or any.
Thanks, Larry.
And so I think your first question is I mentioned that the combined royalty and milestone numbers should exceed our previous guidance.
That's correct the mix has shifted just a little bit from a royalty to the contract side.
But if you think about it both as all or all at 100% margin business overall, where we're much better off as we've we've exceeded those numbers.
And then the second part of your question.
Matt: Now, I have a couple of final remarks. In June, we entered into a new collaboration with Praxis Precision Medicines to discover and develop novel therapies for neurological disorders utilizing the Icogen ion channel technology platform. The transaction includes research funding, potential milestones, and royalty, should the product be commercial. And later in June, we also expanded our collaboration with Roche to a new program, bringing the total number of Icagen technology-related collaborations with Roche to three. This one is for the development and commercialization of small molecule ion channel modulators for the treatment of neurological disorders. Roche made an upfront cash payment to ligand, and we'll provide research funding.
The the Kyprolis numbers, you are correct, Amgen and <unk> have not reported.
So we have an algorithm that uses.
Some of the last quarters are mixed with our expectations and then we take a little bit of a haircut to those numbers to make sure that were in line with our conservative.
And nature and then from there.
Just as in any quarter.
If our revenues booked as off will have a catch up or a true up I should say in the next quarter.
It's similar to all corners and you.
Were assuming some some I mean, I think there was down 10% last quarter you're assuming.
Some sequential and year over year growth.
And kyprolis cause that's probably the biggest clearly the biggest driver by far of your royalty line right. So just trying to get all of them get clarity on that.
Matt: In addition, Ligand is eligible to receive up to $274 million in research, development, and commercial milestone payments, as well as royalties on net sales should a drug be commercialized from the collaborative. Operator?
That's correct.
And you see the queue come out, which hopefully is and the next few days.
Specific numbers will be and mchugh.
Remind investors that it is our assumptions, it's not based on information from Amgen or.
Operator: As a reminder to all our participants, to ask, or if you wish to ask a question, please press star 1. Again, that's star 1 on the telephone. Now, let's just pause for a few seconds to compile the Q&A roster. And we have our first question now from Larry Solo of CGS Securities. Go ahead, sir.
And will be true for Evo MELA not from Evo MELA So youll.
Youll see those numbers and the Q, but they are they.
And they do have a bit of a sequential growth as you pointed out.
Okay alright, okay.
And just a few questions just and I know you guys highlighted.
Lawrence Scott Solow: Great, good afternoon. Thanks for taking the questions. Just one question, Matt, you mentioned that the guidance hasn't changed. I'm just curious about the mix, but it sounds like there's going to be a little bit less on the royalty side, if I'm not mistaken. It feels that way.
Recent approval of relays, and and and Vacs, new Vince from our Phoenix our Pelican.
And then could you just briefly give us an idea of the potential market sizes I guess.
Lawrence Scott Solow: Certainly royalties were a little bit below my number this quarter. And I guess part two of that question is, I thought Amgen hasn't reported yet, so how do you have the Kyprilus expectations already? Your numbers?
And.
The.
<unk> is going to I guess will be replacing or going against everyone is I guess and that market can you give and how do you have that market size and what this potentially do and then obviously the pneumococcal vaccine market is much larger but you know can you slice that down and maybe what the target opportunity maybe is it seems like Merck.
Matthew E. Korenberg: Thanks, Larry. So I think your first question is: I mentioned that the combined royalty and milestone numbers should exceed our previous guidance. That's correct. The mix has shifted just a little bit from royalty to the contract side. But if you think about it both as all or all as a 100% margin business, overall, we're much better off as we've exceeded those numbers. And then the second part of your question, The Kiprolous numbers, you're correct. Amgen and Ono have not reported any side effects.
And for the U S. Only a first or maybe you can discuss that too. Thanks.
Yeah. Thanks, Larry So first on jazz Yep correct. The the new <unk> product will replace a product that jazz had been marketing a prior to that with <unk>.
Merck has got a product that product had done just under $200 million and a supply constrained market.
Matthew E. Korenberg: So we have an algorithm that uses some of the last quarters mixed with our expectations, and then we take a little bit of a haircut to those numbers to make sure that we're in line with a conservative nature. And then from there, just as in any quarter, if our revenues booked are off, we'll have a catch-up. For a true-up, I should say, in the next quarter. Oh, cool. Similar to all
So we expect it to be a 200 plus.
Now that they have full access to as much product as needed.
And ill go little.
Ramp that as quickly as possible.
You've talked about a launch or they've already announced the fact that they've launched and so the.
The first couple of quarters here will be.
Lawrence Scott Solow: And you're assuming some, some, I don't think they were down 10% less, clear, are you assuming some sequential and year-over-year growth on Carpola? Because that's probably the biggest, clearly the biggest driver by far of your royalty line, right? I'm trying to get a little more clarity on that. Yeah, that's correct. When you see the queue come out, which hopefully will be in the next few days, the specific numbers will be in the queue.
