Q4 2024 Ligand Pharmaceuticals Inc Earnings Call
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Speaker Change: Good morning, everyone, and welcome to LIGAND's fourth quarter and full year 2024 earnings call.
During the call today, we will review the financial results we released earlier today and provide commentary on our partner pipeline in business development activity, followed by a question and answer session.
Speaker Change: Our earnings release and a link to today's webcast can be found in the investor relations section of our website at ligand.com. With me on the call today are CEO Todd Davis, Paul Hadden, Senior Vice President of Investments and Business Development, Chief Financial Officer Octavio Espinoza, and Vice President of Strategic Planning and Investment Analytics Lauren Hay. This call is being recorded and the audio portion will be archived in the investor section of our website.
Speaker Change: On today's call, we will make forward-looking statements regarding our financial results and other matters related to the company's business.
Speaker Change: Please refer to the Safe Harbor Statement related to these forward-looking statements which are subject to risks and uncertainties. We remind you that actual events or results may differ materially from those projected or discussed, and that all forward-looking statements are based upon current available information.
Ligand assumes no obligation to update these statements.
Speaker Change: To better understand the risks and uncertainties that could cause actual results to differ, we refer you to the documents that LIGAND files with the Securities and Exchange Commission, or SEC, that can be found on LIGAND's website at ligand.com or on the SEC's website at sec.gov.
Todd Davis: With that, I will now turn the call over to Todd.
Todd Davis: Thank you, Melanie. Good morning, everyone. And thank you for joining our call. I am delighted to report an outstanding quarter and full year results for Ligand.
Todd Davis: Over the past two years, we've been able to transform LIGAND into a profitable, economically diversified, and infrastructure-light organization.
Todd Davis: We remain focused on identifying and investing in highly differentiated royalty assets and operating our royalty generating platform technologies that we believe will generate significant long-term shareholder value.
Todd Davis: Our portfolio of major commercial programs delivers predictable and growing royalty revenue and is the foundation of our strong financial performance this year.
Slide 3 summarizes our financial and portfolio achievements in 2024.
Todd Davis: We grew royalty revenue by 28% and year-over-year core adjusted EPS by more than 40% to $5.74 per share.
Todd Davis: Royalty revenue in the fourth quarter increased 55% over the same period in 2023, which helped generate over $100 million of operating cash flow in 2024.
Todd Davis: LIGAND has over $250 million of cash and investments, no debt, and access to a $125 million revolving credit facility, which we can upsize to $175 million.
Speaker Change: We believe we are in a strong financial position to capitalize on our robust business development pipeline. Lauren will provide more detail on our portfolio later on the call, but I wanted to touch on a few of our key commercial stage assets.
Speaker Change: On our third quarter earnings call, we talked about two new commercial launches within our royalty portfolio during 2024.
Perona Pharma's O2Ver and Merck's Capvaxib
Speaker Change: We are pleased to report that both products exceeded our expectations in the fourth quarter product sales.
Speaker Change: Analysts estimate that both O2Ver and CapVacSieve have blockbuster sales potential, and we believe these products will be meaningful contributors to our royalty revenue over the next several years.
Speaker Change: Another meaningful royalty contributor for us this quarter was Traveres Felspari, which received full approval from the FDA in September.
Speaker Change: Another exciting development this quarter is the regulatory update TREVIR provided following the type C meeting held with the FDA for Felspare in focal segmental glomerulosclerosis or FSGS.
Speaker Change: It is a rare kidney disease that has a high risk of progression to kidney failure. There are currently no FDA-approved therapies for FSGS. Trevere announced its plans to file an SNDA in FSGS by the end of the first quarter of 2025.
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Speaker Change: Also in the portfolio, we are excited about our latest investment. LIGAND led a $75 million financing round with a $50 million commitment to fund the phase 3 study in Castle Creek's DeFi.
Speaker Change: DeFi is a phase 3 gene-modified autologous cell therapy for the treatment of rare orphan disease dystrophic epidermolosis bullosa. Paul will provide an update on the new investment in Castle Creek.
Speaker Change: Turning to slide four, over the last two years we have restructured our business model into an operationally light strategy focused on delivering profitable and compounding growth and we are now seeing the fruits of those efforts.
Speaker Change: We have grown our royalty revenue by nearly 50% and have reduced our cash operating expenses by over 50%.
Speaker Change: Head count is less than a third of what it was in 2022. This is a significant accomplishment. More importantly, it sets Ligand up for a very bright future.
Speaker Change: We are a biopharmaceutical company that delivers profitable and compounding growth.
Speaker Change: Our diversified and growing portfolio of royalty assets generate consistent and predictable revenues. We acquire or generate royalty interests in late stage development assets and commercial assets where there is superior risk reward.
Speaker Change: Our highly qualified team brings decades of investing, clinical, operational, and regulatory experience, as well as a strong origination network throughout the industry.
