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spk01: Good day, everyone, and welcome to LiveGen Pharmaceuticals' first quarter 22 earnings call. At this time, all participants are in a listen-only mode. Later, you will have an opportunity to ask questions during the question and answer session. You may register to ask a question by pressing star and one on your touchtone phone. Please note this call may be recorded. It is now my pleasure to turn today's program over to Simon Ledmore, Head of Investor Relations. Please go ahead.
spk06: Thanks. Welcome to Ligon's first quarter of 2022 Financial Results and Business Update conference call. Our speakers for today's call are in separate locations. Speaking today for Ligon will be John Higgins, CEO, Matt Foer, COO, and Matt Kornberg, CFO. We will use non-GAAP financial measures, and some of our statements will be forward-looking, including those related to our financial condition, results of operations, financial guidance, the impact of the COVID-19 pandemic, and the expected timing, completion, and effects of our previously announced plans to spin off the OmniAd business to become a standalone public company pursuant to a business combination with the Avista Public Acquisition Corp 2. Additional information concerning risk factors and other matters concerning Ligon can be found in our earnings press release and our periodic filings with the SEC. We undertake no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. A reconciliation between the non-GAAP financial measures we discuss and the closest GAAP financial measure can be found in our earnings release issued earlier today. I'd now like to turn the call over to John Higgins.
spk05: Simon, thank you. Good afternoon, and thanks for joining Ligand's first quarter 2022 financial results conference call. In addition to our strong financial performance, the other main highlight this past quarter is the progress we made towards separating out OmniApp into a public standalone company. We anticipate the split will be completed in the second half of this year. The regulatory process has advanced. OmniAb is staffing up, and Ligand continues to recruit new board members. There are strong interests from people to join both Ligand and OmniAb, which we believe validates the strength, success, and outlook for each business. As we move toward the split, we will be enabling investors to focus on Ligand going forward, or what we call the remaining company, or RemainCo. Post-split, we will focus on Ligan being an efficient company built around R&D tools to drive licensing transactions and partnerships. Ligan will leverage its strong R&D heritage, and we will have a broad and growing portfolio of partner programs. The focus will be on financial growth, sharing the economics of quality pharmaceutical products developed and commercialized by others, with an overlay of a lean cost structure. We have a good core of products, including Kyprolis, Evamela, and the addition of four new royalty bearing products from our Pelican acquisition about 18 months ago. We have strong core assets today, and we see major drivers of growth coming from other products in late stage development. Before I talk more about Romainco, first, I want to make some comments about our work with Gilead and others to support the production of Remdesivir for the treatment of COVID-19. We answered the industry's call by stepping up to manufacture Taptosol at about 10 times the scale of our typical annual production. We are pleased in terms of our scientific and operational achievements to help serve the overwhelming health needs as the world buckled under the pandemic. This is an extraordinary chapter in Ligand's history, one every employee is proud to be a part of. However, Ligand is not a COVID company and this business line is moving along. Capsosal supply to manufacturer Remdesivir is not how investors should evaluate the growth or the potential of the business. The focus should be on royalty revenue and on sales of Capsosal for core programs. Our support of Remdesivir has been a significant opportunity driven by the pandemic. No doubt we have generated hundreds of millions of dollars in Capsol sales that yielded substantial cash flow to support our business and strategic investments. However, it is not a factor to value the company in the future. Going forward, we expect that annual sales of Capsosol for Remdesivir will decline, as would be expected with the waning of the pandemic. And we cannot reliably forecast what Capsosol supply needs for COVID will be. Thus, we will no longer give guidance for sales of capsaicin for use with remdesivir beyond what we've provided already. And instead, in our financial reports, we are now breaking out capsaicin sales for remdesivir and the other line, what we're calling core sales, so investors can see on a historical basis the trends and contributions to the business. This will give clarity on how our business is performing and, more importantly, help investors focus on the core drivers of success. The opportunity for investors is that soon we will have a business fully separate and independent of OmniApp, along with the ability to analyze RemainCo, excluding capsules sales for Remdesivir. This should clearly illustrate the growth and contribution to the numerous RemainCo assets and compare our favorable position today in terms of growth and valuation versus our peer companies. On this basis, we expect a ligand will generate solid revenue growth and performance this year, on revenues between $90 and $100 million, along with good cash flow, as Matt Kornberg will discuss. We'll provide more information later this year about our longer-term outlook, but we expect that in 2023, top-line growth will exceed 15% and adjusted earnings for the core business will grow by over 50%. I believe it is a good time to own Ligand, as at the split, Investors will have an investment in two companies, one a focused leading antibody discovery business and the other a financial growth business built around valuable pharma contracts and various proprietary technologies. Now before I turn the call over to Matt, I want to comment on our program that is making good progress and that we are particularly excited about, Sparsantin. In March, our partner Travere Therapeutics announced the submission of their NDA to the FDA for accelerated approval of sparsantin for IgA nephropathy. Travere also announced that plans are underway to submit an NDA for accelerated approval for focal segmental glomerulosclerosis, or FSGS, and to file a combined IgA nephropathy and FSGS marketing authorization application in Europe in the middle of this year. LIGAN will earn a $6 million milestone related to the NDA filing and a $2 million milestone for the NAA filing. LIGAN, of course, is also eligible to receive a 9% royalty on global sales should Sparsanto become approved and commercialized. We are very pleased to see the progress. It has been reported a great data set, and we're really pleased with the advancement that Travere has made the last several months here. Now, I'd like to turn the call over to Matt Kornberg to review our financial results and guidance.