Initial launch quarters, but we do expect that to be to start contributing to the royalty line. This year.
On Merck and.
And vaccine and Vance it competes and a $6 billion plus or minus.
Market with principally.
Principally prep and IR from Pfizer.
Alright.
As you suggested at our split between that market of adult and pediatric and and U S and global et cetera.
Matthew E. Korenberg: I just remind investors that these are our assumptions. It's not based on information from Amgen, or the same will be true for Evomela, not from Evomela. So you'll see those numbers in the queue, but they do have a bit of sequential growth, as you pointed out. Okay, all right, okay. I just did just a few questions.
Merck.
Talking about the end of this year as a potential launch following.
The ACI peak and conversations towards the end of the year in October.
Okay and then just last question any update on <unk>.
Hexcel.
Lawrence Scott Solow: I know you guys highlighted the recent approval of Rylase and Vax Newvance from Phoenix or Pelican, as you've renamed it. Could you just, you know, briefly give us an idea of the potential market sizes for Rylase? I guess Rylase is going to be replacing or going against Irwinese, I guess, in that market. Can you give us an idea of that market size? and what this could potentially do?
Yes, Larry this is Matt I.
<unk> has been something that obviously ex all Captisol enabled program are great assets.
As we said earlier, we're balancing inbound partner interest and a late stage study design.
And so we took on starting the trial.
And we will update more and the future.
Okay.
I can comment on if I look at the clinical Gov clinical Dot Gov website, I think it says maybe that's a mistake that you guys have a planned trial beginning in January 22 is that a just a placeholder in there or did I read that wrong.
Lawrence Scott Solow: And then obviously, the Numerocococococ vaccine market is much larger, but, you know, can you slice that down? And maybe what the target opportunity maybe is, it seems like Merck is going for the U.S. only at first, or maybe you can discuss that too? Yeah, thanks, Larry. So first on Jazz, yep, correct.
And John Quinn trial Dot Gov. That's just we put a pause on the on that trial for the reasons. We described earlier.
I think if that's just that.
The protocol that is out there.
Okay fair enough. Thanks, a lot I appreciate it guys.
Matthew E. Korenberg: The new Ryley's product will replace a product that Jazz had been marketing prior to that with Irwin Ace. That product did just under $200 million in a supply-constrained market. And so we expect it to be 200-plus, now that they have full access to as much price as much product is needed.
And our next question is from Joe and genus of HC Wainwright.
Hi, This is Sarah on for Joe I was actually.
And also regarding the ILEC sale program and if your primary focus at this point.
Matthew E. Korenberg: And they'll look to ramp that up as quickly as possible. They've talked about a launch, or they've already announced the fact that they've launched. And so the first couple of quarters here will be initial launch quarters, but we do expect that to start contributing to the royalty line this year. On Merck and vaccine advance, it competes in a $6 billion plus or minus market with principally Prevnar from Pfizer. There's obviously, as you suggested, a split between that market of adult, pediatric, and then U.S. and global, etc.
Peeling previously mentioned and it really just working on the BD around the program at the moment.
Yeah again this is Matt for as I said, we're where we've received inbound.
And interest around the program and we're balancing that with the late stage study designs and so in general yes, that's a that's a thought.
Alright, thank you.
Yeah.
Okay.
And our next question is from Matt Hulett, Greg.
Craig Hallum capital.
Hello.
Good afternoon, congratulations on the strong quarter and for all the.
Color that you provided just a few questions from me and maybe first off regarding the news. This morning regarding your landing AI partnership maybe if you could provide.
Matthew E. Korenberg: But Merck has been talking about the end of this year as a potential launch following the ACIP, and conversations are toward the end of the year in October. Okay. And then just last question, any update on Iohexall? Yeah, Larry. This is Matt Forre.
Provide a little bit color on what drove that relationship.
You know what are your edge.
Patients as far as you know how that relationship can maybe drive some incremental opportunities and omni up any color would be helpful.
Lawrence Scott Solow: I can comment on that. Obviously, Iohexol is a capsule-enabled program, a great asset. As we said earlier, we're balancing inbound partner interest and late-stage study design. And so we took a pause on starting the trial, and we'll update more in the, I think if I look at the clinical gov, the clinical.gov, you know, that website, I think it says maybe that's a mistake that you guys have a planned trial beginning on January 22.
Yeah. Thanks, Matt.
No.
And with everything around.
We have been and always wanted to remain on the cutting edge of antibody discovery tools and in part.
Expect is obviously are accessing pieces that that can further enhance the capabilities we already have.
And this 1 is a software relationship specifically related to the exploration platform that we gained through the <unk> acquisition last year and it really.
Selected landing AI, because they have a unique a data centric approach.
