Q3 2025 Ligand Pharmaceuticals Inc Earnings Call
Thank you for standing by. Welcome to Lan third quarter 2025 earnings call all lines have been placed on you to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, seemed to press a star, followed, by the number 1 on your telephone keypad. If you would like to invite your question, please press star 1 again, thank you. I would now like to turn the conference over to Melanie Hermann. Please go ahead.
Good morning, everyone. And welcome to Lan's third quarter 2025 earnings call.
During the call today, we will review the financial results. We released earlier today and provide commentary on our partnered Pipeline and Business Development activities. Followed by a question and answer session.
Before we get started, I would like to point out that we will be discussing non-gaap results, which excludes certain items such as stock-based compensation, amortization of intangible assets, amortization or impairment of financial assets, losses from derivative assets and gain from the sale of the Pelto's business amongst others.
I encourage you to review the reconciliation of these non-gaap measures to their most directly comparable, gaap measures, which can be found in today's release available on our website. We believe these adjusted measures provide valuable insight into our core operating performance, both historically and moving forward.
Our earnings release and a link to today's webcast can be found in the investor relations section of our website at lagan.com.
With me on the call today are CEO Todd. Davis, Chief Financial Officer, Tavo Espinosa and vice president of strategic planning and investment analytics, Lauren Hayes.
To the company's business.
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, legging assumes no obligation to update these statements.
To better understand the risks and uncertainties, that could cause actual results to differ. We refer you to the documents that lag in files with the Securities and Exchange Commission or SEC that can be found on legans website at lagan.com or on the sec's website at sec.gov with that. I will now turn the call over to Todd.
Thank you Melanie and good morning everyone. Thank you for joining us today to discuss another exciting quarter for legand.
This quarter was pivotal, not only did we deliver another quarter of exceptional Financial results. We also successfully completed a convertible debt financing providing us with additional flexibility to pursue strategic opportunities that support or growth initiatives.
We are raising our full year guidance for the second time this year.
This increase in guidance, as a result of the strength of our commercial royalty portfolio, which is continued to outperform our expectations due to products like mercs. O2 there and capacity as well as Travers that feel sparring.
Additionally, I'm proud of our deal team's ability to create Superior risk-adjusted returns through transactions, such as strategic merger, pylos with Channel Therapeutics, that has driven substantial value creation. For our shareholders.
When we restructured Ligon in 2022, with the spin out of our antibody operations, we set a new strategic direction for legand.
1 grounded, in focus and discipline.
Since then, we've stayed true to that plan scaling our deal team to accelerate growth in the late stage Pipeline and build a diversified portfolio of high margin, royalties designed to deliver Superior returns.
Strategy has played out exactly as envisioned and I couldn't be more pleased with the progress we've made over the past few years.
Royalty Revenue grew 40% 47% over the same quarter last year and adjusted EPS increased, 68% reflecting, strong performance across our portfolio.
Key drivers contributing to the 47% growth in our royalty. Portfolio include the commercial launch of zei.
Strong launch of mercs 02 there and Capac.
Growth of record. East karza.
And the continued ramp up until spari.
We ended the quarter with a strong balance sheet including approximately 1 billion dollars in Deployable Capital factoring in or undrawn credit credit facility which will allow us to take advantage of our robust Business Development pipeline.
There's been strong uptake of zei in the early launch phase and we look forward to the continued momentum.
The launch of zelle suvi. Is an exciting milestone for patients with molluskum who now have an at-home treatment option. For this burdensome skin infection, we encourage our investors to listen in on the pilotos earnings call which will occur on November 13th. We expect a robust update on the launch performance.
Our deal team has been busy. This quarter committing. 35 million to Orchestra bio for royalty, interest in their aim therapy and virtue Saab.
Hi again has also invested in additional million dollars to help catalyze their Equity private placement, which successfully completed a total raise of 111 million including participation by Aiden partner Medtronic.
We also committed 11 million to erakor in exchange for royalty, rights to at220 and milestone in technology access fees for at 2 9 2.
We are pleased to report that just 1 month. After our investment sanofi announced positive Phase 2 results from its trial, demonstrate demonstrating all primary and key. Secondary endpoints were met in adults with Alpha 1, a trip in deficiency and Pema a rare disease.
since restructuring in 2022, we've been executing on our current strategy and have seen significant growth
Across the core Revenue as well as adjusted EPS. I'd like to point out that in 2024. There were 4 FDA approvals of Assets in our pipeline.
