Ligand Pharmaceuticals Incorporated

Q1 2023 Earnings Conference Call


spk00: Thank you for standing by. My name is Kayla Baker and I will be your conference operator today. At this time, I would like to welcome everyone to the Ligon First Quarter 2023 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 would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star and one. I would now like to turn the call over to head of investor relations, Simon Latimer.
spk07: Thanks, Kayla. Welcome to Ligon's first quarter 2023 financial results and business update conference call. Please note that there are slides accompanying today's call. These can be accessed by going to the investor section of our corporate website where you can find the link to the webcast on the IR calendar page. Today, when discussing our financial results, 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, and the impact of the COVID-19 pandemic. Please review our disclosures about forward-looking statements here on slide two. Additional information concerning risk factors and other matters concerning LIGIN can also 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 on our earnings release issued earlier today. Speaking today for Ligon will be Todd Davis, CEO, Tava Espinoza, CFO, and Matt Kornberg, President and COO. I'd now like to turn the call over to Todd Davis.
spk05: Thank you, Simon, and good afternoon, everyone. Thanks for joining our first quarter 2023 earnings call. 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. I've been in the CEO role for about five months now, and as I have immersed myself in the running of the business, I'm more excited than ever about the prospect of advancing Ligand to the next stage of growth. Our focus is and has been to create a diversified portfolio high margin royalties producing superior risk adjusted returns. Ligand has consummated 19 deals over the last 15 years with a significant and positive track record of achieving this objective. As you can see in slide three, those deals have created our current strong balance sheet and a large portfolio of biopharmaceutical assets including the seven commercial-stage products that are delivering our current growing financial performance. It also includes multiple key late-stage assets that will soon feed into the commercial-stage asset base to further drive growth. Beyond that, a farm team of 80 earlier-stage assets will contribute to our later-stage pipeline. Things like Filspare and our Viking Nash programs came from this group. This bolsters our long-term growth. Matt will cover some of these more specifically during our portfolio update. Also, our current platform technologies, Captozol and Pelican, continue to contribute to our business by adding new license deals with new partners. And finally, our current focus on organizational changes and scaling of deal execution is intended to further accelerate the growth of our late-stage pipeline. This is a proven strategy that requires differentiated thinking and a premier investment team. Turning now to slide four, we have had excellent portfolio development and financial performance to start the year. Total revenues for the first quarter of 2023 were $44 million, driven by 28% growth in royalty revenue. We finished the quarter with $283 million of cash and cash equivalents. During the first quarter, we sold a portion of our shares held in Viking Therapeutics at a substantial gain, which added nicely to our cash balance. Tavo will give more details on this in his discussion. As previously described, we have a $77 million convertible note that we will pay down in May, at which point we expect to be debt-free with over $200 million of pro forma cash available to invest. Another key feature we are striving to improve as part of our business strategy is to have a very lean operating structure. We started the year with cash expense budget of $46 million and have executed on expense reductions to bring that down to $43 million. This was achieved while scaling up the business operation for accelerated growth and expanding the execution capabilities. We will continue to look for efficiencies in the business to ensure we are as lean as possible while retaining core operating and deal capabilities. Meanwhile, we have experienced very positive momentum from our existing product pipeline. Among our pipeline of late-stage royalty products, the accelerated FDA approval for Veer's PhilSparry in February brings our portfolio to a total of seven major commercial royalties, that we expect will drive significant growth for years to come. We believe we have an opportunity to further add to this growth from our existing royalty portfolio through multiple tactical approaches as laid out in slide five. First, in project finance, Ligand is positioned in a unique and advantageous segment in our ecosystem. We see a significant imbalance between the supply and demand of capital for clinical stage programs. Biopharma companies are increasingly looking for alternative forms of financing, which has only accelerated due to the continuing challenges in the equity capital markets. This is especially true for smaller public and private companies. We can provide capital to these companies in return for royalty contracts on their pipeline products via project finance. The second approach is royalty monetization. In addition to providing development capital, we see a significant opportunity to purchase existing royalty rights owned by inventors, universities or companies, which would further add to our portfolio of royalties. Ligand is ideally positioned to capitalize on these opportunities as well. The third approach outlined here is M&A. As an operating business, We have a successful track record of acquiring entire businesses, restructuring operations while we identify companies with undervalued royalty assets or partnered programs. Finally, we will also look at acquiring new platform technologies. We have a significant and successful track record of acquiring technology platforms, enjoying