Treasure Global Q1 2024 Earnings Call Transcript

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Provided by Quartr
May 7, 2024

There are 10 speakers on the call.

Operator

Thank you for standing by. My name is Benjamin, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ligand First Thank you. I would now like to turn the call over to Michael Zhang, Investor Relations. Please go ahead.

Speaker 1

Hello, everyone, and welcome to our earnings call for the Q1 of 2024. During the call today, we will review the financial results we release after today's market close and offer commentary on our partner pipeline and business development activities, after which we will host a question and answer session. Our earnings release and link to the webcast of today's call can be found in the Investor Relations section of our website at ligand.com. Participating on the call today will be our CEO, Todd Davis our COO, Matt Kornberg our CFO, Taiwo Espinosa our Senior VP, Investments and Business Development, Paul Hadden and our Senior VP of Clinical Strategy Investments, Doctor. Karen Reeves.

Speaker 1

This call is being recorded and the audio portion will be archived in the Investors section of our website. Today on our call, we will make forward looking statements regarding our financial results and other matters related to the company's business. Please refer to this Safe Harbor statement related to these forward looking statements, which are subject to risks and 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. YN 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 Ligand files with the Securities and Exchange Commission, including our most recent Forms 10Q and 10 ks.

Speaker 1

With that, I will now turn the call over to Tony.

Speaker 2

Thank you, Michael, and welcome everyone to our Q1 2024 earnings call. I'm pleased to report a strong start to 2024. We continue to deliver on our strategy of enabling the clinical development of high value medicines by entering well structured financial and licensing partnerships. I am happy to say that over the last year we have executed on this strategy, which we expect will propel Ligand into the next stage of growth. I'm excited about our prospects.

Speaker 2

Slide 3 summarizes our financial and portfolio highlights for 2024, some of which have already come to fruition in the Q1. To recap, here's how we have supported our growth strategy so far this year and the outlook that we see for the remainder of 2024. First, we entered the 2nd quarter with a strong balance sheet and a rich funnel of investment opportunities. As of March 31, we had $311,000,000 of cash and investments, including our holdings in Viking Therapeutics stock. We are pleased with this balance sheet and expect to generate an additional $60,000,000 in cash from operations in the remainder of the year.

Speaker 2

Adding this to our $75,000,000 revolving credit facility capacity, we are in a strong financial position and able to continue execution on our strategy. In addition, we are reiterating our 2024 financial guidance as well as our longer term outlook. Over the next 5 years, we see a royalty revenue CAGR of over 20% and an adjusted EPS CAGR exceeding 25%. This growth projection is driven by 3 asset groups: our current commercial assets, our existing portfolio of development stage assets and the new assets that we add into our portfolio through technology licensing and our investment activities. With the announcement of the Genus investment this morning, we will have added more than 10 assets into our portfolio since mid-twenty 23 when we began execution on this strategy.

Speaker 2

This is why we have significant confidence in our ability to deliver on our long term financial growth objectives. Tavo will provide more detail around our financial performance for the quarter and the outlook for the year. 2nd, we announced the creation of Pelfos Therapeutics and the appointment of Scott Plesha to the role of CEO. In addition, we established the Pelfos Board of Directors with the main goal of making XELSUVME commercially available by the end of this year. We believe this product will bring significant improvements to the lives of patients living with tremendous unmet needs.

Speaker 2

Karen will provide a more detailed update, but just as a reminder, on January 5, 2024, the FDA approved ZELSUVNI as a first in class medication for the treatment of molscum contagiosum in adults and pediatric patients 1 year of age or older. You may recall that we purchased 100 percent of the XELSUVME rights as well as rights to the broader nitric oxide platform and its additional we see important portfolio developments on the calendar for this year. Most recently, I want to highlight that in April, our partner Travir Therapeutics gained European Commission conditional marketing authorization for Filspari for the treatment of adults with primary IgA nephropathy. We also have several other key catalysts including the potential FDA approval of Merck's V114 and Verona's ensifentrine, both with PDUFA dates in June. Turning to Slide 4, we will discuss Ligand's strategic differentiation.

Speaker 2

We are a high margin biopharmaceutical business creating strong cash flows with a predictable and high rate of growth. We are aggregating royalties and targeting late stage development assets that are well characterized by data and offer superior risk reward. There is a high demand for capital and we are able to invest selectively with significant advantages with regard to information asymmetry. We originate, diligence and negotiate select investments with a highly qualified team complemented by a network of external experts. We do most of our diligence under confidentiality agreements with access to confidential information.