MKS 02. They called me regarding the full approval of T's Delpi.
With these 4 products all in early stages of their launch with the potential for both indication expansion as well as Geographic expansion.
We expect this growth to continue in the coming years.
I would like to look ahead now, to 2029 and discuss our 5-year, royalty receipts Outlook, which we first presented at our investor day in December of 2024.
we believe our long-term royalty growth is on Pace to meet or exceed the 22% compound, annual growth rate, we outlined at that time,
The existing portfolio alone supports a royalty, receipts kager of 18%.
Future Investments, should add at least 4% of this with potential upside on top of the current Outlook.
A strength of our existing portfolio is evident across both our commercial and development stage programs. However,
We believe that what truly differentiates liyan is a royalty, aggregator is the expertise of our deal team in sourcing and executing high-quality investment opportunities.
And the ability to Drive Superior returns with our operating capabilities and our special situations initiatives.
It is through the strength of this team that growth across the future investment segment of this chart has the potential to surpass expectations.
Turning to the next slide. I'll highlight a few positive developments. Since our long-term Outlook was presented last December.
Each of which has the potential to meaningfully enhance our long-term royalty projections.
First.
02. There is tracking. Well, ahead of the initial forecasts and continues to be the strongest launch in COPD history.
Q3 sales. Grew 32%, sequentially and consensus forecasts. Now project 2 billion in sales by 2029 up from 1.2 billion, previously.
As a 3% royalty, holder Lian stands to benefit materially from this upside.
Second, Phil Spar continues to perform well commercially in. IGA nephropathy with Q3 sales growing 26% over the prior quarter.
Additionally, there's potential upside if approved and fsgs.
If approved the fsgs indication could significantly expand to spar's Market opportunity, potentially north of 1 billion dollars in fsgs alone, according to sell side analysts.
Turning to 1 of our development stage programs. Let's look at poloz Quran rapamycin programs.
We'll hear updates on their Phase 2 program in cutaneous. Venous malformations in the fourth quarter and their phase 3 programs in microcystic. Lymphatic now formations in the first quarter of 2026
Analysts expect Peak sales from these 2 indications could be 1 billion dollars.
In 2025, we continue to execute our strategy of partnering.
with life sciences companies to provide Innovative non-dilutive Capital Solutions since the beginning of the year, we've closed 5 new Investments including the final 02 their inventor monetization
Castle Creek.
Orchestra biomed. The merger of pylos Therapeutics with Channel Therapeutics and our most recent investment in error.
These transactions reflect the unique flexibility of our investment strategy. And are well, Diversified across our investment tactics, including royalty, monetization project, financing and special situations.
Our investment to fund Castle. Creek's phase 3, clinical study of defi in patients with distro, distro epidermal osis bulosa is an exciting opportunity to advance an orphan drug designated Gene, modified cell therapy for a serious unmet clinical need
This collaboration reflects our commitment to invest in groundbreaking de-risk, treatments that have the potential to transform patients lives. And it also strengthens our late stage portfolio.
Our partnership with Orchestra biomed, also expands our pipeline of development stage Partnerships with potential. Royalties on 2 late stage partnered Cardiology programs.
With hypertension and arterial disease, two significant global health challenges.
Next slide, we have seen record setting origination activity this year. Reviewing more than 130 investment opportunities through the first 3 quarters of the year.
We remain disciplined in our approach prioritizing Investments that offer compelling return potential and strategic alignment.
While deep prioritizing those that do not meet our long-term objectives.
At present, we have approximately 32 active investment opportunities under review, representing a mix of creative and pre-approval transactions.
I'd like to take this opportunity to remind everyone of our upcoming investor day, which will be held on December 9th in New York at the Harvard Club.
The registration link can be found on our website.
There will be evaluating consensus updates and Commercial progress, as well as clinical progress of our Assets. In our farm, team to share a refreshed view of this long-term Outlook with you at that time and we hope you can join us.
I'll turn it over now to Lauren for a portfolio update.
Thank you, Todd.
Turning to a portfolio review. I'd like to provide some important updates on loan's key portfolio assets. I will go into more details on merch. O2v trivia sfari and Pelos, Quran Rapa mice and programs on the subsequent slides. But I'd like to briefly discuss updates on 2 of our key pipeline assets, standardized tzield, and a Genesis bot Bell.
