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spk01: Welcome to the Ligon Pharmaceutical second quarter earnings conference call. My name is Vanessa, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. To queue up with your question, you can press zero, then one on your touchtone phone. Please note that this conference is being recorded. I will now turn the call over to your host, Simon Ledemer. You may begin.
spk03: Thank you. Welcome to Ligon's second quarter of 2022 financial results and business update conference call. Some of 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'll 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, and 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 Avista Public Acquisition Corp 2. Additional information concerning our risk factors and other matters concerning Ligon can be found on 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 measures can be found in our earnings release issued earlier today. I'd now like to turn the call over to John Higgins.
spk05: Good afternoon. Thanks for joining Ligand's second quarter 2002 financial results conference call. We are executing well across the organization and are pleased to share our success this quarter, highlighted by strong royalty growth, major partner news, and good progress toward our OmniApp spinout. All aspects of the business are on or ahead of plan financially. As Matt Kornberg will go into, we are raising full year 2022 guidance due to our royalty revenue momentum. A couple of years ago in 2020, our initial outlook for royalties within the low 30 million range. Now we are forecasting more than 60 million in 2022. With our current portfolio of royalty generating assets, we are increasingly confident we are on a trend ultimately to surpass 100 million in annual royalties, excluding any contribution from OmniApp. After the spin out is completed and we have more updates on late stage regulatory approvals by partners, we will provide a more detailed framework for our financial outlook. We're excited about our business with the backdrop of what appears to be an improving environment for the equity capital markets. The industry has seen some major positive developments emerge very recently, and there has been significant M&A announced, both in number of deals and size of deals, which indicates the strength and the durability of our industry. We are increasingly excited for a spin out of OmniAb and we believe the market environment is strengthening for the debut of this special company. OmniAb has what we believe are best in class antibody discovery tools that are highly sought out by major industry players to help advance their work in drug discovery. As a standalone company, OmniAb will have a dedicated capital structure and a board and senior leadership team with deep domain expertise to drive the investments and strategy for the company. The very high caliber of partners and the recent string of positive developments and regulatory events underscore how valuable this platform is in the exciting field of antibody drug discovery. As for the actual spin-out process to split Ligand into two independent publicly traded companies, we've advanced the SEC review process In Avista, our SPAC spin-out partner has filed the second amendment to the S-4 in response to comments from the SEC. After the review is fully completed and the registration statements for Avista and OmniApp are declared effective, we will then proceed to the shareholder vote by the Avista SPAC shareholders and the spin-off of OmniApp through the merger with the SPAC. The outlook on timing to close the spin-off and merger and have two independent public companies is currently Q4, 2022. strategically ligand remainco is focused on three primary areas one acquiring royalty rights to late stage assets consistent with what we've done the last five to ten years two continuing to strike partnerships for our capsul and pelican technologies and three refocusing our capital markets activity and messaging for ligand remainco following the omni have spin outs We have good momentum with our royalty portfolio, and our goal is to continue to expand the number of partner assets through acquisition or technology licensing. It's an attractive market to be looking for assets to acquire or invest in. We are ready for RemainCo to operate separately from OmniAb. As a standalone company, we are highly optimistic that RemainCo's business model and growth prospects will create opportunities for both existing and new shareholders and for analysts to engage with YGANDA. Now I'd like to turn the call over to Matt Kornberg to review our financial results and guidance in more detail.
spk07: Thanks, John. Today I'll review our financial results, update guidance, and give a brief update on some of our major partner programs. The second quarter of 2022 was a strong quarter financially with particularly impressive performance in the royalty revenue line. Total revenues for the quarter were $57.4 million. Royalty revenue increased 108% to $18 million from 8.6 million a year ago. Royalties on all of our major products grew year over year. In addition to Kyprolis, which posted its largest quarterly revenue ever, a significant portion of the total royalty growth was driven by Rylase and Teriparatide. Teriparatide in particular realized significant year over year and quarter over quarter growth. In Q2 2022, we realized 4.9 million of royalty on this drug versus our original expectations for less than 2 million. At the beginning of the year, we expected additional generic competitors for teriparatide by the middle of 2022, based on input from our commercial partner. That competition has not yet materialized, and as a result, the product is exceeding our expectations. Total capsules sales were 29.5 million for the quarter, and this compares with 62.5 million a year ago. As expected, and as we've discussed with investors, COVID-related capsule sales are much lower this year versus last year. Core capital sales were $3.3 million this quarter, in line with our expectations and on track to meet our expectations for the year. Contract revenue in Q2 2022 was $9.9 million. This is lower than last year's second quarter of $13.6 million, but as investors know, contract revenue fluctuation is mostly due to timing of partner events and related milestone payments. Our GAAP EPS