Lawrence Scott Solow: Is that just a placeholder in there, or did I read that wrong? Yeah, the timing's on clinchrial.gov. That's just, we put a pause on that trial for the reasons we described earlier, but that's, you know, just the protocol that is out. Okay, fair enough.
That really blends very well into the platform that we've built around exploration and and we we saw it as an opportunity to also collaborate with.
And with high and folks who are world renowned.
And in the world of AI.
Lawrence Scott Solow: Thanks a lot. I appreciate it, guys. And our next question is from Joe Panginus of AXE Rainway. Hi, this is Sarah on behalf of Joe.
And and incorporate that into some other things that we're doing and the lab that allows us to even increase our throughput even further.
Support our partners even better.
And that's kind of the world, we want to remain and so it's a it's software relationship but it's just I think another example of us.
Sarah: I was also wondering, regarding the Ioxl program, if your primary focus at this point, as you previously mentioned, is really just working on the business development around the program at the moment? Yeah, again, this is Matt. As I said, we've received inbound interest around the program, and we're balancing that with the late stage study design. So in general, yes, that's the, that's, All right, thank you. And our next question is from Matt Ewitt of Craig Helen Capstone. Good afternoon, congratulations on a strong quarter and for all the color that you provided.
And really remaining on the cutting edge.
With our Omnia platform.
That's great. Thank you and then shifting gears a little bit.
Regarding captisol.
With.
The emergence of from desk severe and what that was able to provide from.
And humanitarian standpoint, I know that you come.
Commented previously that it drove a lot of incremental interest a lot of samples were sent out for customers to trial.
And of those preceding of you've heard back from some of those customers are those translating into.
New orders anything that you can provide on that side.
Yeah, Matt I think the value certainly.
And certainly the visibility.
Matthew Gregory Hewitt: Just a few questions for me. Maybe first up, regarding the news this morning regarding your landing AI partnership, maybe if you could, you know, provide a little bit of color on what drove that relationship, and what are your expectations as far as, you know, how that relationship can maybe drive some incremental opportunities in Omniab. Any color would be helpful.
And that has been created for Captisol is substantial anytime a new drug.
And that's you know.
And then approved for and what 18 months or so, but it's already treated over set or approximately 7 million and patients globally.
And and obviously had a big impact on human health and our teams.
Quite proud of the role they have been able to play and that but captisol itself really the differentiating factor is our R. R.
Matt: Yeah, thanks, Matt. You know, as with everything around Omniab, we have been and always want to remain on the cutting edge of antibody discovery tools. And part of that is obviously accessing pieces that can further enhance the capabilities we already have. This one is a software relationship specifically related to the exploration platform that we gained through the Excela acquisition last year. And we really selected landing AI because they have a unique data-centric approach that really blends very well into the platform that we've built around exploration.
Increase but really the same as they've always been our global reach right their captisol enabled drugs Ah <unk>.
Marketed globally, we've got a vast intellectual.
And property portfolio, the drug Master files, whichever our safety data and then of course, the manufacturing and quality and scale that we've built over the years and invested and so those are the things that partners value and yes, we do have.
Partners entering into new clinical trials and new forms.
Uh huh.
And those require different amounts of captisol, depending on the form but our team continues to support those scientific efforts and and and we're proud of that progress.
Matt: And we saw it as an opportunity to also collaborate with high-end folks who are world-renowned in the world of AI and incorporate that into some of the things that we're doing in the lab. That allows us to increase our throughput even further, support our partners even better, and that's kind of the world we want to remain in. So it's a software relationship, but it's just, I think, another example of us really remaining on the cutting edge with our Omniab Plast.
That's great and then last 1.
Given the recent success that you've had with the Pelican platform.
You commented a little bit but are.
Are you seeing incremental interest even here over the past month, or so for that technology and and what does that pipeline look like thank you.
Yeah.
And when we first started looking at Phoenix prior to the acquisition.
And at that time, there had been no products approved.
Matt: That's great. Thank you. And then shifting gears a little bit, regarding captasol, with the emergence of ramesivir and what that was able to provide from a humanitarian standpoint, I know that you commented previously that it drove a lot of incremental interest, and a lot of samples were sent out for customers to trial. How are those proceeding? Have you heard back from some of those customers? Are those translating into new orders? Anything that you can provide on that side.
Utilizing or leveraging the Pelican and technology platform now there are 4.
And and that's that's a substantial developed.
Development when it comes to partnering discussions and it becomes very important.
And so we do see.
We do see a nice flow of potential partnerships.
And we've expanded some of our existing partnerships that's always.
And something that validates that those that are working with the technology are having success with it.
Matthew Gregory Hewitt: Yeah, Matt, I think the value, certainly the visibility that has been created for Captisol is substantial anytime, you know, a new drug that's been approved for, what, 18 months or so, but it's already been treated in approximately 7 million patients globally and obviously had a big impact on human health, and our team's quite proud of the role they've been able to play in that. But Captisol itself, really, the differentiating factors are increased, but really the same as they've always been, our global reach, right? They're caposol-enabled drugs marketed globally.