In October the FDA, nominated tzield as 1 of 9 products selected for the prestigious new Commissioners National priorities. Voucher
These vouchers are designed to recognize and reward products with significant potential to address a major national priority. Such as meeting a large unmet, medical need reducing Downstream Healthcare utilization or addressing a Public Health crisis.
This overlaps perfectly with lien's Mission, delivering High clinical value to patients impacted by serious disease.
The new commissioner's Voucher Program, aims to shorten the standard 10, to 12 months, FDA review timeline to just 1 to 2 months, which is remarkable.
While we have heard concerns surrounding volatility to FDA to date, we have not seen any impact in terms of delays or other issues related to our key portfolio assets.
In addition, we have seen a new willingness by the agency to accelerate timelines and provide incentives that spur real innovation.
We believe this new FDA orientation is Forward Thinking, and very good for patients.
As a result of receiving the commissioner's voucher, the supplemental bla for tzield in individuals, 8 years, and older who have been recently diagnosed with stage, 3, Type 1, diabetes was accepted in October and will be reviewed expeditiously, which is, welcome news for patients, and their families.
We are excited about Tal's, recent recognition and the potential for a significantly expanded indication in the near term.
We congratulate our partner sanofi on this exceptional accomplishment.
Additionally, our partner agents plans to initiate a streamlined 2 armed phase 3 trial of bots Bal in patients with refractory non- liver metastatic microsatellite. Stable colar cancer in the fourth quarter of 2025.
The Phase 2 Data are highly encouraging demonstrating deep and durable responses in this difficult to treat population. Underscoring, the meaningful benefit observed in patients who have failed standard Therapies.
Next turning to Traverse PHS. Bari in August the Rams liver monitoring. Requirement was relaxed from monthly to quarterly for Ian patients during the first year of treatment.
Vari is becoming firmly entrenched, as a foundational treatment for people living with Ian and the approval of these streamlined monitoring requirements, reflects the strong, safety, profile of Phil spari simplifying, treatment initiation for patients,
In Japan, our partner renalis Pharma, completed primary endpoint data collection in his phase 3 Igan trial and toppling results are expected in the fourth quarter of this year.
In October to to guy Pharmaceuticals announced plans to acquire renalis. Jai is recognized for his rare disease, and Nephrology expertise. And we believe they have the ability to accelerate access to Phil Spar for patients.
In Phil spar's second indication. Fsgs, the FDA has assigned a pufa date of January 13th. 2026 and is informed trivia, that an advisory committee meeting is no longer required.
SGS and Trae believes the fsgs commercial opportunity. Could be an even larger 1 with more rapid uptake as it compared to Ian.
Moving on, on October 7th, MK closed. Its acquisition of the OTV, marketer Verona Pharma for 10 billion dollars.
our 3%, O2 very royalty will now be assumed by the new marketer MK who has significant Geographic, reach to expand the o2v footprint globally, as well as robust clinical development infrastructure to accelerate development of OTV and indications such as non-cystic fibrosis bronchi axis
Moving On. We're very pleased with the commercial performance and clinical and Regulatory updates provided by MC on cap backs of this quarter.
MK expects, the capacity of will achieve majority market share in the adult setting in the new makco vaccine category.
MK reported third quarter sales of 244 million representing a significant increase over the prior quarter, as well as a beat to analysts consensus.
Kept active was approved to prevent pumel disease in Japan and August. And additionally, the FDA accepted mercs, SBA for cap backs of in children. Adolescence at an increased risk of pumel disease with a Paducah date of June 18th 2026.
Next slide. Paula completed full enrollment ahead of schedule in their Phase 3 trial in microcystic lymphatic malformations in June, with results anticipated in the first quarter of 2026. Additionally, Phase 2 trials in cutaneous venous malformation are expected in December of this year.
Pela. Recently announced a third Quran rapamycin indication and clinically significant angio,
Paula plans to meet with the FDA in the first half of 2026 to discuss this Phase 2 trial design.
I'd also like to briefly discuss the commercial opportunities. Specific to Quran rapamycin for the treatment of microcystic. Lymphatic malformations.
These 3 results are expected in the first quarter of next year. And this promising product has the potential to be the first and only FDA approved treatment with strong prescriber interests.
The therapy targets. A concentrated population of over 30,000 diagnosed patients, primarily treated at 400 vascular, anomaly centers, enabling a lean Salesforce strategy.