Speaker 2

We expect superior outcomes on our ability to handicap products and their probabilities of success. With the 2023 restructuring changes and now focusing our capabilities into our investment channels, we have created a high margin, high growth business with lean operations and predictable steady future growth. Turning to Slide 5, we will cover our royalty revenue outlook. The Q1 was an excellent start to the year for Ligand in terms of our financial performance, continuation of our core strategy and investment activity. With these elements, we look forward to a strong and productive 2024.

Speaker 2

With the addition of 7 new assets from Agenus into our curated portfolio, we continue to create more upside in Ligand's portfolio. We continue to expect to meet or exceed our longer term outlook provided at Analyst Day. We spent the first half of twenty twenty three restructuring the business and setting up the team to execute on this strategy. Just since then, we've added a total of 10 important new assets into the portfolio. We've spun out the Pelican platform to create Primrose Bio, acquired the nitric oxide platform from the Novan restructuring, which contains multiple programs and now created Peltos Therapeutics to launch the lead program, Zilsubmi, which is now approved for molscum contagiosum.

Speaker 2

All this has occurred in the last 10 months. Paul Hatton is joining us today and will speak next to cover today's announced partnership with Agenus. I would also like to introduce Doctor. Karen Reeves, who joined us approximately 3 months ago. She brings more than 20 years of significant experience at top pharmaceutical companies.

Speaker 2

This includes multiple leadership positions at Pfizer as Vice President of Worldwide Research and Development, Safety and Regulatory and Head of Global Clinical Submissions and Quality. She also served as Head of Global Medical Science at Astellas. She brings extensive experience in all phases of drug development. Karen will follow Paul and provide an update around zelsuvme, zelspari, ensifentrine and V114. I will now turn it over to Paul.

Speaker 3

Thank you, Todd, and good afternoon, everyone. Turning to Slide 6. We are excited about the Agenus investment which PYGAN will deploy $75,000,000 upfront with an option to invest an additional $25,000,000 This investment is unique and that combines our team's strong ability to value partnered clinical stage royalty assets, while also supporting promising clinical stage programs using royalty structures. This non dilutive capital infusion is exactly the type of partnership we hope to bring to other forward thinking and creative biopharma companies like Agenus, who have high value clinical assets and strong operational teams. The Agenus investment significantly increases Ligand's portfolio exposure to the next generation of immuno oncology or IO for short.

Speaker 3

Our $75,000,000 investment will provide us access to economics on 7 IO programs. IO as a category seeks to bring life saving therapies to patients with terminal cancer. The IO category includes multibillion dollar blockbusters such as Yervoy, Opdivo and Keytruda. Agenesis Bot Bow is a compelling next generation I O combination therapy, utilizing the same mechanistic pathways as those blockbuster drugs, namely CTLA-four and PD-one, seeking to offer significant improvements in both efficacy and safety. Doctor.

Speaker 3

Karen Reeves will profile Botvall in more detail, but suffice it to say our diligence team was impressed by Botvall's clinical program in highly refractory colorectal cancer patients as well as other solid tumors. The other 6 IO programs are partnered with primarily large biopharma companies who have deep oncology experience in franchises. These 6 partner programs offer Ligand future potential royalties in the low single digits as well as over $400,000,000 in potential milestones. Our investment team, which has significant healthcare domain and royalty investing experience, spent a considerable amount of time with the Agenus team during our confidential due diligence process, including manufacturing site visits to Agenus' Emeryville facility. Our team's diligence revealed excitement among key opinion leaders for BotVal and the value it could deliver to patients and their families.

Speaker 3

By expanding the investment to the additional 6 partner programs, we diversified our risk, but also our exposure to this innovative category of therapeutics. Agenus has the ability to raise an additional $125,000,000 in the same structure, creating a very nice additional non dilutive capital option for Agenus. Turning to Slide 7. The Agenus transaction illustrates the type of opportunities we are looking for in our investment criteria. We have near term potential cash flows with the potential accelerated approval for BotVal and potential near term milestones from the partner programs.

Speaker 3

The most recent clinical data referenced in Agenesis April press release for Bot Bow shows durable responses in a patient population that has extremely limited treatment options. There is significant royalty duration on each of these 7 assets, far into the next decade by virtue of both patents and biologics exclusivity. Ligand has good structural alignment with Agenus who retains a significant majority of economics in Bot Bow and in the partner programs where oncology focused and promising potential of highly innovative targets continue to provide enthusiasm for partners to invest in bringing these treatments to market. Ultimately, this yields an attractive risk reward profile for Ligand and provides non dilutive capital at a key juncture for Agenus to advance their bot valve program. Now I'll hand the call over to my colleague, Doctor.

