Q3 2023 Ligand Pharmaceuticals Inc Earnings Call
Thank you for standing by my name is Danica and I will be your conference operator today at this time I'd like to welcome everyone to the ligand <unk> third quarter 2023 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. He would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star One again I would now like to turn the call over to Simon <unk> head of Investor Relations. Please go ahead.
Thanks, Danica welcome to ligand third quarter of 2023 financial results and business update conference call for you today for ligand will be Todd Davis.
Paul Allen Senior Vice President of investments, Matt Kornberg, President and CFO and.
And so that's another CFO. Please note that there are slides accompanying today's call. These can be accessed by going to the investors section of our corporate website, where you can find the link to the webcast and presentation on the IR calendar page.
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 and financial guidance additional information concerning risk factors and other matters concerning ligand can be found on slide two as well as 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 the closest GAAP financial measure can be found in our earnings release issued earlier today.
Before we get started I'd like to highlight that earlier today, we announced that we'll be hosting an in person investor and analyst day on December 12 in New York, Our senior management team will provide an in depth update on our business strategy and overview of our portfolio financial outlook and other development. We look forward to seeing many of you there and we'll provide more details on the event in the future.
I'd now like to turn the call over to Todd Davis.
Thank you Simon and good afternoon, everyone. Thanks for joining our third quarter 2023 earnings call.
I am pleased to have the opportunity to speak with you today and provide an update on the company's performance and recent developments.
We are approaching the one year anniversary of my appointment as CEO and I am very pleased with the strong execution by my colleagues and our partners over the last 12 months.
By every measure we have had a terrific year, a great quarter and are poised to accelerate our momentum as a business in 2024.
Adjusted earnings per share is growing we've closed a number of exciting and diverse types of investments to execute on our strategy.
Our team will detail in this presentation, we've cut costs and streamline our business and made a number of additions to the team who has already made a significant impact on our business in short we've achieved everything we set out to do this year and are very well positioned for 2024.
There are three drivers to our current performance and future growth.
One the commercial portfolio continues to generate growing revenues.
Two we are seeing continued progress across our existing development stage partnered portfolio.
This existing portfolio offers us significant future growth on a standalone basis.
Three we have implemented a strategy to scale, our business development and investment capabilities.
This allows us to build upon the existing asset portfolio, adding new late stage development and commercial assets to achieve more sustainable long term growth.
We are now seeing tangible results of this effort with several notable recent transactions that contribute to our goal of adding in high growth risk mitigated programs into our existing portfolio.
We have a strong debt free balance sheet.
And we have also improved our P&L by reducing overall expenses.
The growth in our commercial portfolio together with these initiatives is having a direct impact on our earnings today.
Today, we are raising our adjusted EPS guidance to $5 25 to $5 40 per share up <unk> 15 per share from our prior guidance of $5 10 to $5 25.
When compared to guidance introduced at the beginning of the year.
$3 10 to $3 30.
This increase was driven by 60% to 65 to EPS from the strength of our operating business.
And an additional $1 50 from the sale of Viking Therapeutics stock.
Revenues for the third quarter of 2023 were $32 9 million, including $23 9 million in royalty revenue.
We ended the quarter with cash and short term investments of $191 million.
Pablo will go into greater detail on our financial performance and developments.
Moving to slide four we will discuss business development and the investment team scale out.
One of our key priorities over the last 12 months has been to scale, our investment capabilities, including origination diligence and dealmaking to bring more institutional process to the way, we originate negotiate and execute on investments.
This requires.
Best available talent.
Pharmaceutical investing in dealmaking earlier.
Earlier in the year, we hired Paul <unk> Senior Vice President of investments and business development.
We have also added Lauren hey, as VP of strategic planning and investment analytics as well as several key additional members to our investment analysis team.
Internally, we have added chief Barsky, one of our most experienced scientific leaders to our deal diligence in sourcing team.
These additions are complementary to our corporate team.
Highly capable with regard to public company administration operations and execution.
In September we appointed Mark <unk> Zimmerman to our board of directors.
