Ligand Pharmaceuticals Incorporated

Good evening. My name is Rob, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Ligand Pharmaceuticals fourth quarter 2022 earnings webcast. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, again, press the star one. Thank you. Simon Latimer, Head of Investor Relations. You may begin your conference.

Thanks, Rob. Welcome to Ligon's fourth quarter of 2022 Financial Results and Business Update conference call. Speaking today for Ligon will be Todd Davis, CEO, Tava Espinoza, CFO, and Matt Kornberg, President and COO. 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. Additional information concerning risk factors and other matters concerning LIGIN 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 Todd Davis.

Thank you, Simon. Good afternoon, everyone, and thanks for joining our fourth quarter 2022 earnings call. For those who didn't get a chance to listen to our recent Analyst Day event in December or meet at the JPMorgan conference, I am Todd Davis, the CEO of Ligand. I'm delighted to have the opportunity to address you all today and share some of my thoughts on the company's performance and our future prospects. Though I had been on the board for many years, over the past two months, I've been getting up to speed on the internal workings of the company, In meeting with the team, working with the board of directors, and spending time with a number of our shareholders, I am confident that the future of Ligand is a bright one. Our initial and primary goal for the company is to maintain a laser-like focus on financial performance. To that end, in 2022, we've had a strong finish to the year. Key components to highlight, royalty revenue grew by nearly 50% to $72.5 million, compared to 48.9 million in 2021. Profitability in 2022 of $2.44 in adjusted diluted EPS from our core continuing operations compared to 235 in adjusted diluted EPS in 2021. Including sales of cap dissolve for COVID, the adjusted diluted EPS of 479 in 2022. Our balance sheet ended the year with over $200 million of cash and liquid investments. We successfully completed the spin-out of OmniAB, enabling Ligand to refocus on its core strengths and original value proposition. And last week's approval of Sparsetin in partnership with Travere Therapeutics adds to our royalty-generating asset portfolio and positions us for strong continued growth. TAVO or CFO will provide more 2022 financial results as well as our increased 23 financial guidance. The following framework may be useful to share in explaining why Ligand is situated in a unique and advantageous segment in our ecosystem and how we might think about further building the business. This involves two tactical approaches in general. One is licensing our existing platforms and portfolio assets to generate as many non-accretive product loyalty opportunities as possible. And two, investing capital directly into clinical stage development assets with superior risk-reward profiles. For framework today, number one, I would say is the capital markets dynamics enable this opportunity. There is a significant imbalance between the demand for alternative capital and the supply of alternative capital like project finance. This capital can be invested in specific programs and assets versus companies. This offers partners more flexibility in how they finance their business. Companies are increasingly looking for alternative forms of financing, and market inefficiencies allow us to be highly selective and pick programs with the highest return characteristics. Under project finance, we can provide capital for clinical development projects, and rather than receiving debt or equity securities in return for our capital, we draft customized royalty contracts that accommodate our partners' needs but offer us as an investor unique advantages as well. Number two, we're focused on execution. We will be partnering with clinical development companies to accumulate mid- to late-stage clinical royalty assets. Our goal is to accumulate royalty interests, and we can do that in multiple ways. One, we can partner existing technology platforms. Two, we can implement project finance. Three, we can identify acquisition opportunities of existing royalty contracts or companies with attractive royalty assets. And in terms of new platform acquisitions, we might do that, but we'll only look at operating light models with high operating margins that is likely to be sporadic and infrequent, but can be very accretive when found and achieved. Also, we will target superior risk-adjusted returns on assets that address high unmet clinical need, and we will leverage our 100-plus partnerships and the experienced pharmaceutical and scientific management team that we have to originate, diligence, and execute on deals and investments around these high-value clinical development programs. Number three, our internal focus will be on near-term financial performance and late-stage clinical pipeline growth, which equals future financial growth, as well as adding talented people. We will be refocusing R&D, making the company leaner overall while adding selective talent that can execute on deal origination, diligence, negotiations, et cetera. And we will expand our external focus and networks by working more closely with the board and adding scientific, regulatory, and other talented advisors. We will also be institutionalizing our deal process and origination, diligence, prosecution, and portfolio management with special emphasis on proactive origination. This will add more high-quality assets to our mid- to late-stage clinical pipeline, which, again, we believe equals future sustained growth. In terms of number four, portfolio management, we want to maximize our existing rich asset base. Sparsentin will be our seventh large royalty. It was acquired via M&A, outlicensed to Travere, and became a development success. That was the result of M&A, followed by keen portfolio management. In 2023, we expect 10 major catalysts on Ligand's existing late-stage pipeline. And we will also be leveraging our existing relationships within the portfolio to originate new opportunities and even attract follow-on investments with existing partners. So to summarize, 2022 was another strong year of financial performance. Under my leadership, we will continue to focus on measures to make the company leaner, while adding select talent to focus on the origination and execution of new deals. These deals are intended to grow our late-stage clinical development pipeline of royalty assets, which in turn will create sustainable future growth. Next, our financial performance will be reviewed by our CFO, Tavo, and that will be followed by a review of the portfolio operations by our President, Matt Kornberg. Tavo?