Speaker 3

Karen Reeves, who will continue the discussion of the Agenus investment as well as other Ligand assets. Karen?

Speaker 4

Thanks, Paul, and thank you, Todd, for the earlier introduction. As Todd mentioned, I'll be touching on a few of our pipeline programs, namely ZELZUZME, PHILSPARI and cifentrine and V114. But first, I'd like to just make a few comments on today's Agenus announcement. Regarding Agenus' Bot Bow, this is an exciting program and in my view, the potential impact on colorectal cancer is very promising. Approximately 900 patients have been treated with bowel in clinical trials across 9 different difficult to treat solid tumor cancers.

Speaker 4

The novel therapeutic regimen has demonstrated the potential to be combined with chemotherapy and other standard of care therapies and as an immunotherapy only combo in colon rectal cancer, one of the most prevalent solid tumors globally. In April 2023, Agenus was granted fast track designation from the FDA for the investigation of the bowel combination in patients with metastatic, relapsedrefractory, microsatellite stable, CRC with non liver metastases. Botanselumab is an investigational multifunctional anti CTLA-four immune activator designed to boost both innate and adaptive anti tumor immune responses. Its novel design potentially leverages mechanisms of action to extend immunotherapy benefits to cold tumors, which generally respond poorly to standard of care or are refractory to conventional PD-one CTLA-four therapies and other investigational therapies. Bodasilumab potentially augments immune responses across a wide range of tumor types by priming and activating T cells, down regulating intratumor regulatory T cells, activating myeloid cells and inducing long term memory responses.

Speaker 4

Okay. Let me move on to the next slide and focus now on zeluzumab. Zeluzumab approved by the FDA January 5, 2024 is the 1st in class nitric oxide releasing product for the treatment of molluscum contagiosum, a highly contagious viral skin infection predominantly affecting children with no other approved at home treatment. Molluscum is a pox virus causing chronic dome shaped skin papules with a central indentation and can appear as multiple lesions anywhere on the body lasting from 6 to 8 months and even up to 5 years. Zolsufemi is approved for pediatric patients 1 year of age and older and adults.

Speaker 4

Molluscum affects an estimated 6,000,000 children and up to 5% of the general population in the U. S. This FDA approved treatment can be applied by patients, parents or caregivers at home, outside of the physician's office. One of the challenges of treating molluscum has been the available destructive therapies such as cryotherapy and curettage have major drawbacks, especially for children such as pain and potential for scarring. Zolzuzny is a much more patient friendly treatment.

Speaker 4

Even though molluscum can affect quality of life, cause social distress and persist for many months or years, approximately 70% of children go untreated. Therefore, the at home treatment is a distinct advantage for both treatment and compliance. So, Zolcefni's ease of use as well as being available for children as young as one will hopefully open the doors for more treatment for this disfiguring contagious viral illness. As recently disclosed in our press releases, we have created a new standalone company called Palphos Therapeutics that will commercialize Zelzutane. This company creation effort is very similar to our prior efforts related to Viking Therapeutics and Primrose Bio.

Speaker 4

HealthOS will be operated fully independent of Ligand, although we expect to own a significant equity stake in the business at inception. We are excited to have attracted the talented leadership of Scott Pletcher and our 2 highly experienced independent directors, Peter Greenleaf and Matt Pauls. Let's turn to ensifentrine with an FDA PDUFA date of June 26. Verona Pharma is developing and commercializing ensifentrine, a novel selective dual inhibitor of phosphodiesterase PD3 and PD4 for maintenance treatment of COPD by inhalation therapy. Both Phase 3 efficacy and safety trials, ENHANCE-one and 2 met the primary bronchodilation FEV1 endpoint.

Speaker 4

Improvement of symptoms was shown across trials and the rate and risk of exacerbation were reduced in a clinically meaningful and consistent manner in the trial. Many COPD patients remain symptomatic even on multiple therapies. Ensifentrine can be used in combination with other approved products and potential competitors and there is no need to take into consideration smoking status or eosinophilia. Verona estimates there are over 8,000,000 COPD patients currently receiving chronic treatment in the U. S.