<unk> Zimmerman brings considerable experience in development and regulatory affairs at the global level, having held senior roles at small and large pharmaceutical organizations in the U S Europe and Asia Pacific.
Her skills are very valuable and complementary to the existing science clinical and business expertise that we already have on the board.
As we continue to source and execute on investments, we look forward to the strategic contributions that she will make.
These new hires and our fortified process.
A an ample to us to execute on a portfolio investment strategy, which will build our portfolio of partnered assets and accelerate our growth trajectory over the coming years. Additionally, we've emphasized significant focus on portfolio management with our extensive portfolio of partnerships. We believe that this will maximize results.
<unk> from the existing portfolio and generate new opportunities.
This year, we also opened up an office in Boston.
This is helping raise awareness of ligand in Boston, and Cambridge, a major life Sciences hub.
As a result, we now have greater access to the academic community scientific centers of excellence and the talented biopharmaceutical business executives in that region.
Moving to slide five we will discuss our strategy with.
Slide summarizes the multiple tactical approaches.
We add late stage programs into our portfolio. These are royalty monetization, where we purchased existing royalty rates on existing royalty contracts that are owned by inventors University where companies.
And they are in later stages of development.
Number two would be M&A, where we buy companies with valuable assets or partnerships.
Realizing the value of the assets, while restructuring operations partnering the assets and cutting costs.
Currently challenging financing environment for biotech companies as favorable through this leg of our strategy ligand has a history of doing this successfully with deals like Viking therapeutics and to Pelican Slash primordial genetics merger.
Project Finance.
Where we provide development capital to fund late stage clinical programs and returned for royalty contracts that we draft create and those royalties on future sales of those products.
And finally, the platform technology acquisitions that is where we look for technology platforms with high operating margins and existing licensing contracts, where we seek to generate new royalties by operating those platforms as well as harvesting the existing royalties.
The ideal platform will be scalable and have broad applicability and excellent example of this is our current captisol business.
Now Paul had and will provide additional comments on our investment strategy as well as specific comments on our recent <unk> tolerance and Pelican transactions, calling Paul our President Matt Kornberg will provide an overview of progress made in our portfolio operations near term growth drivers and the noga.
The November follow on investment <unk>.
<unk>, our CFO will format and will provide details on our third quarter financial update call.
Thank you Todd and good afternoon, everyone.
A pleasure to be able to address you on my first earnings call.
I've been receipt for little over eight months down and our team is very pleased with the progress we have made to date.
Cited about what we're building at <unk> and we hope provide a small glimpse of things to come on today's call.
We recently entered into four separate investment and which ligand invested a total of $77 million.
These illustrate some of the different approaches we have in our teams toolkit.
I will review three of our most recent investments tolerance Ahmed and Pelican transactions.
By way of background I joined the company in late Q1 this year.
What attracted me to <unk> with an opportunity set that remains unprecedented.
Specifically the companies that are very important pivot point in both our own history, but also within our industry.
During one of his first earnings call Todd laid out the significant imbalance between the supply of alternative capital and the demand for it.
That imbalance continues and if anything has grown.
He also stated our goal is to accumulate more royalty issues, specifically focused on driving sustainable high profit growth.
We will review some of our recent investments to demonstrate how we are executing against that goal.
Moving to slide seven let's touch on our business development process.
Perhaps the most important change we made at ligand in last six months with the buildup of high proactive outbound global sourcing effort capable of identifying attractive risk reward investment opportunities to acquire royalty interests.
This required experience relationships and discipline.
Creating a global business development pipeline and execution capability is something many of our senior team has done before we are in the early innings of this effort and look forward to continued progress in adding these internally sourced opportunities to our transaction funnel.
In terms of our target investments, we're looking for royalty interest in products that are no more than a few years from market Prada.
Products that have strong clinical differentiation, which address significant unmet medical needs.
Has solid patent protection and strong alignment with the products marketer.
And that we are agnostic as a therapeutic area.
Our Q4 pipeline today has over 25 actionable opportunities representing in excess of $800 million of potential transaction value.
Origination is clearly a strength of our team.
Collectively our existing investment team has a decades long track record of executing on our four key approaches to royalty aggregation.