Speaker Change: We continue to execute on our strategy of acquiring high-growth, low-OPEX assets, a plan we put in place nearly two years ago.
Speaker Change: There is a sizable demand and low supply for royalty capital in the life sciences industry, which allows us to invest selectively as we offer a differentiated capital solution than traditional investors provide.
Speaker Change: Our team works thoroughly to source, diligence, and negotiate investments with customized structures to create proprietary opportunities.
Speaker Change: Our 2024 acquisition of a Pyron is a prime example of this approach. We can replicate this playbook while maintaining a low level of operating expenses.
Speaker Change: Royalty capital is a very small percentage of the total capital invested in life sciences today.
Speaker Change: We believe our model is differentiated, scalable, and offers immense growth potential for years to come.
Speaker Change: Turning to slide six, I would like to discuss our five-year royalty receipts outlook.
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Speaker Change: As we shared during our most recent Analyst and Investor Day, we believe our long-term royalty revenue growth is on pace to meet or exceed the 20% compound annual growth rate we initially outlined in December of 2023.
Speaker Change: Future investments should add at least 4% to this, with potential upside on top of the current outlook.
Speaker Change: Our business development team is constantly developing attractive new investment opportunities and we anticipate another productive year on the investment front.
Speaker Change: In conclusion, we are proud of all that we have accomplished since we began executing on our new strategy in the fourth quarter of 2022. We are highly optimistic about our future prospects.
Speaker Change: I'll now turn it over to Paul Hadden for an update on our recently announced royalty financing transaction with Castle Creek.
Speaker Change: Thank you, Todd. As we discussed at Investor Day last December, 2024 was a year of significant progress at Wygant. We remain excited by the opportunity to partner with companies, both public and private, to provide creative, non-dilutive capital solutions, as well as working with inventors.
Speaker Change: In early January, we closed our final O2VERA Inventor Royalty Acquisition, bringing our total royalty on Verona's O2VERA to 3%. 2025 is shaping up to be an active year for us.
Speaker Change: Two days ago, Wigan announced the closing of a new $50 million royalty investment with Catholic Creek Biosciences, a private company.
Speaker Change: Our investment will go to fund a pivotal Phase III clinical trial for Castle Creek's lead program, DEFI, an injectable, gene-modified, autologous cell therapy that is Phase III ready.
Speaker Change: DEFI which has FDA orphan drug designation targets a disease called dystrophic epidermolosis bullosa or DEB for short. DEB is a devastating and debilitating rare inherited skin disease
Speaker Change: DEB is caused by mutations in the COL7A1 gene leading to extreme skin fragility and blistering from even minor friction. A majority of patients are at significant risk for a deadly form of skin cancer and as such have an estimated lifespan of only 30 years.
Speaker Change: For our investment, Wigan will receive a mid-single-digit royalty on global sales should DeFi receive regulatory approval.
Speaker Change: In May 2023, the DEB landscape changed with the approval of Crystal Biotech's ViJUVEC, a topical HSV vector-based gene therapy administered weekly by healthcare providers in patients' homes.
Vijuvik's approval marked a major breakthrough for DEV patients.
Speaker Change: 2024 U.S. sales were nearly $300 million and peak global sales are projected over $1 billion.
Speaker Change: While Vyjuvik has delivered a much-needed treatment option, it does have its limitations, including restrictions on treatable body surface area and the need for weekly topical dosing.
Speaker Change: This leaves the DEB community still eager for additional innovative solutions.
Speaker Change: The D5 product profile is expected to be meaningfully differentiated and also complimentary.
Speaker Change: Ligand's investment team source-led and structured the $50 million royalty investment, which was joined by an additional $25 million co-investment by Castle Creek Insiders and Investors, bringing the total financing to $75 million for the combined syndicate.
Speaker Change: As highlighted in our press release, the 75 million dollar syndicate is eligible for a high single-digit royalty. LIGAND represents two-thirds of the syndicate and as such is eligible for a mid-single-digit royalty.
Speaker Change: This strategic collaboration with Castle Creek is a testament to our commitment to invest in potential breakthrough de-risk therapies.
Speaker Change: By partnering on DEFI's development, we not only expand our diversified portfolio of potential revenue-generating assets, but also make a significant stride towards transforming the lives of patients suffering from DEB.
Speaker Change: Well, again, excited to welcome this promising late stage clinical royalty investment to our portfolio.
Speaker Change: MyGantt's investment pipeline remains strong as we continue to evaluate multiple proprietary opportunities like DeFi that cannot be accessed through the public markets. With that, I'll turn the call over to Octavio.
Thank you, Paul.