As we disclosed today Merck's view.
<unk> 6 which is another.
Vaccine candidate is.
Leveraging our technology and we are seeing additional global global Big pharma and small biotech partners expand their use of our pellet crem as well so yes, we do see a nice.
Nice interest there and and a lot of it comes from the validation of the regulatory validation and the success of our.
Our current partners.
That's great and hopefully we get some of that from the up here pretty quick thank you.
Yeah.
And our next question is from <unk> Prasad of Barclays.
Hi, good afternoon, gentlemen, thanks for taking the questions firstly on on.
Matt: We've got a vast intellectual property portfolio, the drug master files, which have our safety data, and then, of course, the manufacturing, quality, and scale that we've built over the years and invested in. So those are the things that partners value, and yes, we do have partners entering into new clinical trials and new forms. These require different amounts of capisol depending on the form, but our team continues to support those scientific efforts, and we're proud of that progress.
Covid itself we've.
We seem to have come around full circle now last year around this time.
You changed your guidance, raising capsule and lowering royalties and contract revenues. So I just want to understand from a time.
<unk> point of view what is the enrollment on business discussions now.
Now and how comfortable are you with the outlook, especially on the royalties and.
Contract revenue side.
That's 1 and secondly, coming back to Captisol.
And while it is.
Matthew Gregory Hewitt: That's great. And then last one, given the recent success that you've had with the Pelican platform, I think you commented a little bit, but are you seeing incremental interest even here over the past month or so for that technology, and what does that pipeline look like? Yeah, Matt, when we first started looking at Phoenix prior to the acquisition, at that time, there had been no products approved utilizing or leveraging the Pelican technology platform. Now there are four of them.
And there was not much doubt that 2021 was a peak year for sales at least in the near term based on Covid.
And we all expect some deceleration into next year is your guidance revision signaling a faster pace of deceleration both toward the second half and for 2022. Thanks.
Thanks, Paul.
Yes, so I'll take the first Greg and.
John and Matt.
To add any color but.
I think a year ago versus today.
Yes, I think we're all in a very different place a year ago, we had no idea of when or how vaccines would rollout.
Matt: And that's a substantial development when it comes to partnering discussions becoming very important. And so we do see a nice flow of potential partners. There, as I mentioned, we've expanded some of our existing partnerships. That's always something that validates that those that are working with the technology are having success with it. As we disclosed today, Merck's V-116, which is another vaccine candidate, is leveraging our technology, and we are seeing additional global big pharma and small biotech partners expand their use of our Pelacrem.
We had no idea generally how the virus and the pandemic would play out and.
At the time.
We said some of this on our call glass.
Yes.
On a quarter.
There were as anticipated stockpiling by governments.
It was anticipated.
And disappear of course and.
Just generally speaking a lot of uncertainty around.
Where the.
<unk> I need for Rendez severe would be and ultimately therefore captisol.
And today I think we have a lot clearer picture vaccines have rolled out very successfully.
Thankfully for humans generally.
Matt: as well. So, yeah, we do see a nice interest there, and a lot of it comes from the validation, the regulatory validation, and the success of our current partnership. That's great. Hopefully, we can get some of that for Omnab here pretty quick. Thank you.
And.
We're in a place now where are the manufacturing has caught up with with demand.
And generally and.
Folks can plan a little bit more so.
Well, there still could be.
Uh huh.
Changes in the numbers, if things happened in unexpected ways, new variance or.
Balaji V. Prasad: Hi, good afternoon, John Matt. Thanks for taking questions. Firstly, on the guidance itself, we seem to have come around a full circle now. Last year, around this time, you changed your guidance, raising caps everywhere and lowering royalties and contract revenues. So I just want to understand, from my time period point of view, what the environment is for business discussions now and how comfortable are you with the outlook, especially on royalties and contract revenues. contract revenue side. That's one.
Vaccines was efficacy or something like that.
My comments said based on our current.
Current understanding of the pandemic and outlook for it.
We feel pretty confident and the expected captisol for the remainder of the year.
On the flip side of that the royalties and contract payments.
Similarly last year, we had a kind of little certainty on when folks would return to.
Doctor visits and normal.
And patient visits et cetera, and that's all now I think even in a world where corona virus exists.
Balaji V. Prasad: And secondly, coming back to cap dissolve, while it was not much doubt that 2021 was a peak year for sales, at least in the near term, based on COVID, and we all expected some desertion for next year. Is your guidance revision signaling a faster pace of desertion, both for the second half and for 2022?
Or more permanently.
The World has figured out how to have those things more regularly and some other things that people were putting off whether it's trial.
And I'll starts trial visits or actual doctor visits.
Our back to understanding how to do that so.