Validated orphan pricing models and high unmet clinical needs S Suggest significant Revenue potential in MLM.
With tutoring rapamycin, Paula is building a compelling pipeline in a product which could represent a sizeable royalty opportunity for Lan this franchise strategy. Outlines a phased approach. Targeting rare, der Dermatological conditions starting with microcystic lymphatic malformations. Followed by cutaneous venous malformations and clinically significant angio
Is longer term plans include expanding to potential future indications both. Paula believes could potentially grow the addressable patients by a factor of 10x.
This represents a significant opportunity for market growth and our 8 to 9.8% royalty extends across any and all approved Quran rapamycin indications.
With that, I will turn the call over to Tabo.
Thank you, Lauren.
Before getting into the broader overview. I want to start with the decal of Pelos since it provides an important context for this quarter's results.
The spin-off became effective on July 1 and from that date Pelos has been deck Consolidated from Lan's financials historical. Operating costs through June 30th remain on Lan's books. But beginning, July 1st pel's, expenses are now reflected under the newly merged Pelos Channel. Therapeutics entity operating independently as a publicly traded company under the ticker symbol pths with its own board and management team.
Similar to our equity interest in Viking and Paula Therapeutics, we hold an equity stake in Pelto's approximately 50% of its outstanding shares.
These are carried on our balance sheet, as a long-term investment and remain restricted until the 6-month lockup period expires on December. 31st 2025.
The current estimated fair value of our Holdings in Pelto's is about 180 million dollars as of yesterday's close.
On July 1st, we recognized a $533 million gain related to the Pelos transaction, reflecting the difference between the $62 million fair value of the consideration received and the $9 million of net assets sold.
Adjusted earnings.
While the out license itself is a 1-time event out licensing is core to our business strategy and the Pelos Equity. We received represents tangible value for that reason, we included it in core revenue and adjusted eps.
The remaining 28.6 million of the gain along with the historical. Incubation costs have been excluded from from non-gaap results to maintain comparability with recurring operations. In addition to the gain on Pelos, we recorded a 76 million unrealized gain, tied to the increase in Pelto's, Share value from 62 million at issuance, on July 1st, to 138 million at quarter end.
This appreciation, underscores both Market confidence and Pelto's and the Strategic value of the transaction. Till I end,
I'll walk through the financial implications of the Pelos Pelto's transaction and more detail on the uh next few slides.
Moving now into the quarter's financial highlights. This was an exceptional quarter for Lan marked by record financial performance driven by the continued strength in several Assets in our royalty, portfolio and the recognition of the aforementioned Zelda V out. License component following the spin out. And merger of the Pelto's business, we also capitalize on favorable conditions in the c. A convertible debt, markets in August securing. A 5-year, 460 million convertible note, which further, strengthens our balance sheet, total revenue, and other income for Q3 2025 on a gap basis came in at 115.55%,
.8 million in the same quarter last year.
Of that 53.1 million was tied to the Pelto's transaction including 24.5 million, from the sales of me out license and the 28.6 million gain on the sale of the business to channel Therapeutics.
As discussed earlier we're including the 24.5 million representing the estimated Standalone value of the saliva, license, as core Revenue.
The 28.6 million gain on sale of the business has been excluded, therefore, on an adjusted basis. Core revenue for Q3 2025 grew 68% year-over-year to 86.9 million, other financial highlights to note.
Royalty Revenue, Rose, 47% year-over-year to 46.6 million reflecting strong launch, trajectories and outperformance across several recently approved products in our portfolio.
Adjusted EPS, grew 68% from the same period last year to 3.99.
Given this strong financial performance, we're raising full year of 2025 guidance. We now expect core revenue of 20225 to 235 million and adjusted earnings per share of $7.40 to $7.65 per share. We closed the quarter with 665 million in cash and Investments.
That brings total Deployable Capital to approximately 1 billion dollars. A strong position that continues to fuel, a very active Business Development pipeline, the final remains robust
At this point, we're not limited by dollars. We're limited by human capital and we're planning to expand our business development and investment teams to meet the opportunity ahead.
In August. We executed it on a 460 million convertible debt transaction. We were very pleased with the pricing terms and secured a 75 basis. Point coupon rate and a 32.5% conversion premium.
We also structured the transaction to be netshare settlement to further reduce solution.
