Ligand Pharmaceuticals Incorporated Q1 2023 Earnings Call
Thank you for standing by my name is Kayla Baker and I will be your conference operator today.
At this time I would like to welcome everyone to the ligand first quarter 'twenty twenty-three earnings webcast. All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session.
Thanks, Kayla welcome to <unk> first quarter 2023 financial results and business update conference call. Please note that there are slides accompanying today's call. He.
These can be accessed by going to the investors section of our corporate website, where you can find the link to the webcast on the IR calendar page today when discussing our financial results, we will use non-GAAP financial measures and some of our statements will be forward looking including those related to our financial condition results of operations financial guidance and the impact of the COVID-19 pandemic.
Please review our disclosures about forward looking statements here on slide two additional information concerning risk factors and other matters concerning ligand can also be found in our earnings press release, and our periodic filings with the SEC. We undertake no obligation to revise or update any statements to reflect events or circumstances. After the date of this conference call.
Reconciliation between the non-GAAP financial measures we discuss.
And the closest GAAP financial measure can be found on our earnings release issued earlier today.
Speaking today for ligand will be Todd Davis CEO .
When I was the CFO and Matt Kornberg, President and CFO I'd now like to turn the call over to Todd Davis.
Thank you Simon and good afternoon, everyone. Thanks for joining our first quarter 2023 earnings call I'm delighted to have the opportunity to address you all today and share some of my thoughts on the company's performance and our future prospects.
I've been in the CEO role for about five months now and as I have immersed myself in the running of the business I'm more excited than ever about the prospect of advancing why again to the next stage of growth.
So our focus is and has been to create a diversified portfolio high margin royalties producing superior risk adjusted returns.
Ligand is consummated 19 deals over the last 15 years with a significant and positive track record of achieving this objective.
As you can see in slide three.
Those deals have created our current strong balance sheet.
And a large portfolio of biopharmaceutical assets, including the seven commercial stage products that are delivering our current growing financial performance.
It also includes multiple key late stage assets that will soon feed into the commercial stage asset base to further drive growth.
Beyond that a farm team of 80 earlier stage assets will contribute to our later stage pipeline.
Things like so sorry in our Viking Nash programs came from this group. This bolsters our long term growth Matt will cover some of these more specifically during our portfolio update.
Also our current platform technologies Captisol in Pelican continue to contribute to our business by adding new license deals with new partners and finally, our current focus on organizational changes and scaling up deal execution is intended to further accelerate the growth of our late.
<unk> pipeline. This is a proven strategy that requires differentiated thinking in a premier investment team.
Turning now to slide four we.
We have had excellent portfolio development and financial performance to start the year total revenues for the first quarter of 2023 were $44 million driven by 28% growth in royalty revenue.
We finished the quarter was $283 million of cash and cash equivalents.
During the first quarter, we sold a portion of our shares held in Viking therapeutics at a substantial gain which added nicely to our cash balance.
<unk> will give more details on this in his discussion.
As previously described we have a $77 million convertible note that we will pay down in may at which point, we expect to be debt free with over $200 million of pro forma cash available to invest.
Another key feature we are striving to improve as part of our business strategy is to have a very lean operating structure.
We started the year with cash expense budget of $46 million and have executed on its expense reductions to bring that down to $43 million.
This was achieved while scaling up the business operation for accelerated growth and expanding the execution capability.
We will continue to look for efficiencies in the business to ensure we are as lean as possible, while retaining core operating and deal capabilities.
Meanwhile, we have experienced very positive momentum from our existing product pipeline.
Among our pipeline of late stage royalty products the accelerated FDA approval for <unk> in February brings our portfolio to a total of seven major commercial royalties that we expect will drive significant growth for years to come.
We believe we have an opportunity to further add to this growth from our existing royalty portfolio through multiple tactical approaches as laid out in slide five.
First in project finance ligand is positioned in a unique and advantageous segment in our ecosystem.
We see a significant imbalance between the supply and demand of capital for clinical stage programs.
Biopharma companies are increasingly looking for alternative forms of financing, which has only accelerated due to the continuing challenges in the equity capital markets. This is especially true for smaller public and private companies. We can provide capital to these companies and returned for royalty contracts on their pipeline products.
The project finance.
The second approach is royalty monetization in addition to providing development capital, we see a significant opportunity opportunity to purchase existing royalty rights owned by inventors universities, where companies, which would further add to our portfolio of royalties again.