Octavio Espinoza: First, I want to emphasize that I will be discussing non-GAAP results which exclude certain items such as stock-based compensation, amortization of intangible assets, amortization or impairment of financial assets,
Octavio Espinoza: Losses from derivative assets and expenses incurred to incubate the Pelto's business, amongst others.
Octavio Espinoza: I encourage you to review the gap reconciliation of these non-gap measures, which can be found in today's release available on our website.
Octavio Espinoza: I believe these adjusted measures provide valuable insight into our core operating performance, both historically and moving forward. In 2024, we delivered strong financial results, surpassing the high end of our guidance range, with total revenue of $167 million and core adjusted EPS of $5.74.
Octavio Espinoza: We ended the year with $256 million in cash and investments, and when factoring in our credit facility that's expandable up to $175 million, we have more than $400 million in deployable capital.
Octavio Espinoza: Notably, our continued growth in royalty revenue reinforces our confidence in meeting or exceeding the long-term outlook we shared at our December 2024 Investor Day.
Octavio Espinoza: Slide 11 provides a more detailed breakdown of our financial results for both the fourth quarter and the full year.
Octavio Espinoza: Starting with our full-year performance, total 2024 revenue grew 27% to $167.1 million from $131.3 million in 2023. Royalties increased 28%
Octavio Espinoza: earned $8.8 million from $85 million in 2023, primarily driven by Phil Sparri and Carziba, which we acquired through the recent Apiron acquisition in July of 2024.
Octavio Espinoza: Krivir ended 2024 on a strong note with total Philspari sales of $132 million, generating approximately $12 million in royalty proceeds for Ligand.
Octavio Espinoza: We expect Fils Fari to be a key driver of royalty revenue growth and anticipate that 2025 royalties from Fils Fari will approximately double compared to 2024 levels.
Octavio Espinoza: Other key contributors to our 2024 revenue include the Capasol business, which generated $30.9 million in material sales, up from $28.4 million in 2023.
Octavio Espinoza: and contract revenue totaled $27.5 million in 2024, primarily driven by milestones earned upon the approval and commercial launch of Verona's O2Bear. In 2023, contract revenue was $18 million, largely from the approval of Traverse Fils Fari.
Octavio Espinoza: Total R&D and G&A operating expenses increased 29% in 2024, due primarily to higher non-cash stock-based compensation expenses as a result of executive departures, as well as an increase in costs incurred to incubate the Peltos business.
Octavio Espinoza: Combined G&A and R&D expenses were $100.1 million for the full year and $30 million for the fourth quarter of 2024, versus $77.3 million and $21.5 million in 2023 respectively.
Octavio Espinoza: We expect that cost to incubate the Peltos business to seize in 2025 upon the execution of a Peltos strategic transaction.
Octavio Espinoza: Gap net loss in 2024 was $4 million or $0.22 per share versus gap net income of $53.8 million or $3.03 per diluted share in 2023.
Octavio Espinoza: The decline in gap net income is driven by non-cash items including a financial royalty asset impairment, fair value adjustments to certain partner programs,
and losses from our equity method investment in PrimroseBio.
Octavio Espinoza: Adjusted net income for 2024 was $156 million, or $8.25 per diluted share, compared with $107.4 million, or $6.09 per diluted share in 2023.
Octavio Espinoza: To highlight our core earnings, we exclude gains from sales of Viking Therapeutic Stock, which totaled $47.6 million in 2024 and $35.7 million in 2023 net of tax.
Octavio Espinoza: Excluding these gains, core adjusted net income was $108.5 million or $5.74 per diluted share in 2024 versus $71.7 million or $4.06 per diluted share in 2023.
Octavio Espinoza: Now focusing on the quarter, total revenue for Q4-24 increased 52% to $42.8 million, primarily driven by a 55% increase in royalties to $34.8 million, up from $22.5 million in the prior year quarter. The key drivers of royalty growth were Fils Fari and Carziba.
Octavio Espinoza: Total operating expenses increased compared to the prior year's quarter due to higher headcount-related costs, increased stock-based compensation, and continued investment in the Peltos business.
Octavio Espinoza: Gap net loss for Q4-24 was $31.1 million or $1.64 per share, compared to gap net income of $18.2 million or $1.03 per diluted share in Q4-23. This decline was largely due to volatility in the price of Viking Therapeutic stock.
Octavio Espinoza: As a reminder, we own 1 million shares of Viking stock. Core adjusted net income for Q4'24 was $25.2 million, or $1.27 per share, compared to $18.6 million, or $1.05 per share in Q4'23.
Moving on to the next slide.
Octavio Espinoza: And in turning to guidance, we are reaffirming our 2025 Financial Outlook introduced at our Investor Day in December. We expect royalty revenue to be between $135 million to $140 million, capital sales to range from $35 million to $40 million, and contract revenue between $10 and $20 million.
Octavio Espinoza: These components result in total revenue guidance of $180 million to $200 million with an adjusted earnings per diluted share forecast of $6 to $6.25.