Matthew E. Korenberg: Thanks, Pallaji. Yeah, so I'll take a first crack at it. I don't know if John or Matt would want to add any color, but I think a year ago versus today, I think we're all in a very different place. A year ago, we had no idea when or how vaccines would roll out. We had no idea, you know, how the virus and the pandemic would play out. And at the time, we said some of this on our calls last time, quarter, there was anticipated stockpile by governments, there was anticipated use of Remdesivir, of course, and, you know, just generally speaking, a lot of uncertainty around where the need for Remdesivir would be and, ultimately, capthosol.
Youre seeing that and Ah royalties returning too.
And more normalized levels and certainly are a contract business.
Exceeding significantly.
And we our expectation so.
I think that's the.
That's really the whats driven the new guidance and we have high confidence that we'll meet or exceed our current guidance on the captisol.
Syed.
And I don't think the decline is.
Anymore or.
Swift than we expected other than reflected in our guidance here.
But I think the message for next year is.
And we see the principal.
Factor for capsule from 2022 and forward to be kind of the core demand and the core.
Matthew E. Korenberg: Today, I think we have a much clearer picture. Vaccines have rolled out very successfully, thankfully for humans generally, and we're in a place now where the manufacturing has caught up with demand generally, and folks can plan a little bit more. So, well, there could still be changes in the numbers if things happen in unexpected ways, new variants or vaccines lose efficacy, or something like that. But, as my comments said, based on our current understanding of the pandemic and outlook for it, we feel pretty confident in the expected capital for the remainder of the year.
Business.
And so we're back on trends from there is.
Is it possible that we may see a tail of some and that's fear related captisol sales, yes, but we don't plan to guide to it or talk to it will simply be upside to our guidance from from this point forward.
Thank you and that's all.
Maybe just.
Couple of follow ups on <unk>.
On the CVR liability and the change or adjustment and it.
It wasn't bays and expectation that Theres, now and Arctic 2021 event or.
As the overall property and South, Florida, now and secondly on <unk>, just a quick clarification that youll sales that your royalty revenues is linked to global.
Matthew E. Korenberg: On the flip side of that, the royalties and contract payments, similarly last year, we had kind of little certainty on when folks would return to normal doctor visits and normal patient visits, et cetera. And that's all now; I think even in a world where coronavirus exists more permanently, the world has figured out how to have those things more regularly.
Sales and not just the U S revenues.
Yes, I can.
And give a little more color I know, Matt covered the accounting elements related to our Terra paratype.
And I'll, just say our partner Allergan is strong and committed partner they've got a great team doing.
And.
Based on recent feedback from the FDA Allergan will perform and then submit results from an assessment to address.
Balaji V. Prasad: And some of the things that people were putting off, whether it's trial starts, trial visits, or actual doctor visits, people are back to understanding how to do that. I think you're seeing that in our royalties returning to more normalized levels and, certainly, our contract business exceeding our expectations. So I think that's the, that's really the, what's driven the new guidance, and we have high confidence that it will meet or exceed our current guidance.
Elements related to potential and 8 immunogenicity, so they're doing that.
And it was really just simply the timing.
<unk> of them do.
And that work and submitting it that drove the change and I don't know, Matt Kornberg, you may want to comment other if there are other accounting elements to that.
No.
And it's purely a timing issue.
Balaji V. Prasad: On the Capisol side, I don't think the decline is any more or swifter than we expected, other than reflected in our guidance here. But I think the message for next year is that we see the principal factor for Capsol from 2022 and forward to be kind of the core demand and the core business. So we're back on trends from there. Is it possible that we may see a tale of some randesvier related capsule sales? Yes, but we don't plan to guide it or talk to it. It'll simply be an addition to our guidance from this point forward. Thank you.
Nothing about the accounting that reflects the probability of it happening at some point it's purely a.
And the probability of it happening in 2021.
And.
And on the jazz program, yes.
It is a global royalty.
Thank you.
And our next question is from Jacob.
And some of Stephens.
Hey, Thanks, good afternoon.
Just first question for Matt Kornberg on guidance.
On <unk> it looks like.
And maybe that'll be.
Balaji V. Prasad: Thank you, that's helpful. Maybe just a couple of follow-ups on the CVR liability and the change adjustment in it. Was it based on the expectation that there is now not a 20-21 event or is the overall probability itself low now? And secondly, on Ryleys, just a quick clarification that your sales, that your royalty revenues are linked to global sales and not just US revenue.
Push for approval in 2020.
<unk> Johnson and a 2021.
And do you have a 6 million dollar milestone from that and can you just remind us what that milestone is tied to and is that contemplated in 2020, 1 guidance or should we think about that as a 2022 events.
Hey, Jacob good to talk to you.
The.
Milestone, you're referring to is tied to filing for approval.