<unk> is ideally positioned to capitalize on these opportunities as well.
Yeah.
The third approach outlined here is M&A as an operating business, we have a successful track record of acquiring entire businesses restructuring operations, while we identify companies with undervalued royalty assets or partnered programs.
Finally, we will also look at acquiring new platform technologies, we have a significant and successful track record of acquiring technology platforms enjoying the economic benefits of the existing partnered pipeline and royalty assets and generating new royalties by operating those platforms.
Our side X platform as an example of this approach in this area. We are focused on mature platforms that have significant products in the clinic and offer high operating margins as an operating business.
Turning to slide six I'll cover some of our key goals and progress to ensure we are executing at scale.
The first priority relates to scaling our systems for origination in dealmaking.
We are in the process of institutionalizing our deal process on how we originate negotiate and execute transactions.
Goal here is to increase investment throughput and diligence sophistication.
Reviewing a larger number of opportunities should allow us to be more selective and increase the number of high quality assets and our mid to late stage clinical pipeline.
Intimately, resulting in higher growth this requires premier talent and pharmaceutical investing in dealmaking.
As part of this expansion we made an important recent addition to our deal team with the appointment of Paul Haddon as senior Vice President of investments and business development.
Paul is a highly accomplished expert and royalty financing as he was previously spent 15 years at healthcare royalty partners, where he was instrumental in their growth where it is.
Truly excited to have someone with Paul's experience join our team and I want to take this opportunity to formally welcome him to ligand.
Additionally, we are in the process of establishing a physical presence in Boston. This will help raise awareness of ligand in Boston, a major life Sciences hub.
We'll also have greater access to the academic community scientific centers of excellence and the associated talent to <unk>.
Austin office will be a strong complement to our current presence in California and Kansas.
To summarize.
<unk> had a successful and productive first quarter. The company is growing rapidly based on its existing pipeline of products royalty assets and the multiple growth catalysts.
We expect to sustain and accelerate that growth by creating new pipeline assets through providing capital and technology to promising late stage clinical partners.
Now <unk>, our CFO will provide more details on the Q1 financial results as well as our increased full year 2023 financial guidance. Following Tahoe, our President Matt Kornberg will review progress in our portfolio operations and growth drivers.
Hello.
Thanks Todd.
As Todd mentioned, we kicked off 2023 with a strong first quarter with continued impressive year over year royalty revenue growth and major positive news flow from our partners.
Total revenues for the quarter were $44 million, which.
Rents are 21% increase over the prior year quarter, and a 44% increase when excluding contributions from the Covid captisol sales in the prior year period.
Royalty revenue increased 28% to $17 2 million from $13 4 million a year ago. This growth was driven by strength in amgen's, Kyprolis, which once again reported record quarterly net sales as well as contributions from <unk>, new bands and jazz Pharmaceuticals is riley's as both products continue to <unk>.
Success continued successful launches.
Captisol sales were $10 6 million this quarter versus core Captisol sales of $6 2 million in the same quarter of last year with the difference due to the timing of customer orders total captisol sales in the first quarter.
Last year were $12 1 million with $5 $9 million of that related to COVID-19, we did not have any COVID-19 related captisol sales this quarter Contra.
Contract revenue in Q1, 2023 was $16 2 million versus $10 9 million last year the.
The increase was driven primarily by the $15 3 million milestone earned upon the Fda's accelerated approval of <unk>, thus far.
As Todd mentioned, we are focused on maintaining a lean operating structure and managing costs to maximize our operating margins in Q1 aggregate G&A and R&D operating expenses decreased by 17% when compared to the prior year quarter G&A expenses in the first quarter of 2023 were $10 9 million versus <unk>.
$7 9 million in the first quarter of 2022. The decrease is primarily due to a decrease in head count related expenses as well as lower legal and accounting costs post the <unk> spin out.
R&D expenses in the first quarter of 2023 were $6 7 million versus $9 2 million in the first quarter of 'twenty two I'm, sorry, 2022 with a decrease in the decrease attributable primarily to decreased head count related expenses.
GAAP net income from continuing operations in the first quarter of 2023 was $43 6 million or $2 43 per diluted share and this compares with a GAAP net loss from continuing operations of $12 9 million or <unk> 70 per share in the prior year quarter.