spk03: Thanks, John. My remarks today will cover three topics. I'll review our financials, I'll provide an update on the OmniAB separation process, and I'll provide a brief update on some of our major partner programs. Starting first on the financial front, the first quarter of 2022 was a strong start to the year for Ligand. Total revenues for the quarter were $45.7 million. Royalty revenue increased 93% to $13.7 million from $7.1 million a year ago. All of our major products contributed to royalty revenue growth, with a significant portion of the total growth driven by programs using our pelican expression technology, including Rylase, Terraperitide, and Numacil. Rylase was launched in the middle of 2021, while Terraperitide and Numacil had very nice year-over-year growth in their second full years of commercialization. Total capticel sales were $12.1 million for the quarter, and this compares with $31.3 million a year ago. Beginning this quarter, we're breaking out Capsule sales into two separate lines. One includes Capsule we've sold related to the COVID treatment Remdesivir, and the other includes our sales of Capsule for all other programs and customers, which we refer to as our core Capsule sales. From these lines, you can see that the decline in Capsule sales was a result of a decrease in COVID related sales versus 2021. Our core capsule sales increased year over year from 1.3 million in Q1 of 2021 to 6.2 million in Q1 of 2022. While this is a strong quarter for core capsule sales, as investors know from past periods, quarterly sales are lumpy based on the timing of orders by our large customers. We do not anticipate that Q1 2022 core capsule sales will be a run rate for the rest of the year, and I'll give you more guidance on this in a few minutes. We expect to continue reporting our capital revenue broken out into two lines for as long as sales related to COVID continue to be a material part of the capital revenue line. Contract revenue in Q1 2022 was $19.9 million compared with $16.8 million a year ago. Our gap EPS for the quarter was a loss of $0.91 The net loss for the first quarter of 2022 included a $12.6 million net non-cash loss from changes in the value of Ligand's public company holdings. Also included in the quarter were one-time expenses of just under $5 million related to the planned separation of the company into two publicly traded companies. Adjusted diluted EPS for Q1 2022 was $0.76. and this compares with $1.41 in Q1 of 2021. If we adjust these numbers for Captisol COVID-related sales, our adjusted diluted EPS for Q1 2022 would be 58 cents, and this compares with 14 cents in Q1 of 2021. In the quarter, we repurchased 165.8 million in principal of our convertible notes for 163.7 million in cash. As of March 31st, 2022, we had cash, cash equivalents, and short-term investments of $204 million. Turning now to guidance, we're reaffirming our 2022 revenue outlook for the combined business. We forecast 2022 royalties to be in the range of $55 to $60 million, cap-to-sol material sales to be in the range of $40 to $50 million, and of that $40 to $50 million of expected cap-to-sol sales, we expect approximately $17 to $19 million to be core cap-to-sol sales. and the rest, the remainder, to be capsule sales for COVID. We forecast contract revenue to be in the range of $52 to $62 million. Within all these numbers provided above, we expect $35 to $45 million of this to be attributable to the OmniApp business, principally in the contract revenue line. We're also introducing full year 2022 earnings guidance and a breakout of revenue and earnings guidance for the Ligand business excluding OmniAb and excluding COVID-related Capsule. We expect revenue for Ligand excluding OmniAb and COVID-related Capsule to be 90 to 100 million and adjusted diluted EPS to be $1.50 to $1.80. Anticipating the spinoff of OmniAb and knowing COVID-related Capsule sales are likely to decrease significantly and eventually go away completely. We believe this is the best way to track the performance of the remaining Ligand business. It will be useful for investors to start focusing on these baseline metrics now as we develop our plans and outlook going forward. This is also consistent with how management analyzes the business, and we'll continue to provide disclosure that allows investors to track the business on this basis. As for the other components of Ligand, we estimate that the combined earnings for both COVID-related Capsasol and OmniAb for 2022 will be about 20 cents to 40 cents per share. Therefore, for consolidated reporting for the year, the outlook looks to be about $1.70 to $2.20 in adjusted diluted EPS. Listeners can look to our Q1 earnings press release issued earlier today and available on our website for reconciliation of adjusted financial results with the GAAP financial results. I'll turn now to a brief update on our process to separate Ligon into two independent publicly traded companies. On March 23rd, we announced plans to spin off our OmniAb antibody discovery business immediately followed by a merger with the Avista Public Acquisition Corp. Just last week, the SPAC filed the initial S4 and OmniAb filed the initial Form 10 associated with this transaction. These filings kick off the review process with the SEC which, after the registration statements are declared effective, will culminate in the shareholder vote by the VISTA SPAC shareholders and then the spinoff of OmniAB and merger with the SPAC. The outlook on timing to close the spinoff