Speaker 4

Alone, over half of whom are dissatisfied with their current treatment regimens. If approved, ensifentrine could offer an effective add on or alternative treatment with a good safety profile to address both symptoms and exacerbations. Verona is currently building its commercial infrastructure to prepare for launch following potential approval in June. Ligand will earn a milestone of approximately $5,000,000 upon approval and $14,000,000 upon launch of ensifentrine. Ligand benefits from a low single digit royalty on ensifentrine and we believe the program could be another of our key growth drivers.

Speaker 4

Moving on to Filzpari, the FDA granted an accelerated approval in February 2023 as the 1st and only non immunosuppressive therapy for primary IgA nephropathy in patients with a urinary protein to creatinine ratio equal to or greater than 1.5gram per gram. And Trevir filed a supplemental NDA for full approval March 11, 2024 here in the U. S. In the EU, Felspari received the European Commission approval for a conditional marketing authorization for the treatment of adults with primary IgAN with a urine protein excretion equal to or greater than 1 point 0 grams per day or urine protein to creatinine ratio equal or greater to 0.75 gram per gram. Filspiri is a once daily oral medication that directly targets glomerular injury in the kidney by blocking 2 critical pathways of IgAN disease progression, endothelin 1 and angiotensin 2, with potential to be a mainstay for those who don't respond to single agent ACE or ARP.

Speaker 4

Just yesterday, TRITVERE announced that the FDA granted priority review of their sNDA to convert VELSARIE from accelerated approval to full approval for the treatment of IgAN in the U. S. The FDA assigned PDUFA target action date is September 5, 2024. VOSPARI is one of our key growth drivers. Trevir reported Q1 revenue numbers yesterday afternoon and the quarter came in nicely with sales of $19,800,000 Treveer also continued to disclose the momentum on new patient recruitment.

Speaker 4

Trevir had 5 11 new patient forms submitted in Q1, bringing the total since launch to 19 63. The continued steady addition of potential new patients provides good evidence of future revenue potential. VILSPARI appears to be on track to meet consensus estimates for 2024, which are at approximately $110,000,000 of revenue for the year. In Europe, CSL Vifor expects to launch VILSPARI in the second half of twenty twenty four. We earn a 9% royalty on net sales and we expect that this will be a significant driver of long term growth for our royalties.

Speaker 4

Moving on to Merck's V116. V116 is a 21 valent pneumococcal vaccine for the prevention of invasive pneumococcal disease and pneumococcal pneumonia. It is potentially the 1st pneumococcal conjugate vaccine specifically designed for adults, including 8 unique serotypes not in any currently approved vaccine. According to Merck, V116 is specifically designed to prevent adult invasive pneumococcal disease and the serotypes covered account for approximately 83% of pneumococcal disease in adults 65 and older for CDC data from 2018 to 2021. Immune responses were seen to all 21 serotypes in a diversity of adult patients regardless of immune status or previous vaccine status and higher than comparators in immune response for the serotypes unique to B116.

Speaker 4

The FDA granted B-one hundred and sixteen priority review and we await the fast approaching PDUFA date, June 17. We will earn a low single digit royalty on V116. We would earn a $2,000,000 milestone upon the approval of V116. And with that, I will turn it over to Matt for more comments on the portfolio. Thanks, Karen.

Speaker 5

Today, I'll provide some additional comments on a few of the other significant updates from the Q1 across our portfolio in both commercial and development stage programs. A reminder for investors that Ligand's portfolio includes more than 85 partner programs that drive our royalty revenue, our Captisol material sales our license milestone and contract revenue. Slide 14 shows our key commercial programs that drive the significant majority of our royalty revenue. Our current commercial portfolio includes over 25 different royalty streams and 30 commercial drivers overall, but these 8 programs are expected to contribute over 95% of our royalty revenue in 2024. Starting with Rylase, it's marketed by our partner Jazz Pharmaceuticals and is a component of a multi agent chemotherapeutic regimen for the treatment of children and adults with ALL or LDL.

Speaker 5

This product continues to do extremely well in a market that was previously constrained by supply issues. Last week Jazz reported its Q1 earnings including $103,000,000 in Rylase sales and Jazz continued to highlight Rylase as one of its potential growth drivers. Having received approval for Rylase in Europe in September 2023, Jazz confirmed the ongoing rolling European country by country launch. Next on Vaxnivance, it's a pneumococcal vaccine utilizing Ligand's CRM197 vaccine carrier protein produced using our former Pelican Expression technology platform. Merck is now marketing MaxVaxinibans in both the adult population and the pediatric population.