In my first three months at ligand, we were laser focused on adding to our team.
Specifically individuals of skills expand sourcing underwriting and execution that could complement the strong foundation, we already had.
This required us to SaaS, our internal capabilities and recruit and hire top talent buildup.
Build a bench of expert external consultants and establish best in class investment processes. We knew this would enable our team to effectively invest and acquire new royalty interest, while allowing us to scale the business at the same time.
Our most recent investments in orbit and tolerance or evidence of those capabilities being established immature.
As providers not just technology, but also alternative capital to emerging Biopharma companies are broad mandate is exciting.
But it also requires discipline and theres no shortage of opportunities to look at and that is where our senior teams experience and judgment plays an important role.
I also want to highlight a critical element of our investment strategy.
Zero and process driven diligence.
Today, we have a lot of in house investing in scientific experience, while M&A as a tool in a leveraged from time to time when underwriting new royalty interest and transactions, we're always conducting private equity level due diligence our investment teams and consultants analyze many aspects of our products ranging from clinical trial design pipeline.
Pipeline competition manufacturing intellectual property commercial sales potential in licenses to name a few.
Furthermore, we execute on this process under confidentiality agreement with.
Which provides us with significant informational advantages in our decision making.
Every investment goes through the same rigorous process before being added to our portfolio.
Turning now to specific transactions on next cover Amit.
On slide eight you can see that in October we announced a deal with <unk> therapeutics.
In which we invested $30 million to acquire a 13% portion of the royalties and milestones that are owed to avid related to the potential approval and commercialization of <unk>.
A phase III first in class novel mechanism of action molecule for epilepsy.
It is being studied by Takeda in two rare pediatric epilepsy indications.
Lennox <unk> syndrome, or lgs, and Dravet syndrome Takeda.
Takeda is one of the world's leading pharmaceutical companies in neurology and rare diseases.
Lgs, and Dravet or two very difficult trade conditions, where despite having a few products that have been recently approved the remain high unmet clinical need.
After August successfully completed a phase II trial Takeda bought back the rights in 2021 for 196 million upfront.
Up to 650 $660 million in milestones and if approved tiered royalties up to 20%.
We purchased 13% of that license from avid for $30 million.
Which means <unk> will be eligible to receive up to $86 million in milestones and up to a two 6% royalty on global net sales of <unk>.
It is now conducting a global phase.
Phase III clinical program.
Takeda has also stated that it anticipates regulatory filings for the product in its fiscal year 2024. So we expect royalties to ligand could begin a year later.
This is a great example of a royalty monetization side from our upfront investment we are not taking on any incremental expense or overhead, which is attracted to ligand and theres new requirement for ligand to build supporting infrastructure will get involved in the product development. We have very capable partners that are doing that for us.
For <unk> in this transaction they successfully raised non dilutive capital to further invest in their own pipeline, while keeping the majority of license economics.
We believe there are other biotech companies with products in late stage development that will find non dilutive investments like this one to be highly attractive relative to other financing alternatives in today's equity marketplace.
Our goal is to pursue many future investments like this which offer ligand investors the potential for high margin growth over many years.
This transaction is noteworthy as it was the first under our new investment process for our investment teams sourced performed diligence and negotiate the terms of the entire investor.
Moving on to slide nine.
The second deal we closed this quarter with a $20 million acquisition of <unk> therapeutics.
A holding company owned by the inventors of <unk> or <unk>.
Tolerances owed royalty of less than 1% of worldwide net sales for <unk>.
<unk> is the first disease modifying therapy in type one diabetes or <unk>.
It is a CD three direct antibody indicated delay the onset of stage III T&D in adults and children age eight years and older with stage two <unk> date.
<unk> was granted breakthrough therapy designation by the FDA in 2019 and was approved by the FDA in November 2022.
<unk> is marketed by Sanofi following a $2 $9 billion acquisition of prevention by them earlier this year.
Sanofi recently announced new data from Tcl protect III phase III trial, which showed TD with potential to slow the progression of stage III <unk> in newly diagnosed children Nols.
This data was published last month in the New England Journal Medicine.