In conjunction with the notes, we executed an up, 100% call spread which will result in no dilution to our stock up to a price of 294 per share.
The net proceeds, not only both through our balance sheet, but our accretive to earnings and allow us to take advantage of our robust Business Development pipeline.
Moving on to the next slide, let me expand on our Capital deployment capacity.
We continue to generate robust annual, operating cash flow of of, uh, now executing 150 million dollars on an annualized basis and our current investment pays. Ranges between 150 to 250 million against this backdrop, our decision to pursue a convertible debt. Financing was strategic driven in large part by favorable conditions in the cam. Convertible debt markets as of September 30th 2025. We held 665 million in cash and short-term in
Investments and maintained access to a hundred million credit facility. Bringing our total Financial capacity to roughly 1 billion. Inclusive of our Holdings in Pelos.
We owned approximately 50% of Pelos outstanding shares, carried on our balance sheet as a long-term investment. With an estimated fair value of 138 million at quarter end, which we view as another potential liquidity level.
Looking ahead given the robustness of our business development funnel and the ongoing expansion of our business development function. We may look to incrementally increase our Capital deployment pace,
Pursue high-quality opportunities that align with our strategic financial and financial objectives.
Moving on to the next slide.
Key drivers of royalty Revenue growth. This quarter includes strong performance from trivia, still sparring more and Verona's o2v mksap Vive and record Audi's karza.
Expanding briefly on a few of these starting with s spari trivia, reported third quarter, sales of 90.9 million, a 26% sequential and 155% year-over-year. Increase
They also received 731 new patients, start forms during the quarter showing continued. Adoption among both new and repeat prescribers.
That momentum underscores, the expanding use of those spari and IGA in a prophecy as a reminder, Lian earns a 9% royalty, on sales translating to nearly 9 million dollars in royalty Revenue, this quarter, including our internal estimate of 7 million dollars from sales generated by CSL V4, in Europe.
We're pleased to share that philosophy has now become our largest royalty, generating asset on an annualized run rate basis.
Turning to 0 to V, we continue to see strong commercial momentum.
Verona reported $136 million of O2 bear sales, a 32% sequential increase over the prior quarter.
02 of our sales have been have beaten consensus in every quarter of 2025, and we anticipate a strong launch trajectory to continue.
We are excited to see potential acceleration with this program. Now benefiting from merc's broader commercial organization.
Mercs. Cat-backs also grew significantly this quarter reinforcing MKS competitiveness in the new mmmkay space.
Cap active generated 244 million in sales and 89% sequential increase and a 46% increase over consensus.
On Capital, we recorded 10.7 million in material sales. This quarter compared to 6.3 million in the third quarter of 2024.
The increase was driven primarily by the timing of customer orders.
We recorded 58.2 million in contract Revenue. This quarter up significantly from the 13.8 million in the prior year period.
This includes the previously mentioned 28.6 million gain on the sale of the pto's business and the 24.5 million sales zooming out license.
Turning to operating expenses.
For Q3 2025 GNA. Expenses were 28.4 million up from 24.5 million in the prior year quarter.
Primarily due to recognition of transaction costs related to the Pelos transaction.
R&D expenses Rose, 21 million from 5.7 million in the prior year, period driven by a 17.8 million 1-time, charge tied to our investment in Orchestra biomed
This funding supports late-stage partnered cardiology programs and is accounted for as an R&D funding arrangement, fully expensed in the period of investment.
Other income for the for the quarter totaled, 86.2 million compared to other expensive 9.5 million in Q3 2024.
This year-over-year swing was primarily driven by unrealized, gains from the increase in value of our Equity Holdings in Pelto's and pela.
And higher interest, income reflecting, the impact of our strengthened cash position. Following the convertible note transaction
Gaap net income for Q3 2025, was 117.3 million or $5.68 per share compared to gaap. Net loss of 7.2 million or 39 cents per share and Q3 2024.
On a non-gaap basis. Adjusted net income was 63.8 million or $39 per share up from 35.3 million or $1.84 per share in the prior year period.
The 68% increase and adjusted EPS was primarily driven by the 14.9 million increase in royalty revenue, and the 24.5 million sales will be out-licensed component.
Turning to guidance as mentioned, we are raising Total Core Revenue forecasts to arrange of 225 to 235 million and adjusted earnings per share is now expected to be between 7.40 and $7.65 a roughly 30% increase over last year's EPS of $5.74.