Speaker 5

Merck announced $219,000,000 in Vaxnivans sales in Q1 2024. Ligand earns a low single digit royalty on Vaxnivans sales. For TZYLD, Ligand purchased a royalty on Sanofi's TZYLD in November of 2023 from an inventor. We're very happy with Sanofi's continued investment in tZYLD and its commitment to the first ever launch of a disease modifying therapeutic for type 1 diabetes. It is still early in the launch and diagnosis remains a focus.

Speaker 5

Sanofi has recently stated that they continue to see growth in screening and infusion rates and they're encouraged by the growing infusion rates in pediatric patients. Sanofi continues to describe TZYLD as one of its key launches for the organization and is in discussions with regulatory agencies about expansion into the Stage 3 Type 1 diabetes patients. Transitioning to a few of the pipeline programs in the portfolio, Kieran already touched on ZILSUMA and zifentrine in V114. So I'll cover VK2809, saticlostat and ganaxalone. Viking recently announced that in the Q1 of this year, they completed the 52 week biopsies for the Phase 2b voyage study of VK2809 in biopsy confirmed NASH and fibrosis.

Speaker 5

As Viking has previously disclosed, the study successfully achieved its primary endpoint after 12 weeks of treatment and affirmed VK2809's potent effect on liver fat along with its favorable tolerability and safety profile. Viking plans to report data on the histologic changes assessed after 52 weeks of treatment later in the Q2. Ligand earns a 3.5% to 7.5% royalty on potential sales of VK2809 as well as significant clinical, regulatory and commercial milestones. NASH is a very large potential market and if Viking is successful in their development of VK2809, the program will be addressing a multibillion dollar market opportunity. Takeda is developing cetiklistat, which is the 1st in class novel compound with the potential to reduce seizure susceptibility.

Speaker 5

Takeda is currently running 2 Phase 3 trials and expects to report top line data by September 2024 and file for approvals in Q1 2025. Ligand earns a tiered royalty of up to 2.6% on this drug if commercialized as well as up to $86,000,000 of milestones. There remains high unmet need in rare pediatric epilepsies and we believe cetiklostat is uniquely positioned to deliver value to patients and caregivers through its demonstrated seizure reduction capability as well as its strong safety profile and ability to be combined with a broad range of antiepileptic treatments. Marinis Pharmaceuticals provided an update on the Phase 3 RAISE trial evaluating the safety and efficacy of IV canaxalone in patients with refractory status epilepticus. The blinded interim analysis did not meet predefined stopping criteria and Marinus has completed RAISE enrollment at approximately 100 patients with top line results expected in the summer of 2024.

Speaker 5

Future development of IV Ganaxalone in refractory status epilepticus will be assessed following the review of the final RAISE results. We will remain in dialogue with Marinus on the future of the program and will pass along any updates that as Marinus provide them to the market. With that, I can turn the call over to Tavo for the financial update. Taro?

Speaker 6

Thanks, Matt. First, I want to highlight that I will be discussing non GAAP results, which excludes certain items including stock based compensation, amortization of intangible and financial assets, unrealized gains from short term investments, our share of losses absorbed from accounting for our investment in Primrose Bio under the equity method, expenses incurred to incubate Peltos amongst others. In addition, to further focus our investors on the core business results, we adjust for realized gains from the sale of Viking Therapeutics stock. I encourage you to review the GAAP reconciliation of these non GAAP measures, which can be found in today's release available on our website. Also, I'd like to point out that starting with this quarter, we are updating how we report royalty revenue to provide increased transparency and better align with our evolving business model.

Speaker 6

We will now show 2 lines with 1 labeled as revenue from intangible royalty assets and the other labeled as income from financial royalty assets. Historically, most of our royalty revenue has been earned from programs where we have rights to the underlying intellectual property. We will now refer to this royalty stream as revenue from intangible royalty assets. And starting with this quarter and for prior periods presented, we will also report royalties generated from programs where we do not have rights to the underlying IP as income from financial royalty assets. The amounts recorded to this line item were previously captured in contract revenue and have been relatively small, but we expect it will become a larger portion of our royalty asset portfolio in the future.

Speaker 6

For additional details, please refer to footnote 1 in our Form 10 Q that we expect to file with the SEC tomorrow. We kicked off the year with strong results in the Q1 of 2024 with both on the top and bottom line and are on track to meet or exceed our 20 24 financial guidance. On the top line, royalty revenue grew 8% to $19,000,000 year over year and on the bottom line, we recorded adjusted EPS of stock. Excluding the Viking stock sales, our core adjusted EPS for the quarter was $1.20 As Todd mentioned, we have a strong balance sheet with 311,000,000 dollars in cash and investments as of March 31. Moving over to Slide 17.

