Ligand Pharmaceuticals Incorporated

Ladies and gentlemen, thank you for standing by, and welcome to the Ligand Pharmaceuticals Q4 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone keypad. If you require any further assistance, please press star then 0. I would now like to hand the conference over to your speaker today, Patrick O'Brien. Thank you. Please go ahead.

Thank you, Brandi, and welcome to Ligand's fourth quarter of 2020 financial results and business update conference call. All of our speakers for today's call are in separate locations. Speaking today for Ligand will be John Higgins, CEO, Matt Fore, COO, and Matt Kornberg, CFO. We will use non-GAAP financial measures, and some of our statements will be forward-looking. Additional information concerning risk factors and other matters concerning Ligand can be found in our Ligand earnings press release, and our periodic filings with the SEC. Ligand undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. I would now like to turn the call over to John Higgins.

Good morning. Thanks for joining our fourth quarter 2020 earnings call. The past year was outstanding. The year was filled with opportunities and challenges, and through it all, Ligand had stellar financial scientific and operating performance as a life science technology company we are built upon diverse best-in-class technology platforms to serve our large portfolio of partners and customers our focus is to deliver investors a high growth business driven by our royalty-based contracts 2020 set the stage and we are now very well positioned for significant growth and expansion of the business in 2021 There have been four recent defining factors for Ligand driving our value. One, major expansion of our OmniApp antibody discovery platform. Two, the most prolific acquisition year in our history, diversifying and adding to our growth prospects. Three, serving Gilead to meet their Bechlery production needs to help address the ongoing global health crisis. And four, stellar financial performance. I will now expand on each of these four factors. First, I'll comment on the growth of our OmniApp business. We bought this platform five years ago, and over the past year, we made major investments in the technology and expanded the team to solidify Ligand's position as the industry-leading, best-in-class antibody discovery platform. OmniApp provides our partners with access to the world's most advanced antibody repertoires in screening technologies, to enable unparalleled discovery of next-generation therapeutics. It's a highly efficient and customizable end-to-end solution for the growing antibody discovery needs of the global biopharmaceutical industry. At the heart of our OmniApp platform are both our AI-enhanced models and the biological intelligence, or the BI, of our proprietary transgenic animals that generate high-quality fully human antibodies optimized naturally through the animal systems. Partners seek out ligand due to the quality of our science, our discovery efficiency, and our proprietary inventions. We help partners create mono and bispecific antibodies that become leading drug candidates targeting some of the world's most challenging health needs. The antibody market is exploding in size with major new treatments coming to market at an increasing rate. Antibodies are also the largest area of R&D investment in the industry. We are pleased to see the recent increased visibility and valuations within the investment community for antibody drug discovery technologies with newly minted public companies, increasing consolidation through M&A, and existing participants moving up in value. Weigand is very well positioned as a leader as we have more and more partners, a growing roster of late-stage clinical trials, and a large number of potential regulatory approvals over the next five years. Recent market developments validate the upside potential for LIGAP. We see 2021 as a breakout year for this platform, given expected first-ever OmniAB drug regulatory approvals and key trial data from various programs due this year. Secondly, Quality acquisitions are driving our business opportunities and upside. 2020 was Ligand's most productive year ever for M&A, with four deals and nearly half a billion dollars deployed. The deals brought us earnings accretion, new partners, lucrative contracts, new laboratories, and 100 new scientists to expand our services. M&A is a particular strength for Ligand. Ten years ago, we bought Captisol, and five years ago, we acquired Omniab. Both acquisitions have been major unequivocal successes. The Ligand Strategy Team has good instincts for where to invest, driven by insight and collaboration with more than 125 corporate partners. We invest where the science is best and where it's heading. Our recent deals give you a sense for where we see major future opportunities. We are doubling down to the antibody space with two more tuck-in OmniApp acquisitions this past year, and we bought Icogen and Phoenix, giving us a premier position in the ion channel space and a proprietary protein expression platform. All the new operating units are successfully and fully integrated into Ligand and are projected to contribute meaningfully to our business in 2021. Thirdly, a major factor is our work with Gilead, meeting their immense needs for cactosol to manufacture Veclary, the COVID-19 treatment. Our work started more than a year ago now. It has been an all-consuming and rewarding mission, both scientifically and medically. Gilead relies on ligand's cactosol to formulate Veclary. Beyond delivering a necessary manufacturing ingredient that makes the drug possible, We are partners to Gilead in assisting and supporting an important element of the production work. Medical experts are suggesting COVID-19 will be endemic, meaning it's a disease that will be around to some degree for years to come. Our view today is that Veclary will remain a standard of care and a backbone to future therapies, and Veclary will continue to require Cactusol to make it for years to come, adding to our business long term. Finally, the fourth factor driving our success is our stellar financial performance. As Matt Kornberg will discuss, revenue and adjusted EPS for full year 2020 are both up more than 45% compared to last year. And robust performance is expected into 2021. Driving our performance are many new licensing contracts we signed this past year, more milestone payments for more partners, higher Capsasol sales, and the financial contribution from acquisitions. We have grown in cash flow and are investing in the business even more, hoping to further accelerate our partner revenue. Importantly, given our confidence in the business, we have made a strong investment in buying back Ligand stock. We have deployed over $500 million in the past two years, buying back more than 5 million shares, or 25% of our stock. The average price we paid is $104 per share. We reviewed a wide range of the options for capital deployment and saw the buyback of Ligand stock as an obvious, highly attractive, deep value opportunity. Now, with a reduction in shares outstanding, we have meaningfully increased the outlook for earnings and cash flow per share for all shareholders going forward. As I conclude my remarks, I want to add that Ligand is providing great service to our partners and executing efficiently. We have a very talented leadership team, a highly engaged, experienced board of directors, and a dedicated team of scientists driving the business. I want to acknowledge their hard work this past year and thank them for their excellent contributions. In parallel with our business success, we are a team that cares about our communities and the environment. We are dedicated to social equality and have implemented measures to help elevate our voice, and vocation for social justice. And we are implementing measures to reduce our carbon footprint and minimize consumables and other factors of production in running our technology. To do well, we need to do good. We encourage you to review the ESG reports on our website, follow us on Twitter, and review our upcoming proxy for additional disclosures on our environmental and social work. Our goal is to continue to expand our industry-leading technology offerings and to deliver the best year ever financially in Ligand's history, with guidance that calls for revenues increasing more than 50% and significant cash flow. What we do matters. We're contributing to the advancement of some vitally important medicines to advance human health. Now for a more detailed review of our financial results, I'll turn the call over to Matt Kornberg.