<unk> described the acquisition of prevention bio and a strategic fit being at the intersection of the company's growth in immune mediated diseases and disease modifying therapies in areas of high unmet need.
<unk> has a robust history within the diabetes space.
<unk> <unk> featuring <unk> as one of their key launches with significant blockbuster potential.
Most recent Q3 earnings described T cells, having a multibillion dollar potential.
Coincidentally the day, we announced the acquisition canopy press release to announce their one pledge campaign.
This is a program to help boost awareness of type one diabetes early screening and detection that families can be more prepared for diagnosis.
The campaign tap singer and actor Usher head instructor and VP of <unk>.
Fitness program at peloton, Robin our zone and journalists, Adam Schechter to tell their stories that type one diabetes.
Because tcl is already FDA approved the <unk> acquisition will be immediately accretive to <unk> royalty revenue.
As an example of what ligand believes will be many future transactions with inventors and academic institutions.
Moving on to slide 10.
In September we announced that we were spinning off our pelican business and merging it with primarily Youll genetics to form a new company Primrose buyouts.
As part of the deal ligand is retaining the existing commercial royalties related to the Pelican platform.
Will own 49, 9% of Primrose bio.
We also entered into a purchase and sale agreement with Primrose, whereby we invested $15 million in exchange for a portion of the economic rates from two existing contracts or promotional genetics and an economic interest in potential future revenues generated from the telecom business.
As background, we acquired the Pelican business through the acquisition of Phoenix in 2020.
After incubated Phoenix for three years, we now have five commercial royalty streams from the technology platform.
And with the spinoff and merger, we also retain a significant equity stake in the exciting new company with capabilities and synthetic biology.
This process is very similar to other transactions in the past, including Viking Therapeutics and the <unk> spin off.
The acquisition of Phoenix was a very successful transaction for ligand and one that we expect will continue to generate revenues.
The recent spinoff is consistent with our strategy to streamline the company's operations and focus on accretive high margin businesses and royalties.
We wish the Primrose team well as they continue to advanced technologies that enable the development of next generation therapeutics as a Standalone company.
I will now pass it over to Matt who will cover our portfolio update Matt.
Thanks, Paul.
It's been an exciting period for the portfolio over the last three months and today I'm pleased to be able to provide investors an update on the developments across the commercial programs and the progress in additions to the partner development portfolio.
Slide 12 shows our key commercial and late stage pipeline assets, including two new recent additions through portfolio investment.
I'll touch on our new programs in a moment, but I always like to remind investors that our broader portfolio includes more than 75 additional partner programs beyond the 12 that are highlighted on this slide.
The products listed here are a subset of our programs that are currently approved or in phase III development.
Our current commercial portfolio includes over 25 different royalty streams and 30 commercial drivers overall.
The addition of <unk> yield there are now eight royalty bearing programs that we believe are significant enough that investors should focus on them in the near term and I'll provide updates from Q3 on a few of those commercial programs now.
Kyprolis, which is an important drug for multiple myeloma continued its strong 2023 with another solid quarter.
Kyprolis is marketed by Amgen and a majority of the countries around the world as well as by Ono in Japan in Beijing in China.
In Q3 2023. These companies are again expected to report combined quarterly revenue exceeding $370 million year over year growth for the product has been driven by strong volume growth and the product is on track to exceed $1 $4 billion of global sales this year.
After receiving approval in February.
This is now the second full quarter of severe marketing first priority in Iga nephropathy.
We're in a 9% royalty on royalty on sales and we expect that this will be a significant driver of long term growth for our royalty.
<unk> reported sales of $8 million for Q3, and severe also disclosed at the momentum on new patient recruitment continued in Q3 <unk> had 430, new patient form submitted in Q3 and 990 total since the launch.
We continued growth in potential new patients provides good evidence of the successful product launch and ramp.
Sell side analysts estimates for peak sales and Iga nephropathy are between $500 million and $1 billion.
Sales anywhere in that range would make those priorities lie against both significant royalty generate.
Riley is marketed by jazz.
A component of a multi agent chemotherapy therapeutic regimen for the treatment of children with adult children or adults with al our LVL.