Octavio Espinoza: Additionally, we reiterate our long-term outlook projecting royalty receipts to grow at a compound annual growth rate of 22% or greater from 2024 through 2029.
Octavio Espinoza: Finally, turning to our balance sheet, as of December 31st, 2024, we had $256 million in cash and short-term investments, which includes $40 million in Viking common stock.
Octavio Espinoza: We believe that our existing cash, combined with ongoing cash flow generation, is sufficient to fund our anticipated investment activities for the foreseeable future.
Octavio Espinoza: In closing, I'd like to direct listeners to our fourth quarter earnings press release available on our website for a reconciliation of our adjusted non-GAAP financial results to the GAAP results discussed today. I'll now turn the call over to Lauren for a portfolio update.
Lauren Hay: Thank you, Thabo. I'm pleased to provide some important updates on LIGAND's portfolio.
Lauren Hay: 2024 was a year of significant achievement across our partnered programs with the approval of four products, Verona's O2Vir, Merck's Capvaxib, Peltos' Zilsuvim and full FDA approval of Trevir's Silspari. In addition, we added Recordati's Carceba to our commercial portfolio through the acquisition of Apiron Biologics.
Lauren Hay: This brings us to 12 major commercial revenue drivers with significant momentum heading into 2025. I will review updates on our major commercial partnered products, followed by key pipeline updates.
First on the commercial portfolio.
Speaker Change: Carceba demonstrated strong growth in 2024. Recordati reported that sales in its oncology franchise, which comprises Carceba and one other main product, were 227 million euros in 2024, an increase of 13% as compared to 2023.
Lauren Hay: As a result, Recordati has increased its peak sales guidance for the franchise by 50 million euros, an increase of 20 percent.
Lauren Hay: Our partner, Recordati, has a broad international footprint with extensive geographic reach. Recordati continues to invest in seeking U.S. approval for Carceva.
Speaker Change: Following an encouraging meeting with FDA in 2024, Record Audi plans its next engagement with FDA in mid-2025 to discuss details surrounding a potential BLA filing for CARSIBA in the U.S.
Lauren Hay: Ligand's royalty rights extend globally and would include sales in the U.S. if approved.
Lauren Hay: In addition, at the J.P. Morgan Conference, Recordati shared plans to work to expand the label to Ewing Sarcoma, which would represent a major expansion for the product and an important milestone for patients and their families.
Lauren Hay: Next, Filsbari continues to show tremendous progress in treating rare progressive kidney diseases.
Lauren Hay: In September, Philspari received full FDA approval in a label expansion, which is estimated to expand the total addressable population from 30,000 to 50,000 patients to over 70,000 patients.
Lauren Hay: Our partner, Trevere Therapeutics, reported Q4 2024 Fils-Phares sales of $50 million, a remarkable 40% increase as compared to Q3 2024.
Lauren Hay: This robust performance demonstrates that Fils-Pare is becoming well-established as a foundational kidney-directed treatment in Igam.
Lauren Hay: Fils-Phari will be a significant driver of revenue growth for Ligand in the coming years, contributing meaningfully to our financial performance. Analysts' consensus for peak Fils-Phari sales is estimated at $1 billion in IGAN alone, which if achieved would translate to $90 million in annual royalty revenue to Ligand.
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Lauren Hay: Moving on, the June approval of O2-VER marks the first inhaled CUPD treatment with a novel mechanism of action approved in over two decades.
Lauren Hay: This important achievement also delivered a milestone payment of $5.8 million to Ligand. In its short time on the market, O2Vir has demonstrated impressive commercial success.
Lauren Hay: This underscores the significant unmet need for novel therapeutics in COPD as well as the value O2vera is delivering to patients.
Lauren Hay: In Q4, sales of O2Vera were $36 million, far surpassing consensus estimates.
Lauren Hay: Our partner, Verona Pharma, reports that pulmonologists are prescribing Ojuvera to a broad range of patient types.
Lauren Hay: Highlighting its expansive real-world utilization. Additionally, Verona reports that to date, over 80% of treated patients have a co-pay of $10 or less, facilitating extremely strong market access.
Lauren Hay: The maintenance COPD market is enormous, and Verona estimates that every one percentage point in O2-Var market share would translate into over a billion dollars in net sales.
Lauren Hay: Early prescription trends and patient experience has been overwhelmingly positive and we are excited about what 2025 has in store.
Speaker Change: Next, Merck's Catfaxis. Catfaxis achieved nearly $100 million in just two quarters in 2024 and is off to a very strong early launch trajectory.
Speaker Change: Capvaxie has a compelling competitive value proposition relative to other vaccines in the category. Because of this, Merck is optimistic about Capvaxie's potential and expects it to gain majority market share in the adult setting.