With that context, here's how our revised full year 2025 guidance is shaping up.
Royalty revenue is now expected to be between 147 and 157 million up from the prior range of 140 to 150 million.
Capital sales are expected to to come in at $40 million.
Up from 25 to 35 million.
Again to reiterate Total Core revenue is now expected to be in the range of 225 to 235 million up from 200 to 225 million. And we're raising core adjusted EPS just $7.40 to $7.65 compared to the previous range of 670 to 7.
These updates reflect not only the impact of the Pelto's transaction but also a strong, underlying growth and increase visibility into our royalty streams.
Particularly from Phil spari, o2a and capacitive.
That concludes my remarks. I'll now turn the call back over to Todd for closing comments.
Thank you tago.
we are very pleased with the strong launch momentum across multiple products, including capacity 02 there, Phil spari and zelle sudini and believe there are significant opportunities for both indication expansion as well as Geographic expansion for these products which represent
further upside for like hand,
we believe that merx Global reach will accelerate 02 V's roll out and their plans to invest in the incident pipeline programs will maximize its potential.
Additionally, we're encouraged by the great progress. That Pelos team is making and look forward to watching the continued launch momentum in the coming months.
With a solid base of royalty, generating assets, and late stage pipeline. We are well, positioned to deliver sustained compounding growth, and long-term value for shareholders.
Additionally, our strong, origination capabilities, our investment team, and our robust investment process is driving meaningful portfolio growth. Our deal teams ability to identify
Assess and execute high-quality Investments sets, like the end of part.
Thank you everyone, for joining us. For today's earnings call, I will now pass it back to the operator and open it up for questions.
Thank you. We will now begin the question and answer session if you have dialed in and would like to ask a question, please press the star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw, your question, simply press the star 1, again, if you are called upon to ask your question and are listening via a loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute. When asking your question again, that is the star 1 to join the queue. We will pause for just a moment to compile our Q&A roster.
And your first question comes from the line of Trevor. Alright with Oppenheimer, please go ahead.
Hey, good morning, thanks for taking my questions. I've got a few uh first uh we've seen both Pelos and pela generate enormous value. Over the past year is there anything you can share on the available opportunities and special situations?
Uh, thank you, Trevor. This is Todd, and I think the, uh, opportunity set there is quite robust. Um, just to kind of frame this, the special opportunities uh, is when 1 of the kind of the value components is missing and we need to be more active in the investment. In terms of adding team members restructuring and things of this nature. Um, when we look at any investment, we're looking at kind of those 3 components companies financial strength or access to Capital um and if that's all they need, then we're usually looking at a royalty investment a royalty monetization or simply providing capital.
The other thing is strong management teams. We really need strong counterparties.
Um because uh we want to have as much operating leverage as possible. So we're partnering with people that have uh clinical development capabilities and infrastructure sales and marketing capabilities and infrastructure manufacturing capabilities and infrastructure. When those, when that portion of the component breaks down, then we have to get more involved in just providing capital and will bring other uh, you know, complimentary management into the mix and those those are restructuring. So there are many opportunities like that out there. And the last component is just General Financial strength aside from our financing because
Um, we need, uh, companies that have strong access to Capital, and we have to exist in this ecosystem and Equity is a very important component of what we do. We have to Capital needs to be a portion of the company's capital structure but certainly can't rely solely on it or even predominantly on it.
No, the no van situation.
Where we picked up zelle, Sue me in the nitric oxide platform. Is a good example. There you had a very good technical team which we still work with today. We brought them into a subsidiary, uh, at Ligon and they have what we believed was a great asset and so we brought that into the subsidiary as well restructured it and eventually um uh uh we reset the marketing plan for zelle, Sue me. Once we got that approved and then relaunched a new company in the form of Pelos that's a situation where the companies access to Capital had broken down and they needed a more, uh, um, sales and marketing oriented management team. So that's where we will get involved in these special situations. There are a lot of those out there. Uh, we're typically doing those in cooperation with the counterparties, so where they know those components are missing.
Um, and the 1 other consideration on those is that they are quite consuming. They take a deal team, it takes a lot of attention. And so you really have to go after deep value and significant returns, um, which we believe, we will achieve in the post those situation and then others like that, that we've taken on. But there's let me put it this way. There's way more of those to do than we can do. And that's why we are adding a little bit to our management and deal team, including the operating components that we have, which help us manage through these situations.