This product continues to do extremely well in a market that was historically constrained by supply issues in.
In Q2 of 2023, <unk> reached a record level with $101 7 million in sales and just before we got on this call. We saw the jazz reported Q3 sales of relays, increasing quarter over quarter to $104 9 million Q3, 2023 as compared to Q3 2022 with an increase of over four.
32%.
Vaccinate excuse me back to the advances of $15 billion pneumococcal vaccine utilizing <unk> <unk> hundred 97 vaccine carrier protein produced using the Pelican expression technology platform.
<unk> is now marketing back to advance in both the adult population in the pediatric population.
<unk> $214 million in <unk> sales in Q3 2023.
Third quarter results showed that <unk> on its way to blockbuster status in 2023 sales for the product are now on track to exceed $700 million.
Paul already covered the details of our recently acquired rights to Santa <unk> program and as Paul mentioned expectations for <unk> are clearly in a blockbuster range and we're thrilled to add this premier product to our royalty portfolio.
Lastly, I wanted to provide a quick update on our Captisol business.
For Captisol sales have continued to outperform our expectation for the year as reflected by another increase in guidance for this revenue item.
We reported Captisol sales on a separate line from our royalties, but this business is another of our major drivers of revenue and profitability the.
The gross profit from Captisol should equate to about $17 million, which would exceed our largest current royalty other than kyprolis.
Over the next two slides I'll provide some updates on the portfolio portfolio progress we've seen so far in 2023.
First on slide 13, you can see that some of the key programs, we highlighted at the beginning of the year.
And the progress of those programs have made for each on the approval front. We saw revere obtained U S approval for Pillsbury and Jasmine EU approval for <unk>, which is marketed as <unk> in Europe both.
Both Corona and <unk> submitted NDA to the FDA for key programs and I'll touch more on our <unk> strategy in just a moment.
Merck reported favorable data for the one month six a product that we expect to use to broaden the merck offering and pneumococcal vaccine.
And existing partners <unk>, and Viking reported positive phase II data and irrespective disease areas.
On slide 14, we lay out some of the broader portfolio progress and Captisol licensing that has occurred this year. While these products were not previously highlighted as key programs. We wanted to provide a quick update on these additional growth drivers on.
On the portfolio front, our Chinese partners <unk> submitted an NDA for <unk> to the Chinese FDA in late 2022, and then in May of 2023 received notice of acceptance and priority review status.
The hepatitis D market in China remains significant and with a 9% royalty to ligand, we expect for <unk> to be a solid contributor to the royalty line over the longer term.
Our partner in Nebbiolo reported positive phase II data in acute cannabinoid intoxication, which is a significant new market opportunity as regulation shifts throughout the country.
Novartis received pediatrics pediatric approval for this year for its combination program up to Findlaw and mechanist mechanistic Captisol formulated product and the newly approved combination is indicated for pediatric patients with certain solid tumors.
While this program is not expected to be a huge contributor given the population size is an important product for patients and it should provide a growing royalty stream over the next decade or more.
The bottom portion of this slide provides an update on our Captisol licensing efforts table on the left shows the history of our licensing deals since our acquisition of <unk> in early 2011.
Continued strong interest in our technology provides an organic source for new royalty deals that do not require deploying new investment capital and of course, we will drive our captisol sales over the longer term as well.
A table on the right list the new Captisol agreements, we put in place. So far this year to give investors a sense of the types of programs that we see when we're initially signing up partners to Captisol use agreement.
Over time, assuming program success. These programs will move into our later stage pipeline and drive a portion of our longer term growth.
Turning now to slide 15, I will cover the November business.
This follow on investment as an example of one of the tools, we can utilize to capture additional economics on programs.
We already had a royalty interest in November for <unk> gel, which has a <unk> date of January five 2024.
Product is in development to treat infections from a virus called Melissa.
If approved the product would be the first at home treatment for this condition.
Our $12 $2 million ligand acquired for <unk> gel all the assets related to the nitrosyl technology platform as well as the rights November citizens program.
We're able to execute on this transaction quickly as a direct result of our qualified business development team that has capabilities and reorganization in operations.