Speaker 6

This slide frames up our financial results in more detail. We reported total Q1 twenty twenty four revenue of 31,000,000 dollars versus $44,000,000 in the prior year quarter. The year over year decrease was driven by the $15,000,000 milestone that we earned upon the approval of travirsvulspari in Q1 'twenty 23. Royalty revenue increased 8% in Q1 'twenty 24 to $19,100,000 from $17,600,000 in Q1 'twenty three driven by strength in Filspari, Rylase, TYPRALIS and VaxNU BANZ, partially offset by weakness in EVOMELA due to generic competition in China. In Q1, twenty twenty four, Travia reported continued growth in Pilspari with sales of $20,000,000 Jazz reported Rylase sales of $103,000,000 which is a 20% increase.

Speaker 6

Amgen reported Kyprolis sales of $376,000,000 which was 5% above the prior year and they attributed the increase to volume growth outside the U. S. Merck announced total sales of $219,000,000 for Vax NuVin, which is a 107% increase over the prior year period. We expect these products will continue to drive royalty revenue growth in the future. Captisol sales were $9,200,000 in Q1 'twenty four versus $10,600,000 in Q1 'twenty three with the change due to timing of customer orders.

Speaker 6

Contract revenue this quarter was $2,700,000 versus $15,700,000 in Q1 2023. As mentioned earlier, last year's quarter included a $15,000,000 milestone payment we earned from Trevir upon the FDA accelerated approval of VILSPARI. Total R and D and G and A operating expenses decreased by 3% in the Q1 due primarily to lower headcount related expenses associated with the spin out of the Pelican business offset by investments made to incubate the Peltos business and to build up our business development and investment team in Boston. G and A and R and D expenses were $11,000,000 $6,000,000 in Q1 'twenty four versus $10,900,000 $6,700,000 in Q1 'twenty three respectively. GAAP net income from continuing operations in the Q1 of 2024 was 86,100,000 dollars or $4.75 per diluted share versus GAAP net income from continuing operations of $43,600,000 or $2.43 per diluted share in the prior year quarter.

Speaker 6

The increase in GAAP net income is due largely to the increase in value on our holdings of Viking Therapeutics stock. Excluding the impact of gains from the sales of Viking stock, core adjusted net income was 21,800,000 or $1.20 per diluted share versus $23,400,000 or $1.33 per diluted share in Q1 'twenty three. The decrease in core EPS is due to the $15,000,000 Travir milestone, which was earned in Q1 'twenty three as Rezz referenced earlier. Turning to the balance sheet. As of March 31, 2024, we had cash and short term investments of $311,000,000 which includes $82,000,000 of our holdings in Viking common stock.

Speaker 6

We expect that our current cash plus annual cash flow generation will be sufficient to fund the investment activity we anticipate over the foreseeable future. Turning now to guidance, we are reaffirming the 2024 financial guidance we introduced at Investor Day in December. We expect 2024 royalty revenue will be in the range of $90,000,000 to $95,000,000 sales of Captisol in the range of 25 $1,000,000 to $27,000,000 and contract revenue in the range of $15,000,000 to $20,000,000 These revenue components result in total revenue guidance of 1 $130,000,000 to $142,000,000 and core adjusted earnings per diluted share of $4.25 to $4.75 And as Todd mentioned, we also introduced in December for the first time and we reiterate today a longer term outlook where we see royalty revenue growing at a compound annual growth rate of above 20% from 2022 to 20 28 and adjusted core EPS growing even faster at a compound annual growth rate above 25%. I'll now turn the call over to Todd for closing comments.

Speaker 2

Thank you, Thiago. We are very pleased at our strong start to 2024. I'm enthusiastic about the progress we've made to take Ligand to the next stage of growth. We've entered the 2nd quarter with a strong balance sheet and continue to generate more cash, which provides us the power to invest in high margin royalty assets like a Genus investment announced earlier today. I'm excited about the potential significant catalyst in the coming months with Pilsos' Zelsuvme, Verona's ensifentrine, Merck's V114 and Takeda's saticlustat.

Speaker 2

As our 2024 guidance and longer term outlook imply, we look towards significant long term revenue and EPS growth. Thank you. And with that, we will open it up to questions.

Operator

Thank you. We will now begin the question and answer session. And your first question comes from the line of Matthew Witt with Craig Hallum Capital Group. Please go ahead.