The increase in GAAP net income is largely driven by a $12 1 million increase in income from operations of $20 5 million gain from the sale of Viking therapeutics stock as well as a $32 million increase in unrealized gains relating to the increase in value of our remaining holdings in Viking stock.
Adjusted diluted EPS for the first quarter of 2023 was $2 28.
And this compares with 64 cents in the first quarter of 2022.
Turning to the balance sheet at March 31, 2023, <unk> had cash and investments totaling $283 million and approximately $77 million in outstanding convertible debt, which we intend to repay in cash when it matures later this months.
Following the maturity of our notes, we expect to be debt free and with over $200 million of cash and liquid investments available to invest.
Turning now to guidance for 2023, 2023, and we expect Captisol sales of $21 million contract revenue of $25 million and today, we're raising our royalty revenue guidance by $4 million to be in the range of $78 million to $82 million and therefore now expect total 2023 revenue to be in the range of $1 24.
$128 million.
Additionally, today, we are increasing our 2023 earnings per share guidance to now be in the range of $4 60.
To $4 75.
Which is an increase of $1 30.
The increase in revenue and earnings guidance is attributable to the strength in royalty revenue and the realized gain from sales of biking therapeutics common stock.
As a reminder, I'd like to direct listeners to our first quarter earnings press release issued earlier today, which is available on our website for a reconciliation of our adjusted financial results to the GAAP results I talked about today.
Turn the call over to Matt to provide an update on the business.
Thanks Teva.
Today Im going to review some of the highlights of our current key revenue drivers that led to the impressive first quarter results and also provide more details for investors on the way we are viewing the exciting long term growth prospects for ligand.
Over the course of the last 15 years ligand is aggregated a portfolio of over 100 partnered programs some of which are approved and commercialized while others are in various stages of development of regulatory review on.
On Slide 11, we list 11 products that are currently approved or in phase III development and a traditional pipeline format. We focused a lot of the dialogue with investors over the past 12 to 18 months on these programs.
I'll frame the way, we're thinking about the total portfolio and how it will drive for long term growth for ligand.
Slide 12 is a way to look at the important categories of growth drivers that Tod outlined in his comments, we see these as the principal ways that lagging will drive shareholder value. Our current commercial portfolio has over 25 programs of seven of those are signet significant enough that investors should focus on them in the near term.
There are seven key pipeline programs that we see as potential drivers of growth over the medium term one of which is an expansion of an already approved program and six of which are new approvals.
<unk> team is the remainder of our existing portfolio and it's comprised of over 80 programs that will continue to advance as partners move them ahead.
We plan to highlight specific programs from this portfolio as it become nearer term a more prominent for ligand.
Our platform technologies will continue to add new programs to the early stage portion of the portfolio as they have been doing for years and as Tom covered in detail. We will continue to look at look to add to the portfolio through new deals across a number of different strategies, including M&A project financing and bar.
Turning now to slide 13. This slide provides details about the key commercial programs currently driving our growth.
I'll touch on a few of the key highlights from the first quarter.
As I mentioned on the last call. The biggest news from the first quarter. The first quarter was the fill spiry approval in February .
<unk> received approval for <unk>.
<unk> <unk> and Iga nephropathy, and immediately began marketing the drug.
We will earn a 9% royalty on sales and we expect that this will be a significant driver of long term growth of our royalties.
Iga nephropathy affects an estimated 150000 patients in the U S and a similar number in Europe , approximately 30050 thousand of the U S patients are expected to be addressable under the indicated indication approved via accelerated approval.
<unk> is the first non immunosuppressive treatment approved for this indication.
Consensus sell side analyst estimates for or fill Spiry peak sales in Iga nephropathy exceed $1 billion by 2030.
Which is if thats achieved would make Phil Spiry law against most significant royalty generator.
For 2023, <unk> management has continued to point to the existing consensus estimates from the research community of about $35 million.
Severe indicated that the initial ramp will be gradual and that the full iga nephropathy protect trial data.
Which is expected in Q4 of this year should be a catalyst for a change in the label and a ramp in the sales.
Just before this call started we got a look at the press release <unk> reported $3 million in sales for the first six weeks and they disclosed 146, new patient forms had been received.
A good launch.
Also related to <unk> earlier, this week <unk> announced that the pivotal data from the phase III duplex study in <unk> missed the Egfr endpoint.
Secondary and topline exploratory endpoints, all trended favorably and a reduction of protein area was sustained through week through a 108 weeks of treatment.