As we incubate this newly acquired business the Nova and team continues to progress the program towards approval and is preparing for commercialization consistent with our business model, we will intend to seek marketing and development partners for the acquired assets to maximize the value for ligand shareholders. Alternatively, we are evaluating the opportunity to create a stand alone company to develop and commercialize.
<unk> technology and program.
We've had a significant success.
<unk> and creating new Standalone companies drove Viking <unk> and Pelican transactions and will consider the same for November.
Slide 16 lists some of the programs that we currently view as key pipeline programs that will drive revenue growth in the wave. Following our currently approved program. We've updated this list to show upcoming catalysts and moved to a successful 2023 events to the previous slides.
Of course, we made the New addition to the list with Takeda has particular SAP program that Paul discussed previously.
Of particular note on the slide our upcoming events for trivia Barona Ahmed and Viking with.
With <unk>. The recently reported data from the Phase III protect study showed that the improvement in Egfr chronic slope was statistically significant with respect to the confirmatory endpoint for the EU.
This data is expected to support the EU decision on approval in Iga nephropathy, and the first half of 2024.
Corona submitted its NDA to the FDA for approval of <unk> for the maintenance treatment of patients with COPD. The <unk> date for the product has been established as June 26, 2024, and Verona is building its commercial infrastructure as we speak.
Particular stat is a first in class novel compound with the potential to reduce seizure susceptibility the product targets. The main neurotransmitter in the brain has been shown to play a role in the initiation and spread of seizure activity indicators currently running a phase III trial and expect data in the fiscal year its fiscal year 2024.
Lagging or the tiered royalty of up to two 6% on the drug is successfully commercialized as well as up to $86 million of milestones.
Finally during the second quarter of 2023, Viking announced positive topline results from the phase <unk> voyage study evaluating <unk> in patients with biopsy confirmed Nash.
The company expects to report data from the secondary and exploratory objectives of this study in the first half of 2024, and we expect that following these results Viking would move forward into phase III with this program.
With that I can turn the call back over to travel further financial update.
Thanks, Matt.
The third quarter of 2023 was an exceptional quarter financially with continued impressive performance in royalty revenue strong captisol sales lower overall operating expenses and an improved outlook for the year, resulting in our four upward guidance revision this year.
Total revenues for the quarter were $32 9 million, which represents a 22% increase when excluding last year's contribution from Covid Captisol sales.
Revenues for the third quarter of 2022, including COVID-19 related sales were $59 2 million.
Royalty revenue increased 24% to $23 9 million from $19 3 million a year ago with the growth driven by strength in amgen's Kyprolis and growth in sales of drug of drugs using the pelican platform, namely New nacelle right lays index new bands.
Captisol sales were $8 6 million this quarter versus core Captisol sales of $3 6 million in Q3 of 2022 with the increase due to timing of customer orders.
Total captisol sales in Q3 of 2022.
At $35 9 million with 30 $244 million of that related to COVID-19.
We did not have any COVID-19 related captisol sales this quarter.
<unk> revenue this quarter was $4 million versus $4 million in last year's third quarter. The decrease is driven primarily to the timing of partner milestone events.
We continue to focus on managing cost to maximize our operating margin in Q3, total R&D and G&A operating expenses decreased 17% when compared to the prior year quarter, primarily due to a decrease in head count related expenses associated with the Spinout of the Pelican business.
The decrease in operating expenses was offset by an increase in transaction related expenses associated with the <unk> transaction.
G&A R&D expenses were $14 7 million and $5 5 million in Q2, Q3, 2023 versus $14 9 million and $9 2 million in Q2 2022, respectively.
GAAP net loss from continuing operations in the third quarter of 2023 was $12 8 million or <unk> 74 per share and this compares with GAAP net income from continuing operations of $9 6 million or <unk> 56 per diluted share in Q3 2020 to.
The decrease in GAAP net income this quarter as compared to the same quarter last year is due largely to unrealized losses on our remaining holdings of Viking Therapeutics stock and the Covid Captisol sales in the third quarter of 2020 to adjust.