and merger and have two independent public companies remains the second half of 2022. Lastly, I'll provide a few updates on our key portfolio programs. John mentioned previously most of the details around Sparsentin, but I'll just add that we expect a Sparsentin launch early next year. And this program could be a major driver of growth for us in 2023 if the launch is timely and successful. We look forward to tracking Travere's progress with the FDA and MAA, as well as their commercialization efforts. In April, Mark announced that the FDA granted breakthrough designation for V116, a 21-valiant pneumococcal vaccine utilizing Ligand's CREM197 vaccine carrier protein, which is produced using our Pelican Expression Technology platforms. Merck plans to initiate Phase III clinical trials for V116 in 2022. And along with VaxNuVans, V116 is a key component in the pneumococcal vaccine franchise that Merck continues to build to compete primarily with Pfizer in this multi-billion dollar market. And finally, the products utilizing our Pelican expression technology continue to show great commercial progress. In the first quarter, we booked just under $3 million of teriparatide royalty revenue, approximately $1.6 million of rylase royalty revenue, and just under $1 million of Numasil royalty revenue. With that, I'll turn the call over to Matt Ford to provide additional details on OmniApp's business and strategy. Matt?
spk00: Thanks, Matt. I'm going to focus my comments this afternoon on our OmniApp platform as we prepare for it to become an independent, publicly traded company later this year. The OmniApp Discovery platform provides our partners with access to diverse antibody repertoires and cutting-edge high-throughput screening technologies, to enable the discovery of next generation therapeutics. At the heart of the platform is the biological intelligence, or what we call BI, of our proprietary transgenic animals. These animals have been genetically modified to generate antibodies with human sequences to facilitate the development of human therapeutic candidates. Over 55 partners currently have access to OmniAb-derived antibodies, and more than 250 programs are being actively developed. We've added a substantial number of new programs over the past 12 months, and our partners, have completed or are conducting over 100 clinical trials. These trials include indications that span oncology and inflammation, metabolic diseases, and immunology. We've recently added multiple new partners and expect to be adding more this year at potentially an even higher rate than in the recent past, given our ongoing business development discussions. We're looking forward to the ASCO annual meeting early next month, where multiple OmniApp partners will present new clinical data. Over time, our platform has become increasingly validated, now with two approved drugs, one under review at the FDA, and many others in or preparing to enter the clinic. We believe the OmniAb business is poised for continued growth and believe our growing roster of new partners and programs illustrates the value of our technology. OmniAb is now being used in diverse modalities, including full-length IGGs, various formats of bispecifics, antibody drug conjugates, and others. We continue to invest in our technology to expand its utility and have developed dozens of different antibody discovery workflows that leverage various elements of our technology and that are then carefully paired with partner programs depending on their needs. Being here at the PEGS Protein Engineering and Cell Therapy Conference here in Boston this week and meeting with current and potential partners, it's very clear to me that our industry scientists place high value on the fact that our team and our technology can feed flexibly into a variety of workflows to meet each program's scientific needs. That flexibility allows us to efficiently grow our portfolio of programs while investing to further improve our comprehensive, biologically-driven platform. Our business development team continues to secure new license deals, and we're in the process of expanding that team given increasing demand for the platform and also given that we seem to be managing more inbound interest than ever before. Within OmniAb, we have extensive capabilities for ion channels and transporters that were developed in the Icogen platform over many years. We view these as best-in-class capabilities for a viable target to lead delivery and for difficult and high-value ion channel targets. These capabilities were established around small molecules and we believe have clear potential in multiple formats or modalities. In addition, these differentiated core capabilities can provide novel reagent generation, proprietary assays, and in silico competencies that can also support partner discovery programs and can be used when pursuing ion channel and transporter targets in a variety of approaches. We're making very good progress on our operational and strategic goals as we prepare to become a standalone public company. Our team continues to be highly focused on key areas that include partnered pipeline development and expanding the utility of the OmniApp platform. And our team is now finalizing completion of a major expansion of our wet labs and our ion channel R&D facilities, and a significant expansion of our transgenic vivarium facilities, given increasing demands from our partners. And with that, I will turn the call back over to the operator for questions. Operator?