Balaji V. Prasad: Yeah, Belagia, I can give it a little more color. I know Matt covered the accounting elements related to Terraparatide. I'll just say our partner, Alvagen, is a strong and committed partner. They've got a great team doing the work. Based on recent feedback from the FDA, Alvigin will perform and then submit results from an assessment to address elements related to potential information on innate immunogenicity.
And it is it is just under 6 million $5.99 million.
And it was originally a reason that we increased guidance in 2021.
And that and there is now and event that will happen in 2022.
<unk>.
Despite that moving out of our guidance, we're still tracking well ahead of our contract payment line.
Matthew E. Korenberg: So they're doing that, and it was really just simply the timing of them doing that work and submitting it that drove the change. I don't know, Matt, and Cornberg, you may want to comment on whether there are other accounting elements. No, that's it. It's purely a timing issue. There's nothing about the accounting that reflects the probability of it happening at some point.
Got it okay Super helpful. Thanks from that Matt and then from that 4 just on the recent omni app deals on the AI capabilities.
And it seems like your attitude this morning.
Well how has that helped business development efforts is this something customers were asking for does it kind of and increase the funnel for omni and.
Matthew E. Korenberg: It's purely a probability of it happening in 2021. And on the jazz program, yes, it is global royalty. Thank you. And our next question is from Jacob Johnson of Stevens. Hey, thanks. Good afternoon.
More broadly and and is this something that's pretty easy to.
To cross sell.
Yeah look at it.
Jacob Johnson: Maybe just the first question: Warrenberg on Guy. On Sparsentan, it looks like maybe that'll be... push for approval in 2022 of a $6 million milestone from that. Can you just remind us what that milestone is tied to? And is that contemplated in 2021, guys? Hey, Jacob, good to talk to you.
And we're quite proud of what we.
And we've built and what we continue to build around omni app not only through our own internal technology development, but through what we've acquired and.
We've done multiple acquisitions related to omni and over the last few years.
And I'll just speak generally and say every single 1 of them when they are announced theyre quite technical right. So.
Investors naturally want a little more background and understand a little bit more about the technology et cetera.
Matthew E. Korenberg: Yeah, the milestone you're referring to is tied to filing for approval, and it is just under $6 million, $5.99 million. And it was originally a reason that we increased guidance in 2021, and that is now an event that will happen in 2022. So despite that, moving out of our guidance, we're still tracking well ahead of our contract payment line.
Across the board our partners our existing partners get it immediately.
And we've had great success of expanding our relationships with the partners as we've expanded our technology stack.
Adding new programs, it's been a real source of additional programs for instance, and when we added accelerant.
And I can think of multiple conversations with partners, where they have said look we have these other ideas. We never thought these types of programs would be possible, but now that these technologies are married under omni App we.
Matt: And then for Matt 4, just on the recent Omniab deal, on the AI capabilities you added via Excela, and it seems like you added something, Well, how has that helped business development efforts? Something customers were asking for, does it kind of increase the funnel for Omniab more broadly? Yeah, look, we're quite proud of what we've built and what we continue to build around Omniab, not only through our own internal technology development but through what we've acquired. And we've done multiple acquisitions related to Omniab over the last few years. And I'll just speak generally and say every single one of them, when they're announced, they're quite technical, right?
We can actually go after these targets that previously we wanted to but have never tried and and that's 1 example, we also have seen great success and increasing.
The speed and throughput of finding high quality antibodies for our partners. So the answer across the board is really yes that partners understand that value.
And.
It causes them to increase the depth and the breadth with which they're leveraging our technologies.
Got it thanks for that and then if I can just sneak in 1 more just from Matt Kornberg, just on gross margins given the dynamics around Captisol sales.
Matt: So investors naturally want a little more background to understand a little bit more about the technology, et cetera. But across the board, our partners, our existing partners, get it immediately. And we've had great success expanding our relationship with our partners as we've expanded our technology stack, adding new programs. It's been a real source of additional programs. For instance, when we added Accela, I can think of multiple conversations with partners where they've said, look, we had these other ideas.
I think maybe.
And a little bit impacted they are a little bit lower this quarter, probably due to factory sales as we think about the back half for gross margin just any help you could give us in terms of how to think about those.
Yes. Thanks.
Good question.
As you pointed out the royalty and contract payments were obviously, 100% margin.
And so our material sales and.
Matt: We never thought these types of programs would be possible, but now that these technologies are married under Omniab, we can actually go after these targets that we've wanted to before but have never tried. And that's one example.
And our Captisol sales, specifically are really where all the cost of goods comes.
And as that's a more significant portion of our overall business it drives our corporate gross margins down.
1 of the things that we've talked about in the past is that.
Matt: We also have seen great success in increasing the speed and throughput of finding high-quality antibodies for our partners. So the answer across the board is really yes, that partners understand that value, and it causes them to increase the depth and the breadth with which they're leveraging our technology. And then, if I can just sneak in one more just for Matt Kornberg.