Severe plans to engage with regulators to explore a potential path forward for spar Santana as a treatment for <unk> in both the U S and Europe , and we will keep investors updated as more information becomes available for that indication.
Another highlight from the first quarter was Kyprolis type.
<unk> is marketed by Amgen and a majority of the countries around the world as well as by Ono in Japan and by Beijing in China.
It is an important drug for treating multiple myeloma.
In Q1, 2023, Amgen reported record quarterly revenue of $358 million and the product is on track to easily exceed the $1 3 billion of global sales recognized and realized in 2022.
<unk> marketed by jazz is a recombinant erwinia asparaginase used as a component of a multi agent chemotherapy chemotherapy <unk> regimen for the treatment of children and adults with al our LVL.
This product continues to do extremely well.
That was historically constrained by supply issues in Q4 of 2022 <unk> also reached a record level with $81 million in sales. We look forward to jazz is Q1 commercial report later this quarter.
Vaccine advance is a $15 billion pneumococcal vaccine utilizing law against <unk> hundred 97 vaccine carrier protein produced using the Pelican expression technology platform.
<unk> is now marketing <unk> in both the adult population in the pediatric population.
<unk> announced a $106 million in vaccine van sales in Q1, 2023 and commented that their strong ongoing pediatric launch was tracking with our expectations. We agree and we see the first quarter results is a strong indication that the product is tracking to exceed the 2023 consensus sales estimates of about $300 million.
Lastly on this slide I'll, just mentioned that while we report our Captisol sales on a separate line from our royalties. We internally think of this product line is another of our major drivers of revenue profitability and growth.
At our 2023 current guidance level of $21 million for revenue. The gross profit from Captisol should equate to about $13 million, which would be in line with our largest current royalty other than kyprolis.
Slide 14 lists the seven programs that we currently view as key pipeline programs that will drive revenue growth in the wave. Following our currently approved programs as mentioned one of the programs is an expansion of our currently approved program jazz Pharmaceuticals filed for approval of <unk> in Europe in May of 2022, and therefore, we would expect to see a decision from the.
EMA later in 2023.
In terms of new products and product approvals Verona is developing as adventuring in COPD and announced positive topline results from both of its phase III enhance trials.
The company expects to submit their NDA for the first in the first half of 2023.
This is a very large market and estimates for the program are in the range of $500 to $1 billion annually.
No van has already submitted their NDA for <unk> gel and the <unk> date and received a <unk> date of January five 2024.
The programs at Pearl Vela, Mariner Viking and <unk> are all expecting data. This year that we think will be validating for the programs and their probability of becoming approved drugs.
Finally on slide 15, I'll cover the drivers of longer term organic growth at ligand.
First we have a group of programs that we are calling our farm team. This is the 80 plus programs that are in the portfolio already that we don't highlight for investors day to day. Many of these programs are disclosed in our 10-K, but generally we don't talk much about them.
Like any Biopharma company portfolio, our expectation is that many of these programs will advance to the point, where they joined the key pipeline programs that we do regularly highlight and discuss as we identify programs from this group that are becoming more promising we will add them to our key pipeline charts and discussions.
The other driver of long term organic growth is the company's platform technologies <unk>.
<unk> and the Pelican expression technology platform are constantly attracting new partners and signing new license deals while some of these programs to quickly transition into key pipeline programs. Most of these deals will be for earlier stage programs that take several years to mature into important contributors to the near term like and growth story well.
We will continue and announce continue to announce the new license deals that happened from these platforms, but then the programs will join the farm team and mature as part of the broader portfolio before we highlight them further.
We're excited about the prospects for the overall growth of the portfolio and look forward to updating investors on our progress across all of these growth drivers on future earnings calls and at health care conferences.
Now I'll turn the call back over to the operator for questions.
Operator.
Thank you at.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
Our first question comes from the line of Larry Solow with CJS Securities. Your line is open.
Hi, good afternoon, its actually lead you go to for Larry This evening.
Just starting with the Viking stock that you sold during the quarter can you talk to the rationale behind the timing of those sales and then how we should think about your intentions for the rest of your holdings there.
Sure.
A little hard to hear but I think this with regarding the sale of Viking stock.
I would just start off by saying that we are this is Todd sorry, but.
But we are big believers in Viking and we retain a significant shareholding.
For us equity as an important investment, but it's also an investment tool that enables us to support partners and enabled deals like we did with the original creation of Viking.