Speaker Change: We expect strong performance from Kevvaxieve in 2025, the first full year of launch for this innovative vaccine.
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Speaker Change: Our fourth approval of 2024 was Zilsuvme, a topical treatment for molluscum contagiosum. Ligand gained rights to Zilsuvme through a Special Situations Investment with Novan in 2023 and achieved FDA approval of Zilsuvme in 2024.
Speaker Change: Wigan then launched Pelso's Therapeutics, a wholly owned subsidiary, to prepare for launch. They'll suit me as the first and only at-home treatment for molluscum, a highly contagious viral skin disease.
Speaker Change: Commercial launch is expected by mid-year and LIGAND is in the final stages of executing on a strategic transaction to launch the asset.
Speaker Change: Next I'd like to focus on key developments in our pipeline. Building upon Fils-Pare's success in IgA nephropathy, Trevere is planning to submit an SNDA for Fils-Pare for the treatment of FSGS, another serious rare kidney disease by the end of Q1.
Speaker Change: FSGS is a leading cause of kidney failure and there are no approved medicines for patients living with this progressive disease.
Speaker Change: Earlier this month, Trevere shared that the company held an encouraging Type C meeting with FDA to align on the contents of a potential submission in FSGS, integrating Phil Sparty's Phase II and Phase III data, as well as feedback from the Paracel Working Group.
Speaker Change: If the SNDA is accepted and Fils Fari is granted priority review, this critically important medication could become available to patients by the end of this year, marking what could be the first FDA approved treatment in FSGS.
Speaker Change: Trevere has guided that the commercial opportunity in FSGS is at least as large as in IGAN and approval would mark an important accomplishment in our commercial portfolio.
Speaker Change: In terms of additional pipeline updates, Agenis presented compelling data in several colorectal cancer treatment settings at the recent ASCO GI conference. Their efforts to secure a development and commercial partner remain ongoing.
Speaker Change: Palvello recently initiated clinical studies of cutorin rapamycin in two serious rare dermatological conditions.
Speaker Change: First, the company started dosing patients in the Phase 3 Selva trial in microcystic lymphatic malformations. Additionally, last month, Palvella began dosing patients in the Phase 2 Toiva trial in cutaneous venous malformations.
Speaker Change: We look forward to the results of these studies in early 2026.
Speaker Change: And finally, last month, Takeda announced full discontinuation of the Sotiklisat program. If re-licensed, Leiden's royalty economics would remain intact.
Speaker Change: In closing, the success we achieved in our portfolio in 2024 underscores our commitment to investing in high-value medicines that deliver significant clinical benefits and generate long-term, predictable revenue streams for Ligand.
Todd Davis: With that, I will turn the call back over to Todd for closing remarks.
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Thank you, Lauren.
Todd Davis: To sum up, we are very pleased with our 2024 financial results, as well as the progress we've made over the last year in improving our investment capabilities and growing our asset portfolio.
Todd Davis: Our diversified portfolio, including our major commercial royalty generating programs and the late stage pipeline, form the foundation of our growing success.
Todd Davis: On its own, the commercial portfolio should drive growth in the mid-teens through the early 2030s.
Todd Davis: When you add our development stage portfolio, including but not limited to
Palvelas, Qutorn, MLM Asset
Todd Davis: Travir's FSGS-SNDA submission and our recent investment in DeFi, we continue to expect EPS growth in excess of 20%.
Todd Davis: We are well positioned to execute against our goals in 2025 and deliver attractive growth and shareholder returns over the long term.
Todd Davis: Thank you everyone for joining us on today's earnings call. We will now pass it back to the operator and open it up for questions.
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Todd Davis: If you wish to ask a question, please press star followed by 1 on your telephone and wait for your name to be announced.
Speaker Change: Your first question comes to the line of Matt Hewitt from Craig House.
Your line is open.
Matt Hewitt: Good morning, congratulations on the strong year and you know, looking forward to another strong year in 25. Maybe first up, this recent acquisition or recent investment into Castle Creek. If I'm not mistaken, that might be your first move into cell and gene therapies. Can you confirm if that was the case? And number two, are you looking at others? How does the risk profile change for that type of a program versus maybe a larger small molecule? Any color on that, please?
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Matt Hewitt: Yes, a great question. This is Paul Hadden. I think you are correct. That is our first cell and gene therapy
We're excited about the program. It's a very
Speaker Change: The targets going after is already established with the approved Crystal Biotech product. We're seeing cell and gene therapy but we're not actively pursuing that as a particular sector but we will be opportunistic where we find good risk-reward opportunities like the the Castle Creek investment.
Speaker Change: That's great. And then maybe a question on Captosol, and this is maybe two parts, but the SQ Innovations LASIX, is that, with that launch potentially coming later this year,
Speaker Change: Is that a big user of captosol? I'm trying to think of magnitude what that could mean for your captosol sales. Obviously, there was a nice step up with your 25 guidance for that segment to begin with on the Gilead news. But would this create another potential step up later this year into fiscal 26? Thank you.