Speaker 7

Good afternoon and congratulations on the strong start to the year. Maybe first up on the Agenus partnership, congratulations on making that deal. I guess a couple of things. 1, walk us through the process on how you kind of got engaged with them and where you see the most excitement within those 6 different properties or programs? And then secondly, what will be the deciding factor in the follow on $25,000,000 investment and how long do you have to make that decision?

Speaker 7

Yes.

Speaker 2

Paul, why don't you go ahead and take that?

Speaker 3

Yes. So great questions. Process wise, we've been in direct discussions with the company for several months. And we had reached out to them given where they were in the space in biopharma recognizing they've got a number of different royalty assets and obviously we're developing BotVal themselves. So that I think covers the process question you asked.

Speaker 3

In terms of what's exciting, obviously, Karen alluded to our excitement about Bothell and I touched on it. And that's obviously an important asset in the mix. But the basket also is quite interesting as well in terms of the partners that are involved there, the different mechanisms and the fact that it's multiple products in the bag in terms of the overall portfolio. So we kind of view it as a very broad basket in that respect. And so that's, I think, the attractive aspect of it.

Speaker 3

And then your third question, I think there is a time limit. I have to go back to the 8 ks in terms of what's been disclosed about the option to invest further. But obviously, it's at our option and potentially future events, future clinical events, data would be influence our decision as to whether or

Speaker 5

not to invest more capital. Yes.

Speaker 7

Got it. And then maybe a separate question regarding the Palthos opportunity, I guess, is the way to call it. Are you still having discussions with potential partners on that? Or at this stage of the game, are you looking to, just kind of run that and see how it goes for a while?

Speaker 2

Yes. We are exploring all options to optimize the value of the asset for our shareholders, Matt. That includes strategic discussions as well as the spin out pathway, which you've seen us execute on historically with Viking Therapeutics and things like Primrose Bio. So both of those work very well and we have built this as a standalone company so that we have as much optionality around the asset as possible. So that whole process is underway at Pothos.

Speaker 2

And I would just add on to Paul's answer, Matt, from before. Most of these deals just to remind the investors here, are not marketed deals where there's a large process around them. We have to proactively identify assets that we're interested in and go meet with the company. These deals are created and we're looking we have a very tight screen. We're looking for high clinical value on late stage assets that are well characterized with data in terms of safety and efficacy.

Speaker 2

That allows us to get into our analysis and kind of the handicapping process, as well as the deal discussions with the counterparties. So it's a very, very outbound oriented proactive process that we execute on.

Speaker 7

That's very helpful. Thank you.

Operator

Your next question comes from the line of Balaji Prasad with Barclays. Please go ahead.

Speaker 8

Hi, good afternoon. This is Shao on for Balaji. Thanks for taking our question. So regarding your Agenus deal announced this morning for the low single digit royalties on the Boat Barrel, given that the combo where the combo stands on the regulatory process now, how much of it should we factor into the $230,000,000 royalties revenue goal you have for 2028? Thank you.

Speaker 6

Yes. First of all, thanks for the question. We don't expect these deals to contribute anything here in 2024. And then we haven't disclosed how much of this will contribute in the outer years, but we'll come back at a later date and provide that level of granularity.

Speaker 5

Yes. And I think, Tavo, I would just add that, on that 5 year chart that we've shown, more is in today's slides, there's a slice of that that is intended to capture all of the capital we deploy and the new deals that we'll invest in. And this deal would be one of those, right? So we've got a bar in there that's intended to capture kind of the potential for these future deals. And we'll continue to add to that bucket with all the capital we deploy.

Speaker 5

And if it's appropriate at a time in the future, we'll update that chart to reflect the amount of deals that we've done and the potential for that future. But for now, we're maintaining our sort of 2028 outlook as Thavo described in his comments.

Speaker 8

Got it. Very helpful. Thank you.

Operator

Your next question comes from the line of Larry Solow with CJS Securities. Please go ahead.

Speaker 1

Hi, this is Justin on for Larry. First question on Kyprolis. You mentioned growth slowed to 5% as reported by Amgen in Q1. Was this consistent with your expectations? And then can you update us on the 2 to 3 year outlook as this will go off patent in 2027?

Speaker 6

Yes. On Kyprolis, the sales figures came in line with consensus and also pretty much in line with what we were expecting in our internal models. And we have been messaging consistent with what Amgen has been saying about Hyprolis that we expect in late 2027 for the generic competition to come in and take share.