The key and strategic economics for US are contained within the license agreement in the form of royalties and milestones, which we view as longer term assets.
So therefore equity for us as a source of cash and we will sell it from time to time when we own. It. This enables our key investment strategy to further drive growth.
And this is pretty consistent with what we've done historically.
And we continue to hold onto the royalties in key programs like Nash.
That's very helpful.
One more just on.
Capital requirements in General I think you had mentioned once you pay down the convert youll have about $200 million of net cash and you've also spoken a lot about the various ways to deploy that capital including M&A.
What other liquidity is available to you got to you all after eliminating the convert.
<unk>.
Do you foresee needing additional financing beyond the $200 million of cash and whatever youre going to generate.
To fund all of your goals here.
But I think we have significant access to the debt market still if we need it but the 200 million plus capital that we have to invest.
Should I think.
Be more than adequate for our strategy over the next 12 months to 18 months, which point, we will reassess. We believe we have very good access to the capital markets even in this environment.
Given our strong relative financial position.
Okay.
Okay, Great I will hop back ended now, let's let others ask some questions.
Thanks.
And our next question comes from the line of Scott Henry with Roth Capital. Your line is open.
Thank you good afternoon, I'll start out with a big picture question for Todd and then get into a couple of specifics.
You've now been CEO .
Going on a 150 days somewhere around there.
I know one of your main drivers is to scale up dealmaking and you've laid out how you want to do that can you talk about any other kind of near term to mid term initiatives you have.
Waste that you want to put your stamp on the business I know you are on the board before but any processes that youre looking at differently.
Yes, I think that.
The company historically has had an M&A orientation, they have done very well with that.
And created significant returns and so the the scaling up of the business development team is really youre talking about a handful of new hires that are very capable we've done most of that at the senior ranks that we have.
A handful of business analytic science and Clinton Reg evaluate evaluation folks that we have open positions.
And in the medium term I think we are expanding.
Although we've done almost all of these formats historically, we have not done them.
Consistently and I think what we wanted to do is scale.
Our business development and investment side of this so that we can consistently originate novel deals on high value clinical products with a very capable clinical development partners. That's really the objective that takes networks execution senior relationships and.
And capital and Thats, what that team is going to be focused on we're already executing on that strategy, we have about $700 million.
In asset opportunities on late stage pipeline.
That we're looking at assessing et cetera, and it's working its way.
Through our pipeline. So that's where we are we have a ways to go on the organization, but a lot of it's been achieved.
And we're executing on the deal front now looking at several deals that are kind of at the mid stage of the deal process.
Okay, great. Thank you for that color just a couple of specific questions.
First the royalty guidance went up about I think $4 million could you talk about what came in a little better than expected.
Yes, the key driver there was the Amgen.
<unk> again reported record sales.
Sales and.
That's the key driver as we look at how that extrapolates over the year.
Okay and.
I know, it's not your products Farhan youre the partner.
But you guys are pretty smart guys. So I'd be curious to hear what you think of the STS data and how that impacts I mean really three things the way I think of it as one how does it impact the approval of that second indication to how does it impact if it's not approved off label prescribing.
And three does it have any impact on the IGON indication I recognize it's not your specialty but I'd be curious what your bullet points are on the topic, if you would like to share them.
Okay. Thanks, Scott I appreciate you, giving me some credibility for being able.
To have a view on this but we'll give it our best but just to remind everybody that really what we're doing is is facing all of our comments I'm about to make on public information.
We don't have any information from trivia thats non confidential or that's confidential, we only we only get the public information so.
With that said, we do have views on all of that based on listening to their earnings call their call.
Disclosing the data and then reading our press releases et cetera, and just talking with our own scientists.
In kind of I'm not sure I'll answer these in the order that you you ask them, but I guess first off.
The opportunity as I mentioned in my prepared comments for Iga nephropathy is more than $1 billion on its own without Sds I mean roughly.
30% to 50000 patients at approximately $100000 little bit less but that's kind of a three $5 billion to $5 billion opportunity where data fully penetrate that market. Even as currently approved obviously no one expects them to fully penetrate that market, but I think people still see that as a $1 billion opportunity on its own.
In terms of <unk> as a potential.
Approval downstream and <unk> it was pretty clear.
When they announced it but.
They are still planning to discuss a path forward with both the U S and European regulators.