for the quarter was a loss of $0.05. Net loss for the second quarter of 2022 included a $1.9 million net non-cash loss from changes in the value of Ligon's public company holdings. Adjusted diluted EPS for the second quarter of 2022 was $1.03, and this compares with $1.63 in the second quarter of 2021. If we remove COVID-related capsule sales, our adjusted diluted EPS for Q2 2022 was $0.34 compared with $0.76 in Q2 2021. With our core revenue nearly equivalent in Q2 2022 and Q2 2021, the decrease in adjusted and diluted EPS is largely driven by additional omnibus expenses as that business scales up in preparation for the spinoff. In the quarter, we repurchased $62 million in principal of our convertible notes at a 3.4% discount to par for $60 million in cash. As of June 30th, 2022, we had cash, cash equivalents, and short-term investments of about $148 million. Turning now to guidance, we're raising our 2022 revenue outlook for the combined business. We now forecast 2022 royalties to be in the range of $62 to $66 million, up from our previous outlook of $55 to $60 million. This increase of about 10% for the full year is driven mostly by upside from Terra Paratide and Kyprolis, offset by slightly lower full-year contribution from vaccine advance. As mentioned earlier, Kyprolis is doing well and hitting all-time highs for quarterly revenue. Teriparatide is riding strong commercial trends because additional generics have not entered the market yet. We're now assuming the other generics will enter in early 2023. If that does turn out to be the case, we would anticipate sales for teriparatide next year will be lower than 2022. As for vaccine advance, a very promising vaccine with impressive new data announced over the past few months. It's now positioned to launch for the pediatric age group by early next year. Merck is our partner, and they will compete against Pfizer in this $6 billion vaccine market. The pediatric population represents 75% of the market, and Merck's approval in that population coming more than a year ahead of Pfizer, we expect that that will produce or help drive royalties in the future. We now expect capsule material sales to be in the range of 55 to 60 million, up from our previous outlook of 40 to 50 million. We continue to expect approximately 17 to 19 million of our capsule sales to be core capsule sales, and the balance to be capsule sales for COVID. We affirm our forecast for contract revenue to be in the range of 52 to 62 million. These guidance components result in total revenue for ligand of 169 to 188 million, which is up from our previous total of $147 million to $172 million. Within the revenue numbers I just provided, we expect $35 to $45 million to be attributable to the OmniAd business, principally in the contract revenue line. And with respect to the COVID-related Capsule sales, our updated guidance reflects the sales already completed year-to-date, as well as sales that are completed or expected to be completed in Q3. We're also raising our guidance for the Ligand business excluding OmniAb and COVID-related Capsule. For that portion of the business, we now expect revenue to be 97 to 104 million, up from 90 to 100 million previously, and adjusted diluted EPS to be $1.80 to $2.05, up from $1.50 to $1.80 previously. We estimate that the combined earnings for both COVID-related Capsule and OmniAb for 2022 is about 60 cents to 95 cents per share. Therefore, for consolidated reporting for the year, our outlook has increased to $2.40 to $3 in adjusted diluted EPS, up from our previous range of $1.70 to $2.20. One final note on the guidance I just provided. We've excluded from all these numbers two large milestone payments that may hit in late 2022 or early 2023. Ligon is owed $15 million upon the approval of SPAR sent in, OmniAb is owed 25 million upon the first commercial sale of teclistamab. Given the size of these payments, it's impossible to build a range around their achievement, and as such, we've simply excluded them from guidance since we do not know with high confidence exactly when those payments will be achieved. Just as a reminder, I'd like to direct our listeners to our second quarter earnings press release issued earlier today and available on our website for reconciliation of our adjusted financial results to the GAAP results I talked about today. Now I'll turn to providing a few updates on some of the key portfolio programs that are remaining with Ligand following the OmniAb spinoff. We're continuing to monitor the progress of Parsentin as we approach the November 17th Bidoof Day for IgA nephropathy. We expect a launch early next year and expect Parsentin royalties to be a major driver of growth for us. Travere provided a regulatory update last week when they announced plans to submit their conditional marketing authorization application with their partner V4 Pharma for IgA nephropathy in Europe, with a review decision expected in the second half of 2023. Kevere also now plans to pursue a traditional approval of sparsantan for FSGS pending completion of the phase three duplex study, which is expected to conclude in the first half of 2023. In June, Merck announced the FDA approval of vaccine advance for infants and children six weeks through 17 years of age. Subsequently, the CDC's ACIP voted unanimously to provisionally recommend use of VaxNuVans as an option for pneumococcal vaccination in infants and children. VaxNuVans is a 15-billion pneumococcal vaccine utilizing Ligand's CREM197 vaccine carrier protein that's produced using the Pelican Expression Technology platform. Additionally, Merck announced positive results from a Phase 1-2 study evaluating B116, which is their investigational 21-billion pneumococcal conjugate vaccine utilizing Ligand's CREM197 vaccine carrier protein. Merck stated, sorry, started a broad phase three program for V116 in July 2022. Lastly, on the program front, Novant announced positive results from their B-simple IV pivotal phase three study for SB206 in patients with molluscum. At the end of 12 weeks, 32.4% of patients in the SB206 group achieved complete clearance of lesions compared with 19.7% of patients in the vehicle group. Novam plans to file an NDA for this program, SB206, later this year. With that overview, I'll turn the call over to Matt Ford to provide additional details on the OmniAb business and strategy. Matt?