Yeah, Matt, don't touch.
Go ahead, Chavo.
Speaker Change: Hey Matt, Octavio here. Yeah, so first of all, we're looking forward to that eventual approval later in 2025.
Speaker Change: And just as a reminder to our audience, we are doing relatively modest milestones.
Speaker Change: and royalties on that product. But then again, to your question.
Speaker Change: We will be selling a material capital-solved product to S2Innovation. But it's not going to be one of the major contributors to the overall commercial.
I would say more of a minor contributor.
Got it. All right. Thank you very much
Speaker Change: Your next question comes from Jo Penlegis from HC Wainwright. Your line is open.
Jo Penlegis: Everybody, good morning. Thanks for taking the question. So very nice with the DeFi deal, and I'm just curious, as you're looking forward with regard to all the kinds of creative deals that you're looking at, how does this deal signal your desire and ability to do even more syndicated deals?
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Speaker Change: Yeah, so we will syndicate deals when necessary. That's often driven Joe by our discipline around size. There's certain size limitations.
Speaker Change: that we want to observe so that we can create a diversified.
at Risk Diversified Portfolio.
Speaker Change: And so opportunistically, we will syndicate these deals. There are a number of other folks that are interested in them. But as you know, our typical deal size, especially on development stage assets, is 20 to 50 million.
And we're selecting things that have.
Significant evidence of safety and efficacy.
Speaker Change: as was the case with DeFi, and that is kind of the major risk parameter that we observe when we're analyzing these assets.
Speaker Change: And then on top of that, we kind of limit ourselves at 50 million on development stage products. That number will increase over time as the size of our portfolio increases on a proportional basis.
Matt Hewitt: No, that's helpful. Thank you. And then I guess two financial related questions. Can you discuss any potential with your growing cash balance of thoughtful share buybacks that I know could potentially be available? And then maybe Tavo, can you just discuss the asset impairment charge? Thanks.
Matt Hewitt: look for high value royalty assets. You know, at some we do we do have a stock buyback program in place. We don't we don't we'll be opportunistic there, but we don't have any.
to use the capital to buy back stock today.
Matt Hewitt: There's a Ticholstat asset that's with Takeda, they discontinued that and so we did have an asset carrying value on the balance sheet that we wrote off in QPAR.
Great, thank you.
Speaker Change: Your next question comes to the line of Doug Meehan from RBC Capital Markets. Your line is open.
Doug Meehan: Yeah, thank you. First question just has to do with the DeFi deal.
Doug Meehan: I know that you expect this to be used in combination therapy, but perhaps you can walk us through how you see it being used that way, given that we do already have that crystal.
product on the market today.
Hi, Doug. This is Paul again. Great question.
Paul Hadden: First off, I think there's a couple of important points to note. I think the DeFi...
Doug Meehan: product is an injectable product. Crystal's product is a topical product.
Doug Meehan: breaks in the skin in different places and one could envision where an injectable product would be much more advantageous for delivery versus a topical product.
That's one piece. The other piece is obviously the
Doug Meehan: potential frequency of dosing. The crystal product is weekly. We expect the D5 product to be much less than that. And then additionally, the surface area that you're allowed to treat in any given treatment course could also be different. So that
Doug Meehan: Those coupled together, you can see how these products could be complimentary. And so from that perspective, we envision that it would be a welcome addition if it's approved.
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Speaker Change: Okay, excellent. Second question does have to do with the potential deals that you're working on. Maybe Todd, you could speak to, you know, what proportion of the deals would be synthetic versus actual royalties that you're contemplating on buying or even companies like you did last year?
Doug Meehan: And then finally, maybe you could expand on potential strategic transaction as well in any way that you can. I'll leave it there. Thank you.
Doug Meehan: Sure, yeah, so we don't discriminate or favor royalty monetizations or also known as royalty acquisitions.
project finance, or special situations.
Doug Meehan: We do observe that quite often in special situations, such as our Peltho setup that we've been working on this year, that the potential returns can be very significant, and they need to be significant because they do require more bandwidth from the team.
Doug Meehan: And so that is just an observation that we make when we're stepping into these things. So we need the technologies that we do this with or the products that we do special situations with to be
Doug Meehan: potentially very highly valuable. And in that case, just for example, as you know, we paid just a little bit over $12 million to buy those assets out of bankruptcy. We already have an approved product.
Doug Meehan: They'll sue me, it's not launched yet, of course, because there's a number of things you have to do to set up for a launch when you're buying something out of a bankruptcy.
Doug Meehan: But it's very promising and, you know, on top of that, there's an underlying nitrocell platform.
that is potentially usable in many, many different areas.