Given the significant unmet unmet medical need.
And the positive trends even in the Egfr data, but also in the other topline data in the strong signals of efficacy that the Exxon and other and other data points all to us means.
We'd expect it hopefully theres a path forward both in the U S and in Europe .
And then lastly kind of in terms of read through.
Of the <unk> fully mature egfr data to the Iga nephropathy.
Data just to remind investors both trials were essentially run.
Where they've got an interim look at proteinuria data and an interim look at Egfr data and then.
Fully mature data in NFS GFS was what was reported.
Recently.
So as characterized by severe.
It's important to remember the diseases are different.
SGS is relapsing remitting disease versus Iga nephropathy is a continuously progressive disease, when youre talking about Egfr.
It's one reason that you might expect different results in Iga nephropathy and you saw on the <unk>. When you are talking about the Egfr endpoint also the study designs were different specifically around the washout period from other medications that was done in the <unk> trial, which wasn't done in Iga.
Iga nephropathy trial.
And then lastly, the active control arms.
In both studies.
Particularly in the <unk> study performed much better than.
They were expecting so it made that the hurdle for statistical significance, even higher in the FSC fsc's trial than they expected. So taking all that together the company seems very confident and we're equally confident that the Iga nephropathy readout will be we'll be just fine.
Okay that was great I appreciate that color on that topic final question. It's a quick one with regards to the Viking gain first congratulations it's nice when it works out that way.
The question is.
I want to pull that out of the quarter.
Have to assume a tax rate how should I think about it if I wanted to get a kind of a comparable number going forward and looking backward.
Yes, the tax rate on the Viking gains is it going to be a little bit higher than the.
The non-GAAP right, we've been applying to.
Operating income you can you can apply 22% to that Scott.
Okay, great. Thank you for taking the questions.
Sure.
And our next question comes from the line of Matt <unk> with Craig Hallum. Your line is open.
Good afternoon, and thank you for taking the questions and congratulations for the strong start to the year, maybe first one captisol.
Strong quarter.
Im hearing you correctly it sounds like there was maybe some orders that came in a little earlier than you had anticipated for the year is that the case and that's why you've elected to leave the $21 million number for the year and then I guess the follow up to that is how should we be thinking about cadence for the remainder of the year for the other call. It 10.
The $10 5 million.
Yes, Hey, Matt.
Thanks for the question, yes, exactly right.
The first quarter was quite strong compared to.
The guidance for the year end.
You hit the nail on the head one of our larger customers ordered a significant amount of there.
Expected orders for the year in the first quarter.
As we always say in almost every quarter. These orders are lumpy customers frequently will move their order pattern around like this.
We do think there is potential for some strength.
Later in the year, but.
For the same reason that some folks accelerated orders this quarter, we don't want to raise the guidance before we're pretty certain net.
Folks are going to <unk>.
Finish off with stronger demand than expected.
The rest of the year. So there may be some strength, but for now we think it's most appropriate to leave it at the current guidance.
Got it and then as far as the deal pipeline is since current concern you gave US a couple of different data points of ways to look at that.
Is that given the environment that we're seeing right now, particularly with small pharma and biotech.
Company funding essentially drying up is that creating.
A lot of opportunities and given the size of your team how are you finding or structuring.
Projects to dig into those opportunities and how should we be thinking about the cadence.
View, signing some of these new agreements.
Over the next couple of quarters not only in signing the agreements, but then will you be looking at the opportunities themselves as far as okay. Well. This one is going to have a phase III trial. This year. This from our phase III trial next year, so youre kind of staggering the goalpost if you will on the other side.
Yes.
Good question, Matt This is Todd and I think in terms of the pipeline.
I would just emphasize this is a strategy.
That works in a strong capital market environment, but you are right in a challenging capital market environment, where you have the issues with SBB.
People, having that have that having to refinance at a significantly higher rates.
And then there's the normal need for access to capital and biopharmaceutical industry.
With fewer debt and equity alternatives available.
It is an especially robust and.
An opportune time for us and Theres, a pretty big void that we can fill.
Right now so I like the position that we're in as a result of that I can tell you that although we are still building the team as mentioned we have several capable people here.
It's a bit of a fire hose right now so the key is to be very selective on what you work on which means high quality screen upfront. So we're really looking at <unk>.
Assets with very high clinical value.
Things that are within about at least four years of approval, that's typically phase two ish or beyond.