spk04: Thanks, Matt. I'm going to focus my comments this afternoon on our OmniAb platform as we continue to prepare for the business to become an independent, publicly traded company in the fourth quarter. We're making good progress on our operational and strategic goals as we prepare to become a standalone public company. And as John said in his opening remarks, the path we are on to separate OmniAB into its own company is exciting and momentum is building to further drive growth and expansion of the company post spin. Recent events and input from our partners validate our plans. Our team continues to be highly focused on value creating areas that include gaining new partners, supporting existing partnerships, and expanding the utility of the OmniAb platform. Just as some background for those on the call who might not be as familiar with it, the OmniAb Discovery Platform provides our partners with access to diverse antibody repertoires and cutting-edge, high-throughput screening technologies designed and operated with the goal of enabling the discovery of next-generation therapeutics. At the heart of the OmniAB platform is the biological intelligence, or what we call BI, of our proprietary transgenic animals. Multiple species of animals have been genetically modified to generate antibodies with human sequences that facilitate the efficient development of human therapeutic candidates. Within OmniAB, we also have extensive capabilities centered around ion channels and transporters. We view these as differentiated capabilities for viable target-to-lead delivery and particularly for difficult and high-value ion channel targets. These capabilities were established and built around small molecules and have clear potential in multiple formats and modalities. In addition, these differentiated core capabilities can provide novel reagent generation, proprietary assays, and in silico capabilities that support partner discovery programs and can be accessed when pursuing ion channels and transporter targets in a variety of approaches. Our mission within OmniAB is to enable the rapid development of innovative therapeutics by pushing the frontiers of drug discovery technologies. We work to achieve this by enabling the discovery of high-quality therapeutic candidates and by being the partner of choice for pharma and biotech companies. We are very proud of the role that we play within the industry and the contribution that we make to the discovery of therapeutics to improve human health. A significant value driver and differentiator for OmniAB is that our team and technology can be easily inserted 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 in further improving what we see as a best-in-class, biologically-driven discovery technology platform. Currently, more than 60 partners have access to OmniAb-derived antibodies, and more than 270 programs are being actively developed. And this number continues to grow as we add new partners and as existing partners, leverage our platform for more programs in new and exciting ways. During the second quarter, we added four new OmniAB partners. Today, there are two NMPA-approved drugs that were derived from our OmniAB platform, and another one that is under review at both the FDA and EMEA with action expected in the coming weeks. Also of note, a partner very recently entered the clinic with the first antibody drug conjugate, or ADC, that was discovered using our platform. We're pleased with the progress and are excited to deliver Ligand shareholders their shares in a new standalone company as we expect the completion of the spin in the next few months. And with that, I'll turn the call back over to the operator for questions. Operator?
spk01: We will now begin our question and answer session. If you have a question, please press 0, then 1 on your touchtone phone. If you wish to be removed from the queue, please press 0, then 2. If you're using a speakerphone, please pick up the handset first before pressing the numbers. Once again, if you have a question, please press 0, then 1 on your touchtone phone. We have our first question from Larry Solo with CJS Securities.
spk06: Hi, good afternoon. It's Pete Lucas for Larry. In terms of Kyprolis sales, grew very nicely in the quarter. Just wondering how much of this growth is being driven by second-line therapy in combo with Darzalex?
spk07: Thanks for the question. Yeah, no, really nice quarter out of Kyprolis. Amgen, obviously, with record sales in their territories. Ono in Japan had good sales, not quite a record quarter, but very nice sales for that region. And the China sales we're estimating was kind of in line with a second quarter growth. So good sales all around. We obviously don't get details on exactly what line of therapy is driving or exactly where the sales come from. But anecdotally, we're hearing sort of what you're hearing that Increased use with DARS-Lex and the broader data set that Amgen and others have been putting out is what's driving some of that revenue growth.
spk06: Very helpful. Thanks. And just one more quick one from me, switching gears here. Can you give us an update on the progress with VK2809 therapy for fatty liver disease? I know the enthusiasm has waned a bit around this one, but just would love to get an update on where we stand if there is one to provide.
spk07: Yeah, sure. Obviously, the program you're talking about is the Vikings TR Beta NASH program that has been progressing significantly well. Obviously, the trial had some delays through COVID with enrollment and otherwise. We're working towards their data, which they expect next year. And then following that, obviously, they'll likely have to run a pivotal trial to get to the endpoint. All signs so far are trials on track and data should be solid.