Speaker 1

Okay. That's helpful. And then on in Europe, what's the in Europe, what's the opportunity there? Thank you.

Speaker 5

Yes. Thanks for the question, Justin. A reminder to investors that FilSpari is approved for IgA nephropathy in the U. S. And now in the EU.

Speaker 5

And the patient population in the U. S. Is about 140,000, of which, FilSparri has said publicly that about 30,000 to 50,000 are applicable for treatment with Filspari. They haven't given the same corresponding numbers in Europe in terms of the applicability, but the patient population is in the same neighborhood. From a market sizing standpoint, based on the pricing that, Filspari is there.

Speaker 5

Certainly the potential if they got every single patient would be in that neighborhood of $3,000,000,000 that you described. So that's more of a TAM, if you will, for the current approved indication and applicable patient population. If you look at the research consensus estimates that are out there for the Filspari covering analysts, they top out more in the $500,000,000 to $750,000,000 range for potential sales. And I think Tavo had said on our Analyst Day back in December that our 5 year model incorporates those $500,000,000 to $700,000,000 type estimates.

Speaker 1

That's helpful. Thanks a lot for taking the question. Of course.

Operator

Your next question comes from the line of Joe Pantginis with H. C. Wainwright. Please go ahead.

Speaker 9

Hey, everybody. Good afternoon. Thanks for taking the question. So also I want to add my congratulations for the Agenus deal today. And I think I want to ask my question, hopefully it's a self fulfilling prophecy.

Speaker 9

You had very important cash deployment today that you announced. And I guess the obvious question to me is to your earlier strategy changes that you've made that you're choosing opportunities, but it's agnostic with regard to the level of investment that you make. Is that correct now? It just seems to be so. Yes.

Speaker 9

Thanks for

Speaker 2

the question, Joe. We're not really agnostic to the level of investment. I mean, we view ourselves as a portfolio. We're trying to build a very risk mitigated predictable growth portfolio for investors. So like any portfolio manager, we're managing our exposure the same way a portfolio manager would.

Speaker 2

So we essentially try to stay in the neighborhood of about $40,000,000 per product of exposure. If something significantly less risky, we'll upsize on it. And conversely,

Speaker 1

if it's a high upside but

Speaker 2

a little more risky, we'll downsize on it. In the case of the Agenus deal, of course, it's with the number of shots on goal, the 70 $5,000,000 of exposure here we think is quite appropriate for us with the type of kind of portfolio exposure we're trying to build. Does that answer your question?

Speaker 9

It absolutely does. Thanks for that, Todd. And then, I have 2 logistical questions. So first on Paltos, I just wanted to check on the future impact on the P and L. Will this be analogous to your Viking investment where your investment is directly on the P and L aspect or any other impacts to consider?

Speaker 6

Yes. So we are thanks for the question, Joe. In terms of how we account for the investment in the incubation of Palthos, it is consistent with the adjustments that we booked for Viking in that we take out the gains on Viking Therapeutics stock gains. We're also removing the operating expenses associated with incubating Peltos and you'll see that in our GAAP to non GAAP reconciliation. And the run rate that you saw in Q4 is pretty much what we're seeing here this quarter.

Speaker 9

Great. Thanks for that. And then the other house keeping question is with regard to how you're viewing the current Captisol mix with regard to research use and commercial use? And how do you view the current inbounds with regard to inquiries with regard to the asset? Thanks.

Speaker 5

Yes. Thanks, Joe. The Capstone business continues to be very strong. I'll address your second part first. The inbounds on licensing and interest in the platform continue to be as strong as ever.

Speaker 5

We obviously saw a significant increase in those inbounds during the COVID pandemic. But we've kind of returned to the normal pace of those where we've tended to do 5 or 6 different new partnerships every year on average over the life of the time we've had the technology. We're still continuing to see that level of interest and hope to do that many deals this year if we continue out the rest of the year. In terms of the mix between commercial and clinical use, it continues to be about where it has been the last couple of quarters. There's no nothing material one way or the other.

Speaker 5

Obviously, our larger commercial partners Kyprolis and some of the others continue to grow. And so the commercial use is growing. The clinical use is somewhat dependent on the timing and pacing of the clinical work and some of the larger Phase III trials that have gone on over time.

Speaker 9

Great. Thanks for all the added color guys.

Speaker 5

Thanks, Joe.

Operator

We have no further questions at this time. This concludes today's conference. Thank you for participating. You may now disconnect.

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Treasure Global Q1 2024
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