Some of our sales to India, which were significant in.
Q2 related to the consortium.
Those are a bit lower margin than our typical sales just given the logistics and.
Nature of where they are selling and some of the contracts with those parties. So.
Matthew E. Korenberg: Just on gross margins, given the dynamics around captives all sales, think maybe a little bit impacted. They're a little bit lower this quarter probably. As we think about the back half for gross, Yeah, thanks. Good question.
Captisol margins themselves will be a bit lower this quarter and should rebound over the course of the second half of the year a bit and then.
The overall corporate margins, we'll continue to be just driven by the mix shift between royalty and contract as it compares to captisol.
Matthew E. Korenberg: As you pointed out, the royalty and contract payments are obviously 100% margin. And so our material sales and our capsule sales specifically are really where all the cost of goods comes from. And as that's a more significant portion of our overall business, it drives corporate gross margins down. One of the things that we've talked about in the past is that some of our sales to India, which were significant in Q2, related to the consortium, those are a bit lower margin than our typical sales, just given the logistics and nature of where they're selling and some of the contracts with those parties.
Got it Super helpful.
Thanks, Matt and Matt.
Thanks Jacob.
And for our last question is from Scott Henry of Roth Capital Go ahead Sir.
Thank you and good afternoon, if I could just follow up very briefly on captisol because it ties into.
To that prior question and and I think you've probably answered it Matt, but I just wanted to make sure I was interpreting it correctly.
And from the looks of it to me that the Cogs went way up into Q4 for Captisol and I know.
And it just incrementally.
When I'm going forward should should I think of it.
Matthew E. Korenberg: So cap-to-sale margins themselves will be a bit lower this quarter and should rebound over the course of the second half of the year a bit. And then the overall corporate margins will continue to be just driven by the mix shift between royalty and contract as it compares to Capizal. Got it. Super helpful. Thanks, Matt. And Matt.
It is a blend between Q2 and prior quarters or where do you think it'll revert all the way back to kind of prior quarter.
Right.
And it probably got large anyways yeah.
Hard to tell exactly where the demand will will be but.
The majority of.
Of of sales.
That we've sold to the consortium and and India that the vast majority of it happened in Q2.
Matthew E. Korenberg: And for our last question, it is from Scott Henry of Brought Capital. Go ahead. Thank you, and good afternoon.
So we expect continued sales there over the course of the balance of year, but.
Based on our current expectations, we probably sold.
Scott Robert Henry: If I could just follow up very briefly on Captisol, because it ties into that prior question, and I think you probably answered it, Matt, but I just wanted to make sure I was interpreting it correctly. You know, from the looks of it to me, the cogs went way up in two Q for Captisol to sell, not just incrementally. When I'm going forward, should I think of a blend between Q2 and prior quarters, or do you think it'll revert all the way back to some prior quarter? The numbers are that large, anyway.
Most of what we expect to sell to India.
Already so.
The next couple of quarters, we'll have some in there but.
Generally speaking and should be closer to previous margin than this past quarter.
Okay. Thank you and then.
You talked earlier about not really.
Expecting a huge.
Tail.
From Rem death, severe but that would be upside, you'll only think about back to a steady.
State run rate I would assume the new normal isn't going back into the $30 million a year range.
Matthew E. Korenberg: Yeah, hard to tell exactly where the demand will be, but the majority of sales that we've sold to the consortium in India, the vast majority of it happened in Q2. So we expect continued sales there over the course of the balance of the year, but based on our current expectations, we've probably sold most of what we expect to sell to you already.
And just because of the attention. It is gathered there there will always be some room death severe use after that is that a fair assumption that that going back to normal is probably a higher normal and you know what we saw in 2019.
Matthew E. Korenberg: So in the next couple of quarters, we'll have some in there, but generally speaking, it should be closer to previous margins than this past quarter. Okay, thank you. You talked earlier about not really expecting a huge tale from Remdesivir, but that would be the upside when we think about getting back to a steady state run rate. I would assume the new normal isn't going back into the 30 million a year range. You know, because of the attention it's gathered, there will always be some remdesivir use after that. Is that a fair assumption that, you know, that going back to normal is probably a higher normal than, you know, what we saw in 2019?
Yes, it's hard to sort through all of the.
Pandemic impact versus other.
Shifting some of the sales to the urgent need for them that severe.
But generally speaking.
The business for the let's say, the 4 or 5 years, pre pandemic or $25 million to $30 million of demand.
And we had just kicked.
And to that 30% to $35 million per year of demand range and other.
Generally speaking Thats, where we probably are starting from and.
And some of the factors we've talked about here, but.
Scott Robert Henry: Yeah, it's hard to sort through all of the, you know, pandemic impact versus shifting some of the sales to the urgent need for Remdesivir. But generally speaking, I think the business for the, let's say, the four or five years pre-pandemic was $25 to $30 million in demand. And we had just ticked into that $30 to $35 million per year of demand range. And I think, generally speaking, that's where we are. We are probably starting from here.