Doug Meehan: The potential returns on that are significant, but you've got to work that long term. So that's really the key observation between royalty monetizations and project finance, or project finance being synthetic royalties that you create.
Doug Meehan: We're really mostly focused on the asset diligence and how promising the asset is.
Doug Meehan: and you know the key criteria around that in addition to
Doug Meehan: you know, strong evidence of safety and efficacy is high unmet clinical need.
Doug Meehan: That's your ultimate and best protection against payers and payer pressure, and it's the factor that we think is the most important when you're considering reimbursement risks.
Doug Meehan: You don't have a label yet, so you really kind of have to forecast.
Doug Meehan: The probability of success in that arena by the value that you're adding to patients
Doug Meehan: and clinical treatment. So that's that's how we view it. So far I would say it's kind it's been around 40 40 and 20 if I had to divide it up 40% royalty monetizations 40% project finance and about 20% special situations.
Great, thank you
Speaker Change: Your next question comes to the line of Trevor Orrett from Oppenheimer. Your line is open.
Paul Hadden: Yes, Trevor, it's Paul again. Great questions. Estimates in the U.S. are a few thousand patients.
Paul Hadden: I think if you go globally, it's going to be a multiple of that.
Paul Hadden: In terms of readily identifiable, I think if you look up this condition, DEB on the World Wide Web, you'll see the picture of these patients.
and you'll understand how devastating and debilitating this condition is.
I mean, literally, these patients are missing a gene that...
Paul Hadden: codes for the collagen that connects the the skin tissues. So you really have what looks like second and third degree burns on these patients. So they are readily identifiable, especially in the in the severe populations.
Paul Hadden: And then in terms of scale, all I can tell you is because we were dealing directly with Castle Creek, we went very deep from a diligence perspective, which included the CMC. We got very comfortable with their ability to supply the product.
Paul Hadden: and obviously that's one of the benefits of dealing with synthetic royalties. You have the ability to go under confidentiality.
do site visits.
Paul Hadden: work with a company directly to see, you know, everything that they know and ultimately, you know, get comfortable around an investment from the multitude of areas where you do M&A level due diligence. So hopefully that answers your questions, but if I missed anything, just please let me know.
Speaker Change: Yeah, no, that's helpful. Can you also give us a sense of, you know, how much revenue Juvec is generating and any potential population differences between the two of those?
Speaker Change: Yes, I think Vyjayuvik last year clocked in at just shy of 300 million and obviously that's about 18 months into the launch so on a really good ramp rate
Speaker Change: And, you know, from a more global perspective, you know, that should continue to grow. As I mentioned on the earlier question, there is a complementary factor in terms of, you know, what DeFi could do. And so from that perspective, you know, we're pretty bullish about the opportunity overall.
Speaker Change: Thanks, everyone. We'll see you in a bit. Thanks, everyone. We'll see you in a bit. Take care. Take care. Bye.
Okay, great. Thanks. Thanks for taking the questions.
Speaker Change: Your next question comes from Broussard from Berkeley. The line is open.
Xiao An: Good morning, this is Xiao An from Bellagio. Thanks for taking our questions.
Xiao An: So just a quick one on our through-wear. Seems like the uptake has been nicely in the first two quarters of the product launch, even without the J-code, and the equity market was reacting positively towards the initial traction.
Xiao An: So, can you discuss some of your expectations you have around infection growth and your view of the overall maintenance therapy for COPD and what's your view of the, you know, impact of the overall COPD market in the times of the biologic entrant such as Duprexan?
Thank you so much.
Xiao An: Yeah, so this is Lauren Hay. We're really pleased to see the very early success of O2Bear. You know, the launch trajectory looks to be very strong. We haven't even yet seen the impact from the permanent J code, which became effective, to your point, January 1st. So that should further catalyze a strong first quarter of sales in our view.
You know as I shared during my prepared remarks
Xiao An: The COPD market is quite large. There are 8.6 million maintenance-treated patients, according to Verona, half of whom remain.
Xiao An: symptomatic despite treatment and so there's a very large addressable population for Verona.
Xiao An: They've shared that about half of the treated population at this point has been on triple therapy, so Lama Lava ICS.
Xiao An: kind of, you know, target a different type of patient. So we continue to be very optimistic about the launch. You know, Verona is doing a fantastic job, and we'll look forward to continued progress later this year.
Great, thank you so much.
Speaker Change: Thank you. Your next question comes from Larry Sullo from CJS Securities. Your line is open.
Great. Thanks. Good morning. Congrats on the report.
Larry Sullo: Exciting year lots of business development and things moving forward. I guess question for Tavo first question would just be I know you
Speaker Change: Guide to Provide at the Annual Study, you spoke about just some increased investment in cash expenses in the business development team in 25. Could you just give us a little more colour on how 24 kind of strict out on the expense line and what you're looking for, what's incorporated into your outlook in 25.