spk06: Great. Thank you very much. Great. Thank you.
spk01: We have our next question from Matt Hewitt with Craig Hallam.
spk02: Good afternoon. John, you had given us the three priorities for RemainCo. And I'm just curious, given the environment that we've kind of weathered here so far this year, I'm just curious if that's created any interesting opportunities from an acquisition standpoint as you look to bolster the royalty rights portion of your business.
spk05: Yes. Well, it certainly has. We've talked about our business model, and we're dedicated to technology necessary to discover, develop drugs. but also royalty acquisitions, finding companies that need more capital support, doing our diligence and coming in. We excel in thriving markets when there's tremendous capitalization and fund flows. We've seen the last decade tremendous inbound interest to license to access our technologies, but obviously there's been a pretty significant contraction the last year and a half. We're reading over 20% of companies, public biotechs, have less than one year of cash. And so this is creating an opportunity. Quality companies are on the wrong side of their stock price in desperate need of cash. So it's creating more inbound overtures to partner on some late-stage assets from an investment perspective. From an acquisition, you know our history. We've acquired a handful of what we call busted biotechs, good companies with IP and data. But again, they really got stuck from a market timing issue. We're being more selective about doing those sort of acquisitions. We're good at it. We really have demonstrated a great track record of securing high quality assets for very attractive values. But we want to be disciplined in terms of how much infrastructure overhead and cost we're bringing on. One final comment I'll make is we are highly engaged. We are throttling our activity a little bit with an eye towards completing this spin out. And we do believe we're very close. We haven't lost opportunities. But practically speaking, we want to make sure that we've got a clean story. There's no other public proxy issues that might with closing this very important transaction for all of our shareholders.
spk02: That makes complete sense, and thank you for the details there. Maybe one more question. As far as the Pelican platform is concerned, obviously you've had some really good success initially out of that program, but I'm just curious, what would be the next one or two opportunities coming out of the Pelican opportunity? Thank you.
spk07: Thanks, Matt. Yeah, the Pelican platform has been performing extremely well. Obviously, four major programs that we talk about publicly on the calls and in our disclosures with the Merck Vaccine Advance Program, Jazz Rylase, the Alvagen Terra Paratide Program, and Numacil from Serum Institute of India. There's additional programs from Serum Institute of India, one in meningococcal vaccine. And then there's additional programs from Jazz that they're working on that are follow-ons there. And obviously I mentioned today the V116 program from Merck. All of those we expect will be kind of the next crop of growth drivers for the portfolio. And behind that, there's a handful of existing and new license deals that the team has done over the course of the time before we own the business as well as since we've owned the business that should fuel the growth for years to come.
spk02: That's great. Thank you.
spk01: Thanks, Matt. Our next question is from Bruce Edmund with Morgan Stanley.
spk00: Yes, good afternoon. My question is simple. A couple of years ago, we came out with a product for postpartum depression. I've never heard anything in your calls as to how that is progressing. Can you give us an update on that, please?
spk07: Thanks, Bruce. Yeah, there are actually a couple programs for postpartum depression in the portfolio. One was from a company called Sage Therapeutics that the program has now approved. It's called Zorresso. It's had limited commercial success, but has done about a million and a half in revenue, a quarter for the last several years. As the program's commercialization has been limited to in institution or in hospital delivery programs. A second partner called Marinus has a program called Ganaxalone or IV Ganaxalone, which was recently approved orally, but the IV formulation is still in development, and that is being studied in that disease as well. So both those are in the portfolio and progressing.
spk00: Okay, thank you.
spk07: Thank you.
spk01: We have no further questions. I will now turn the call over to Mr. John Higgins for closing remarks.
spk05: Thank you. I appreciate the turnout, the questions. We are delighted with our performance this year. We're watching the equity markets. It's a challenging environment, but our execution has been superb. And I know it's not lost on our largest shareholders who spend maybe more time in meetings with us, but We're effectively running two companies now, two public companies. We have the management teams built out, the infrastructure, and both companies are really very far along to be run independently. We continue to execute on licensing, new deal making, obviously reporting out on partner events, but the momentum we have with the overall company, but specifically the momentum we have into this spin out, we feel really, really good about. So thanks for your patience. It's been a long journey the last year or so as we've worked up our planning and had our process communicated. But we feel we are close, and we are really excited about all aspects of our business right now. Thanks for joining the call. Public in-person conferences are coming back. We will be live at some events this fall, but the next one coming up is in about five weeks, the HCW conference, the middle of September. So if you sign up for that, we'll see you there. Thanks, everyone. Bye-bye.
spk01: Thank you, ladies and gentlemen. This concludes our conference. Thank you for participating. You may now disconnect.
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