Adjusted diluted EPS for the third quarter of 2023 was $1 <unk>.
Versus 60.
In the third quarter of 2022, which exclude COVID-19 related Captisol gross profit the.
The increase in adjusted EPS is primarily due to an increase in core captisol sales and a decrease in operating expenses.
Our future operating costs are expected to decrease as a result of the Pelican spin out as those costs will now be absorbed by Primrose buyer, we will account for our $49 nine ownership interest in Primrose under the equity method as a result, <unk> will absorb its share of Primrose bio net losses, which will be presented separately.
At the noncash items and adjusted out for purposes of reporting adjusted non-GAAP earnings.
<unk> in the fourth quarter, we expect to incur incremental operating costs associated with our acquisition of <unk>. Our intent is to spin out and our out licensed that Nov and business and therefore, we will be adjusting out these expenses for purposes of reporting adjusted non-GAAP earnings.
Turning to the balance sheet as of September 32023, we had cash and short term investments of $191 million, which includes $25 million of our holdings, Inc. Viking common stock in October we deployed $50 million to acquire the tolerance in.
Asset that Paul described earlier.
We are a cash flow positive company that generates over $75 million of cash annually from our existing business our current cash annual.
Annual cash flow generation will be sufficient to fund the investment activity, we anticipate over the foreseeable future.
Turning now to guidance, we are raising total 2023 revenue to be in the range of $126 million to $129 million and adjusted earnings per share in the range of $5 25 to $5 40 the.
The increase in guidance is attributable primarily to an increase in captisol sales as well as a decrease in operating expenses approximately $1 50 of adjusted earnings per share is attributable to realized gain from sales of Viking therapeutics stock earlier this year.
Adjusted for the Viking stock gains our core 23, adjusted EPS guidance is $3 75 to.
At $3 90.
Or approximately 55% above last year's adjusted EPS of $2 44.
As a reminder, due to the unpredictable nature of the pandemic, we exclude captisol for COVID-19 related sales from guidance and we'll update investors as orders are received and shift each quarter. Finally, I'd like to direct listeners to our third quarter earnings press release.
Issued earlier today, which is available on our website for a reconciliation of our adjusted financial results to GAAP results I talked about today.
I will turn the call over now to Todd for closing comments.
Thank you travel.
Our unique business model means that we have a lot of portfolio activity and.
And a significant amount of new deal activity to follow.
All of this activity is focused through the filter of our main objective.
We choose achieving superior reward relative to the risk we take on.
And delivering substantial predictable growth of earnings per share.
We're very pleased with this quarter's results as well as the progress we've made over the last 12 months we've.
We've improved our investment in business development capabilities and have grown our asset portfolio.
Comparing where we are now to December of last year.
And the last year, we've grown commercial product drivers up to eight plus captisol.
And the last year royalty revenue has grown from $73 million to our current current guidance of $82 million to $84 million, we expect growth to continue for years off of this existing portfolio.
In the last year cost management efforts have reduced our operating expenses from approximately $92 million a year ago prior to the <unk> spin out and other restructuring activities to today's annual cash operating expense run rate in the mid $30 million range.
As a result in the last year adjusted EPS has grown from $2 44 per share last year to an annual EPS run rate of approximately $4 per share excluding gains from the sale of equity holders.
Meanwhile, the investment team has added three new assets.
Two our growth portfolio over the last several months and is actively pursuing additional growth opportunities.
Thank you everyone for joining us for todays earnings call.
I want to remind you that <unk> will be hosting an in person Investor day on December 12 in New York.
Where we will go into significant detail I'd like to now open it up for Q&A.
At this time I'd like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
We will pause for just a moment to compile the Q&A roster.
Your first question comes from Matt Hewitt with Craig Hallum. Please go ahead.
Hi, This is Jack on for Matt Congrats on a good quarter.
The recent $20 million acquisition of tolerance, how did that come about and to be clear there is no milestones related.
Correct.
Hey, Jack it's Matt.
Confirm that there are no milestones remaining in the deal that we are entitled to and then I'll ask Paul to give a little color on how that how the transaction came about.
Yes.
Matt This is Paul.
And of course that.