And any sort of increased demand from.
New partnerships that eventually trickles into capsule sales and.
Any sort of upside from lingering lingering cap sulfur and the best of your sales would be upside to those numbers.
Okay, and then just a couple of small questions. Riley's did did you disclose the royalty like and received on that.
Scott Robert Henry: And then some of the factors we talked about here, but any sort of increased demand from new partnerships that eventually trickles into capsule sales and any sort of upside from lingering capsule sales for remdesivir would be upside to those numbers. Okay, and then just a couple small questions. Rilis, did you disclose the royalty ligand receipts on that? It's not disclosed, but it is a load of mid-single-digit
Okay.
It's not disclose.
But it is a low to mid single digit royalty.
Okay.
And then V..1 1 and 6 obviously, it's a vaccine have have you disclosed anything about what it's a vaccine for.
No and Merck has just said it's part of their innovative.
Vaccine portfolio, they've said, they're going to have some phase 2 data before the end of the year.
Matthew E. Korenberg: And then V116, obviously it's a vaccine. Have you disclosed anything about what it's a vaccine for? No, Merck has just said it's part of their innovative vaccine portfolio. They've said they're going to have some phase two data before the end of the year. They actually talked about it on their call this morning, but that's the extent of what they've disclosed thus far. Okay, great. You did, final question, just with regard to Sparsenton. After last quarter, it really feels like that's a core growth driver for the revenue and royalty line going forward. Obviously, a little bit of a delay, but do you have the same amount of enthusiasm and confidence for that program in the long run, just perhaps pushed out a year?
And they actually talked about it on their call. This morning, but that's the extent of what they've disclosed thus far.
Okay great.
And final question, just with regards to sports and Sports Center.
And then.
You don't have to after last quarter. It really it really feels like that that's a core growth driver.
For the revenue and royalty line going forward, obviously, a little bit of a delay, but do you have the same amount of enthusiasm and confidence for that program and the long run just perhaps.
About a year.
Yes, Scott Good question, we do and obviously the announcement the data the regulatory and clinical presentation. We saw earlier this year really really I think brought that product back to the forefront and all of us and investors were expecting it would be.
Matthew E. Korenberg: Yes, Scott, good question. We do. And obviously, the announcement, the data, the regulatory, and the clinical presentation we saw earlier this year really, I think, brought that product back to the forefront. All of us and investors were expecting it to be on a little bit faster regulatory path. But what we're hearing out of Trebier and the narrative, and all the public disclosure is that while they're answering questions, there's still tremendous medical need.
Pushing out a little bit faster regulatory path.
But what we're hearing out of total beer and.
And the narrative and and all the public disclosures that.
While they are answering questions.
Still tremendous medical need.
And there is high engagement with the FDA, there's a path forward that may be actually.
Matthew E. Korenberg: There's high engagement with the FDA. There's a path forward that may actually be a faster path for registration in Europe. And since the product qualifies for orphan designation, in terms of having a market that they can really develop in terms of the medical potential, that registration and the duration of the market protection do not start until it's actually approved. So you're right.
And I asked her path.
For registration in Europe.
And since the product.
Qualifies for orphan designation in terms of of having a market that they can really develop.
In terms of the medical potential that that registration.
And and the duration of the market protection does not start until its actually approve so so you're right I think overall, we're looking at a a bit of a delay but the milestones. We do think its got good probability for approval and launch.
Matthew E. Korenberg: I think overall we're looking at a bit of a delay, but the milestones, we do think it's got a good probability for approval and launch. We're excited about that partnership and product. At the same time, right now, literally the last few months into the next quarter or two, we've got two or three new approvals out of the Pelican franchise. We are looking at potential approvals for some Omniab drugs.
Excited about that partnership and product at the same time right now literally in the last few.
Into the next quarter or 2 we've got 2 or 3 new approvals out of the Pelican franchise. We are looking at potential approvals for some army have drugs, so and if theres a nice growing base of new royalty bearing assets that are going to enter the story and start.
Matthew E. Korenberg: So there's a nice growing base of new royalty-bearing assets that are going to enter the story and start to, we believe, elevate that royalty line and support our growth going forward. Okay, great. Thank you for the caller, and thank you for taking the question. Thank you, Scott. And this concludes today's conference call. Thank you, everyone, for your participation. You may now disconnect.
We believe elevate that royalty line and support.
Our growth going forward.
Okay, great. Thank you for the color and and thank you for taking the questions.
Thank you Scott.
And this concludes today's conference call. Thank you everyone and for your participation you may now all disconnect.
Thank you everyone.
And do.
2 months.
Good day.
And we're doing really well.
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John.
Your line.
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Yes.
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Operator: Everyone. Thank you. Thank you.