Speaker Change: and going into 2025 we're growing at about 4% and we expect that to be kind of the steady state going forward is what we've kind of signaled to investors roughly at the rate of inflation.
Speaker Change: Okay, so it's like a 40 million plus or minus number in 25. That's correct, that's correct.
Speaker Change: and it sounds like the final opportunities continues to expand Todd it doesn't feel like you you know I know you don't time exactly how much you're going to spend you know per year of course not it's more opportunistic but it doesn't feel like there's any hesitancy there like we could sound like we could have another big year after 2024
Speaker Change: Larry, I think that's right. I mean the number of opportunities that are out there far exceed
Speaker Change: What we can execute on. So kind of the supply demand relationship, if you will, between, you know, capital and the types of things we're looking for is very favorable.
Speaker Change: The key issue, therefore, is what we spend our time on and, you know, we've really never been busier, so we really have to triage to what we think are the highest clinical value products and that's really what we're focused on seeking out.
Speaker Change: Gotcha, and if I could just, last follow up, just on, um, on, um, Zell Sousamay and Pelvos. So it sounds like you guys are doing a lot of, uh...
Thank you. Bye. Bye.
Speaker Change: strategic planning and stuff ahead of actually announcing a partner so you it feels like you'll be able to hit the ground running at some point once that partner comes in I'm just trying to figure out this partner is it just going to be an investment partner is it someone who's going to be the marketer just trying to or you know
how that shakes out, and the launch plans. Thanks.
Speaker Change: Yeah, I mean, I can only go into a certain level of detail right now, Larry. However, yes, we have, as you know, we've put
Speaker Change: Potential CEO, etc. They've been making significant preparation so that we will be ready to go. There was a significant amount to do in terms of things like running validation batches and preparing the manufacturing, which they've been executing on.
Speaker Change: and so all of that is on schedule. It is still our intent to launch the product in the first half of the year. There are some risks there. These things are not easy and you wanna do them right, not fast.
Speaker Change: But we have we think we think the bones of a deal Insight here and the key is that we finance this we're not going to going to forward integrate
Speaker Change: and become a sales and marketing company. We need partners to do that, that's why we created Pelthos, and we need to get Pelthos financed through a strategic transaction, and that's what we're focused on right now.
Speaker Change: Got it. Great. Thanks, Todd. I appreciate that call. You bet.
Speaker Change: Your next question comes to the line of John van der Mersten from Zapp. Your line is open.
Speaker Change: Thank you and good morning. Regarding DeFi and Castle Creek, does the opportunity here assume similar pricing and penetration as Vijavec does?
Speaker Change: Yeah, John, great question. This is Paul. I think it's fair to use that as an analog given that it's out there. Obviously, per my earlier comment, there is some opportunity to to be complementary in terms of being used in the same patient. So from a penetration perspective, there can be some overlap, but we feel comfortable with the analogs that are out there and also with the opportunity that we invested in. So it's a it's a fair assumption.
Speaker Change: Okay, and what's the expected financial impact of that termination letter to Kassi on Ligand?
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Hey John, I'll take that one.
Speaker Change: here. So it's a two-year termination term. We don't expect it to have a material impact for 2025.
Speaker Change: The generic implications to the China market do not change, that's been in place. We've talked about that in the past.
Speaker Change: But Acrotech, who we have the direct license agreement with, our understanding is that they intend to have a marketing partner in China, and our license agreement with them will continue. So the short answer is no short-term impact in 2025, but longer term we expect to still benefit from the China market via our direct licensing arrangement with Acrotech.
Speaker Change: Okay and on your opportunity set I seem to remember at one of the events that that 200 opportunities were mentioned I guess you know they're kind of on you know they're waiting to be acted upon
Speaker Change: How has that changed in terms of, you know, new additions and then ones that you said, you know, will pass out? You know, I guess I'm wondering about kind of the flow rate there. And has it increased since that last update? I think that was possibly at the Investor Day.
given that number.
Go ahead, Paul.
Paul Hadden: Yeah, so great question, John. I would say that we've seen an uptick in our pipeline. There is some week-to-week and month-to-month churn. To Todd's earlier point, you know, we're constantly trying to assess where we want to apply our team's time and resources.
Paul Hadden: But his comment spot on earlier about how we've never been busier. So we're excited about the opportunity set. Obviously, we have to maintain a very disciplined approach and be judicious about where we spend our time. But we're excited about what we're seeing. And I think, you know, this
Paul Hadden: This call is evidence of being off to a good start, if you will, so we're excited.
Okay, thank you.
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Paul Hadden: As there are no further questions, I would like to thank our speakers for today's presentation and thank you all for joining us.
This now concludes today's conference. You may now disconnect.
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