spk01: At this time, if you'd like to ask a question, please press the star and 1 on your touchtone phone. You may remove yourself from the queue at any time by pressing the pound key. Once again, that is star and 1 to ask a question. We'll take our first question from Larry Sallow from CJS Securities.
spk02: Great. Thanks, guys, and congrats on the progress with the spin. Sounds like everything is moving ahead on schedule, so glad to hear that. Maybe just a couple of starting questions on Kyprolis. I think Amgen put out a pretty good number in Q1. It sounds like they seem pretty optimistic in the full year. So a question around Kyprolis and more just on the Bay gene, biogene, recent approval, just trying to, like, get a little bit more color on how big potentially that the opportunity in China could be for Kyprolis.
spk05: I'll jump in there. I thought Matt might, but Larry, thanks for the question. So yeah, to break it down, Kyprolis approved in 2012 early, U.S. only. Now it is sold through Amgen, U.S. Europe. Ono is the Japanese partner. and you referenced Beijing, they just launched in the first quarter in China, a big market. So the product is annualizing over $1.2 billion. A year and a half ago, sales stalled a little bit. We believe that was largely pandemic-related office visits for oncology treatments, but the growth is picking up. The last two quarters, Japan looks strong. Amgen, you're right, reported a good first quarter. We do not know Beijing's quarter yet. It's a partial quarter, and they have not given guidance or broken it out. China, our estimate would be at least 100 million. Annual sales, it could be 200 to 400 million, but it's too early to tell, and we're looking forward to getting a few quarters run rate.
spk02: Um, before we can, and I mean, kind of like, uh, uh, you know, John, like, uh, you know, three to five, like a five year potential, you know, without, I'm not holding it to the number, but it seems like it, you know, just to get a little like relative size or, you know, what this does to the potential Tam for, you know, is really kind of what I'm looking at.
spk05: Yeah. And, um, a fair question. Again, we're going to get the first quarter and maybe a more of a trend line, uh, And watch for Bayesian Signal. As a public company, they're fairly vocal or out there on their financial performance, so hopefully they'll have some messaging. But it's so early, it's hard to factor that in. But a long way to say it's a great asset. It's a very good royalty, and it is definitely still growing. We expect it to drive good cash flow for Ligan going forward.
spk02: Great. And then just a similar question, maybe on support of the antenna, and I think you guys have given some numbers just on potential market size. I think initially we thought the SGS indication might be first, but it seems like they may eventually both be approved together. Maybe the IGA and the Prop 3 will be first. And I think that the Prop 3 market is actually the bigger of the two potential markets. So, again, maybe just potential size or, you know, what that could eventually, you know, be. even at the low end of, you know, expectations. Again, a five-year-plus outlook, not what we're going to do in Q1 of 23 or anything like that.
spk05: Yeah, I'll give a comment, and Matt Kornberg, he studies the public company research reports as well. Right. It's a broad range. Right. Several years ago, the partner would describe this as, you know, as much as a half a billion to a billion-dollar U.S. market. And certainly the pricing potential and the patient needs supported that. I say that because we get those questions and that those numbers are out there. Nobody is planning that right now. It's too early. We've seen as low as $200 million. So, you know, that's a broad range. But where we are is really at a point now that clinical has gone so well. So far the regulatory is on or ahead of schedule. before we jump the gun on commercial, we're really going to listen and watch to see what Trabir provides for guidance before we get in front of those numbers. Any other perspective the street might have right now around that asset?