Got it. Thanks D. It's helpful. And then my second question is a bit of a 2-part. Uh, can you comment on how the number of investment opportunities has shifted over the past year? Are you seeing accelerating Capital demands and then can you also comment on how your new cash balance changes, either the scope or the size of how you're approaching deal making if at all.
Sure. Yeah, so taking the latter first. Um, uh, you know, I I think that uh, our diversification strategy right now has this pegged at about, as we've been saying, um, we don't want to put any more than 50 million dollars into a binary risk situation. Um, and we're seeking out things that have, you know, significant evidence of safety and efficacy and on a relative basis or D risk, but still, we are buying risk. And we don't want to put more than 50 right now into a potential binary risk situation.
You know that said we view diversification by asset. So in multiple asset situations we can size up the deals, you know, very significantly. Um and we also as you know we will use equity as a tool here and this makes us as a very good partner. I think the orchestra example, which Paul LED for us is a good 1. We got what we think is a very good royalty investment in 2, great uh product development programs there
Um, but we were also able to facilitate or or catalyze if you will uh, a broader Equity round and get the company into a much greater position, overall of financial strength. So that we are in fact, coexisting with significant amounts of equity in that situation at this point and we believe the company has a great management team and has now much much better access to Capital in the long term as well. So, um, we can be very good partners because we are able to support uh companies kind of throughout their capital structure.
Um getting to the overall, you kind of deal types and demand. I would just say that um you know, royalty capital for a lack of a better term is really 5% or less of the market and I would say on the development side significantly less and that's where capital is most needed.
So I think there's a huge opportunity there. There's way more to do than we can do. So, the deal flow, does move around a little bit, mostly in style not in amount as the capital markets change. For example, when an IPO Market opens up a lot of the late stage, private companies, once they get public, so they're more inclined to do that. So they can provide liquidity for their Equity investors but still, uh, you know, even in those cases, with very strong companies and strong Equity syndicates, as well as the case with capsule,
Creek, they want, uh, and there's a, there's a rationale for having royalty Capital, be a component of your total capital structure.
Sounds great. Thanks for taking the questions.
Yep.
Thank you. And once again if you would like to ask a question, thank you, press the star 1 on your telephone keypad. Your next question comes from the line of Matt huitt with great Callum. Please go ahead.
On for Matt Hewitt. So last week the FDA announced it wants to speed up the process of personalized gene therapy. How should we think about the Castle Creek investment in general opportunities in gene therapies going forward? Thank you.
yeah, I think, um, uh, that's 1 of the, uh, points that Lauren was making, um, earlier in the call here is that, uh, there's there's some concerns around some volatility and changes that the FDA, but, um, we're focused as we've said, many times on
Um, high value assets.
Targeted towards severe clinical. Needs that that can be really impactful.
And that's kind of the fda's core um reorientation strategy as well. So we think there's great overlap between just our investment strategy in general investing in products that will make the most amount of different for patients.
And what the FDA is is, uh, orienting around, in that regard. And so I can't say that we'll have a specific um, uh impact on.
Any individual asset or company. Although we know that the OT dealt has already benefited uh from that but um there clearly is an effort to be more pragmatic in severe diseases where there are certainly where they're currently no treatments but also where there's you know add
Marginally adequate types of treatments available. Um, and I think that that's a sensible, uh, strategy. And it's they're talking about shortening, the review timelines from 12 months to a couple to a few months. And, you know, that's very positive for us as, you know, our general strategy also is to invest in assets that are within, you know, at least 3 or 4 years of a potential approval. And, um, uh, we sometimes will invest Phase 2. That's where we originally invested at palavela.
And in, in those situations, we rely heavily on third-party data, for example, um, uh, off-label use of rapamycin. And some of the conditions that a pel is currently exploiting had existed prior to that investment. So there's real world evidence of efficacy, efficacy and safety, even though it was for us an earlier stage asset. So we viewed that as de-risked, but it still had the full timeline to March through. Now, on top of being able to take advantage of those types of repurposed and de-risked assets. We also potentially, in general can be looking at shorter timelines for approval and review.
Appreciate it. Thank you.
And the next question comes from the line of Jade. Mine with people. Please go ahead.
Okay. This is Jad on for Annabelle. Um, congrats on the strong quarter. We still have 2 questions.