Our proprietary intermediary relationships.
<unk> focused.
And we had some existing relationships.
With the <unk> group. So that's all I can say for that that question, but the answer to that.
Yeah. That's helpful and then for a follow up with the $30 million.
Avid therapeutics, we obtained 13% interest in milestones and royalties.
The milestones could you please walk us through how much of the original 616 regulatory.
Marshall milestones install available and then second are these structured similar to most of your I guess the milestones that you receive them.
Upon trial starts not completions.
Yes, so we can't comment on the structure of the milestones when they get paid.
I can tell you is that.
$660 million is still on the come so none of that's been paid yet.
So when we bought into was that milestone waterfall and then obviously the tiered royalties behind that that we mentioned on the call up to the 20%.
That's helpful. Thank you.
Okay.
Alright. Our next question is from Larry Solow with CJS Securities. Please go ahead.
Hey, good evening guys.
Thanks for the call Tonight.
Some quick questions on the product because I guess, we'll get some of these new product quality that gets will get an update.
The analyst day.
Just a few.
Guidance.
A little bump up for the.
The rest of the year.
If I did my math it looks like it's like a couple more on the comment about what you said and then couple of million on the operating expense side, Alright, I won't kind of golf ball.
Although our $2 5 million.
After tax savings with somewhere around there somewhere in the ballpark there.
That's about right I would say the majority of that.
The increase to the guidance was driven by the like Captisol sales this quarter and certainly the year. The operating expense savings contributed most of that had already been accounted for.
Got it.
In terms of <unk>.
Video transcript.
Well I guess.
The $8 million and it sounds like the funnel of sales opportunities growing there.
Is there any work.
Now with the FDA, yet I know the protect study came out.
But obviously, it's Nick again.
I know, it's still published by the landfill volumes.
It's getting pretty high praise and companies that got into Atlanta.
Just.
Has the outlook changed at all if anything get pushed to the right.
Paul.
I guess, the right sorry for the year, but any thoughts on the multichannel model will be great.
Yes, Thanks, Larry.
So just to remind everyone.
The <unk> product was approved on accelerated approval and they were running a confirmatory trial.
We're running the trial to the end to get the confirmatory endpoint.
Derek.
And <unk> did slightly missed statistical significance.
Four.
A U S version of the endpoint.
What I.
I would do is direct all investors definitely to listen to everything that <unk> is saying and listen closely to what they are saying, but I think the company has high confidence that the product will remain on the market in that.
Robust.
Package of data that they've generated over the phase II and phase III programs.
Clearly as supporting evidence for the benefit to patients.
It would be very surprising outcome for the product to be pulled off the market.
Hi.
The company Hasnt commented on exactly what their conversations have been with the FDA. So far but they have said that they are in conversation with the FDA and so.
We will look to them to to provide any more details, but we're pretty optimistic internally based on the public info that we see.
Okay I appreciate that color just a couple on pelican assets.
<unk> you mentioned <unk> I think reported.
They are on a run rate now over $400 million in the U S.
It does.
That was a European approval.
It's not a simple double.
Mark and inevitably similar fall.
Actually be all $1 billion.
Some point.
Yes, Thanks, Larry.
Ed.
The market for <unk> and <unk>.
Historically prior to this product and the predecessor product that was supply constraint was a worldwide product and Jess marketed it around the world.
We are certainly pursuing additional territories.
The EU approval.
It does add some potential for the product, but we point investors to jazz is public comments as well on this.
I think.
Hey, reiterate free.
<unk> that in the U S.
Product without significant competition.
In Europe, and some of the other markets around the world There is competition for the product and so on.
If you can't comment I can't comment on the potential size, but I wouldn't be surprised if it's if it's as big as you suggested.
Going into a $1 billion product worldwide I don't think thats the opportunity.
Okay. Okay, that's a little too big Okay. That's what I'm all set. Thank you. Thanks for taking the question.
Thanks Kurt.
Alright, as a reminder to ask a question. Please press star followed by the number one.
Okay.
We do not have any other questions and that concludes our question and answer session and today's call. Thank you all for joining you may now disconnect.
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