spk03: Yeah, I think, John, you captured it, and Larry, you mentioned, but the patient population for IgA nephropathy is approximately 100,000, and the patient population for FSGS is close to 30,000 or 40,000. So certainly IgA nephropathy is the bigger opportunity in terms of patients and the launches, as we mentioned, expected hopefully next year. And then the research, the third-party research that we look to, the consensus numbers that we look to, there is a wide range, as John mentioned, you know, 200 on the low end and a billion on the high end, but something in the several hundred million range seems like what everyone is expecting, at least in terms of potential.
spk02: Got it. And then just last question, I think, John, just to confirm, you just referenced potential growth in 23. That was for the remain call, right, sort of the mid-teens top line. I think you said 50% earnings growth. I know that wasn't a guidance. That was just sort of a target, right? Is that what I heard?
spk05: Correct, yes, we did. And I'm sure it's clear by the prepared remarks. We're excited about the business. Investors now, as we move toward the spin, we can't predict the exact – date or month of it. But we expect the spin will happen. We're going to have a remaining company, and it's a very well-positioned company. We'll have more detail in conferences, et cetera. But when we look at the portfolio of inline, currently royalty-generating assets, and then the calendar of potential approvals for the next one to three years, this is everything. I've been here 15 years. This is everything that we've worked for in terms of building high-quality research business backed by royalty growth. And so we're, one, trying to give more clarity around the business components. And specifically, we did give some numbers today, but it's early days. We're very confident in top and bottom line growth. And as the quarters move on, we'll have more specificity around that.
spk02: Got it. Great. I appreciate all the call that you provided. Thanks. Larry, thank you.
spk01: Our next question comes from Matt Hewitt from Craig Hellam Capital.
spk04: Good afternoon, gentlemen. Thank you for the update, and congratulations on the strong start to the year. One of the questions I've been getting a fair amount recently regarding funding, biotech, small and biotech and pharma companies in particular, given the current market dynamics. And I'm curious. I mean, I look at your portfolio of your partners, and you've got a pretty wide portfolio. swath of the market, a lot of large companies. You mentioned Merck, obviously, earlier, a number of them that are very well-funded. And on the other end, you've got some smaller companies. What are you hearing from your partners regarding funding? And I guess for those that are on the smaller side, does this create opportunities for you from an investment standpoint if one of these or more of these have platform-type opportunities where you could step in, maybe provide some incremental capital, but add to your stable of platforms?
spk05: Yeah, Matt, do you want to comment?
spk03: Yeah, thanks, Matt. I appreciate the question. And I guess first off, generally, we certainly see what you're commenting on out there. Markets are difficult for fundraising in the biopharma sector. That's not rocket science right now. And we've seen hundreds of companies that are trading at or below cash levels and or private companies that are struggling to finance and A lot of those companies are coming to Ligand, looking to partner or looking for financing. And so the opportunity set is certainly at this point, the market is certainly providing a wide opportunity set for us. Within our own partner base, most of our partners are well-funded through whatever the next key value-driving event is, if not just fully large companies that are set for funding. But there are a subset, exactly as you suggested, where we do see opportunities to invest more in a business or a program and in exchange get economics. And that is something that we think is a good opportunity. We know the programs really well. We either created the science or they're using our technology in most cases. And we can use that as a competitive advantage to have some insight onto the program. And so for us, it does provide an additional opportunity. We do think we're excited about that, at least from that standpoint, for the next six to 12 months as the markets sort themselves out.
spk04: That's great. Thank you very much.
spk03: Thanks, Matt.
spk01: And once again, that is star and one to ask a question. We will pause for a moment.
spk05: Okay, well, thank you. It sounds like that's the end of our questions. We appreciate people dialing in and listening to the story. It's been a busy year so far, and we'll have some updates. We're at two conferences later this month, HCW, May 24th. We'll have a live presentation, and then we'll be at the Craig Hallam Conference June 1st. Thank you, everyone. We appreciate your time.
spk01: This does conclude today's program. Thank you for your participation. You may disconnect at this time. Have a great day.
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