1. Um, is there any additional quality? You can provide for the doses? We launched. I know you. You talk about it a bit but is there. What do you expect? Um, going forward for the next couple of quarters and then my second question is um, if there's any other details, you could provide for the error core transaction.
Specifically for at 292 that's being um deified sanity. Uh what does the worldview rate look like? Um, any details? It would be helpful. Thank you.
Sure, I I I'll cover the, they'll soon be launched and you'll be disappointed with the additional information. I can share because I can't share uh, much more. Um, and then I'll have Lauren discuss at 292 and our Arrangements there. Um, in terms of the zelle sue me, launch, they're reporting. I think on the 13th where you will get a lot more information, we just followed a general script data and I can tell you, it's from our perspective, that's encouraging. That's something that, you know, analysts and everybody else has
Access to as well.
But they haven't changed their guidance yet. Going forward, I think that they're
An at 2 9 2.
Great, thanks Todd. Um, so sure, thanks for the question on at 292, um, or after all for an alpha. Um, we're really excited about that asset. Um, you know, we view it as being highly differentiated versus the, the standard of care.
Um, this is a treatment that is designed for patients with alpha 1, antitrypsin deficiency. Um, it was licensed to inhibits and then acquired by sanofi in 2024 for 1.7 billion. So clearly they, they have a lot of conviction around the asset as well. Um,
What's differentiated about it is that we're seeing a a potential movement from plasma drive to recommend treatments and also a much more convenient dosing regimen for patients. Um, and then, as Todd mentioned in his remarks, you know, we were really encouraged to see the phase 2. Um, potentially pivotal data released by Santa Fe, which was very positive. Um,
Just last month. So, you know we're really encouraged by the the progress of this asset in the very short time since we've closed this transaction. And then with regards to um, you know, the, the royalty exposure here. These are actually technology access fees. Um, and that's what we're we're able to disclose in terms of what we will receive on this asset. So thanks for the question.
Thank you for the answers.
And the next question comes from the line of sahil. Dinger with RBC please.
Hi. Uh this is AEL for Doug. Uh thank you for taking a questions. Um my first question is related to the competition. Um have you seen any changes in the competitive landscape uh for royalty asset, as it relates to either, uh, on the market products or products that are in clinical stage
Uh, and then I have a follow-up.
Sure. Yeah. Um, just in in
Yet, I think.
There will be people interested in this space, uh, because it makes so much sense. Um, I think that this is a very, very logical place for royalty Capital to, uh, focus on and I've thought that for a long time, um, but there was a lot of inertia around, um, the, the initial funds because they were, they were funded mostly by large debt, allocators like Pension funds that were following debt metrics and wanted debt levels of risk. So, you really couldn't go into the development, uh, side. So I think that will change over time. Uh, our view is that there will be competition. We haven't seen. Um, any yet, frankly, we haven't been, uh, competitive and very many deals at all. Most of the folks that do development stage clinical investing are much much larger than
We are, that's that's 1 component of it. And then the other component is that, you know, in excess of 12 billion dollars of royalty, Capital, that is available, the very significant majority of that is focused on Commercial stage assets as opposed to development stage assets.
At times, that is helpful. And and then my follow-up question is related to the recent approval of latex on you uh, the product where you have royalties,
Uh, how do you see that product versus the existing products in the market? Specifically fewer or 6? That is that is marketed by a c form of which was recently acquired by another company Mankind. And we also saw a recent approval of a nasal spray in the same category. So could you speak to what are your thoughts on the products and Peak sales potential for that product? Thank you.
Sure, thanks for the questions. Yeah. We were really encouraged to see the the full approval for our partner SQ Innovation. And, you know, I think the, you know, the existing product, um, kind of as validated the, the potential for, you know, moving the treatment from the inpatient setting to the outpatient setting and you know, there's a lot of kind of macro momentum around trying to to get patients out of the hospital more quickly.
Kind of across, you know, the health care spectrum and so we're really encouraged to see patients, have, you know, another, uh, treatment option. And we believe that it's differentiated in, in several ways, including the size of the device and just sort of the the convenience for patients and the, the commercial rollout strategy. So we'll look forward to to seeing more. Um, you know, at this point there's no information regarding guidance or anything like that but we we view this product as as a very positive introduction into the marketplace.
Thank you.
Joining us, this concludes today's conference call. You may now disconnect