And that have significant evidence of safety and efficacy.
Where we think we can obviously price these not only above our own cost of capital, but where we can price them.
In excess of the risk we're buying so that theres significant alpha that we're creating on a product a product basis. So this is a great environment for this.
Cadence is I wouldn't want to commit to anything because when youre investing you want to do it right not fast, but there is a lot on our plates right now inevitably some of this will start to come to fruition over the next several months.
The volume is pretty high in terms of what we're looking at and there is a lot of very good assets out there, but importantly, you need a really good team on the other side, we're not in the clinical development business. So when we partner with somebody we're also assessing the team their ability to execute et cetera, thats really important.
That's really helpful. Maybe one.
Minor one and then I'll hop back in the queue as far as the Riley's opportunity does the EMA.
Approval would that trigger another milestone.
Later this year.
Okay.
I don't think we've disclosed specifically.
Whether those whether there's a milestone or not on the EMA around that contract but.
Hi.
There is typically very low milestones for this program outside the U S that may.
May be triggered around that.
Alright, thank you.
And our next question comes from the line of <unk> Prasad with Barclays. Your line is open.
Hi, good afternoon decent shell for <unk>. Thanks for taking our questions. Just a quick one on Kyprolis and you have in Australia currently modeled.
Annual revenue of around one <unk> to $1 4 billion for 2023, which will translate to a wrong faulty median royalty revenue for <unk> do you think this is a range, Louisiana ballpark off Youll ask me. Thank you.
Yes, thanks for the question.
This is Matt.
Yes.
I agree that can same consensus we see for the Kyprolis revenues in that one three to one four level. Just a reminder, I mentioned in my prepared comments as well, but folks should.
Aggregate both the <unk>.
<unk> sales the <unk> sales and then Beijing sales in China. So all three contribute and we get paid a royalty on the aggregate sales across that.
And in terms of the math.
Don't know the exact number but.
It's the.
Exact royalties are disclosed.
In the Ks and Qs we present, so it's one 5% on the first 252 hundred $50 million and then it's 2% for the next 252 five for the next $2 15 and.
3% for everything over $750 million, your math sounds about right but.
There are a few adjustments from what they report to what we actually get paid on through currency changes and things like that but for est.
Estimation purposes, it sounds like your math is pretty close.
Got it very helpful. Thank you so much.
Thank you.
And our next question comes from the line of Joe Pin Guinness with H C. Wainwright. Your line is open.
Hey, guys. Good afternoon, thanks for taking the question Todd.
Todd I wanted to ask about the evolution of your thinking around strat.
The strategy here, especially since you took over but of course, you've been with the company for a while.
Your initial comments had some nice.
Breakout of how Youre thinking about things in the Q&A has touched upon it but I guess I wanted to approach it from this way.
<unk>, obviously has a long history. So curious based on all the different kinds of deals that you've done previously what do you think some of the best performing deals have been with regard to structure the fundamentals of science or what have you.
And how are you looking to apply those learnings to the new deals going forward.
Greg Good question Joe.
The company historically has executed on almost every deal format I've mentioned royalty acquisition project Finance M&A and platform acquisition.
But it has been predominantly M&A they've executed on.
M&A has created the majority of our returns the company is very good at this.
But I would just say that even in the M&A deals really the lens that we look through is it is the products that drive value. So you really selecting the right products in these situations, where very product and team focused.
We look at platforms Opportunistically of course, but structure as a tool and so M&A is one approach and really one structural approach.
As this project finance as as royalty acquisition et cetera, and the more tools you have the more opportunities you will have to get to high quality teams and high quality assets, which means you'll get more high quality deals done and have greater growth. So that's the way we're looking at it and approach it.
I appreciate it thanks a lot.
Thank you there are no further questions at this time, Todd Davis, I will turn the call back to you.
Thank you.
I want to thank everyone for joining our first quarter earnings conference call. While we are offering investors is high growth in the biopharmaceutical segment.
But with a broad portfolio that mitigates the typical volatility in binary risk nature of drug development that is inherent in narrower portfolios. Instead, we are making these product by product investment decisions with the benefit of confidential information shared from our drug development partners. This.
It gives us a significant information advantage and the aggregation of our broad portfolio of royalty cash flows where no single asset determines our fate and with that I'll turn it back to.
To the operator and thank everybody for joining us today. Thank you.
And this concludes today's conference call you may now disconnect.
Okay.