the economic benefits of the existing partnered pipeline and royalty assets, and generating new royalties by operating those platforms. Our SIDEX platform is an example of this approach. In this area, we are focused on mature platforms that have significant products in the clinic and offer high operating margins as an operating business. Turning to slide six, I'll cover some of our key goals and progress to ensure we are executing at scale. The first priority relates to scaling our systems for origination and deal making. We are in the process of institutionalizing our deal process on how we originate, negotiate, and execute transactions. The goal here is to increase investment throughput and diligence sophistication. Reviewing a larger number of opportunities should allow us to be more selective and increase the number of high quality assets in our mid to late stage clinical pipeline ultimately resulting in higher growth. This requires premier talent in pharmaceutical investing and dealmaking. As part of this expansion, we made an important recent addition to our deal team with the appointment of Paul Haddon, a Senior Vice President of Investments and Business Development. Paul is a highly accomplished expert in royalty financing, as he was previously spent 15 years at Healthcare Royalty Partners, where he was instrumental in their growth. We're truly excited to have someone with Paul's experience join our team, and I want to take this opportunity to formally welcome him to Ligand. Additionally, we are in the process of establishing a physical presence in Boston. This will help raise awareness of Ligand in Boston, a major life sciences hub. We will also have greater access to the academic community, scientific centers of excellence, and the associated talent. The Boston office will be a strong complement to our current presence in California and Kansas. To summarize, Ligand had a successful and productive first quarter. The company is growing rapidly based on its existing pipeline of products, royalty assets, and the multiple growth catalysts. We expect to sustain and accelerate that growth by creating new pipeline assets through providing capital and technology to promising late-stage clinical partners. Now, Tavo, our CFO, will provide more details on the Q1 financial results, as well as our increased full-year 2023 financial guidance. Following Tavo, our president, Matt Kornberg, will review progress in our portfolio operations and growth drivers. Tavo?
spk02: Thanks, Todd. As Todd mentioned, we kicked off 2023 with a strong first quarter with continued impressive year-over-year royalty revenue growth and major positive news flow from our partners. Total revenues for the quarter were $44 million, which represents a 21% increase over the prior year quarter and a 44% increase when excluding contributions from the COVID Capasol sales in the prior year period. Royalty revenue increased 28% to $17.2 million from $13.4 million a year ago. This growth was driven by strength in Amgen's Kyprolis, which once again reported record quarterly net sales, as well as contributions from Merck's Vax Nubans and Jazz Pharmaceuticals' Rylades, as both products continued successful launches. Capsasol sales were 10.6 million this quarter versus core Capsasol sales of 6.2 million in the same quarter of last year, with the difference due to the timing of customer orders. Total Captisol sales in the first quarter last year were 12.1 million with 5.9 million of that related to COVID-19. We did not have any COVID-19 related Captisol sales this quarter. Contract revenue in Q1 2023 was 16.2 million versus 10.9 million last year. The increase is driven primarily by the 15.3 million milestone earned upon the FDA's accelerated approval of Trevier-Fosfari. As Todd mentioned, we are focused on maintaining a lean operating structure and managing cost to maximize our operating margins. In Q1, aggregate G&A and R&D operating expenses decreased by 17% when compared to the prior year quarter. G&A expenses in the first quarter of 2023 were 10.9 million versus 11.9 million in the first quarter of 2022. The decrease is primarily due to a decrease in head cap related expenses, as well as lower legal and accounting costs post the OmniApp spin-out. R&D expenses in the first quarter of 2023 were 6.7 million versus 9.2 million in the first quarter of 22, I'm sorry, 2022, with the decrease attributable primarily to decreased headcount-related expenses. Gap net income from continuing operations in the first quarter of 2023 was 43.6 million, or $2.43 for diluted share, And this compares with a gap net loss from continuing operations of 12.9 million or 70 cents per share in the prior year quarter. The increase in gap net income is largely driven by a 12.1 million increase in income from operations, a 20.5 million gain from the sale of biking therapeutic stock, as well as a 32 million increase in unrealized gains relating to the increase in value of our remaining holdings in biking stock. Adjusted diluted EPS for the first quarter of 2023 was $2.28, and this compares with $0.64 in the first quarter of 2022. Turning to the balance sheet, at March 31, 2023, Ligan had cash and investments totaling $283 million and approximately $77 million in outstanding convertible debt, which we intend to repay in cash when it matures later this month. Following the maturity of our notes, we expect to be debt-free and with over $200 million of cash and liquid investments available to invest. Turning now to guidance, for 2023, we expect capital sales of $21 million, contract revenue of $25 million, and today we're raising our royalty revenue guidance by $4 million to be in the range of $78 to $82 million, and therefore now expect total 2023 revenue to be in the range of $124 to 128 million. Additionally, today we're increasing our 2023 earnings per share guidance to now be in the range of $4.60 to $4.75, which is an increase of $1.30. The increase in revenue and earnings guidance is attributable to the strength in royalty revenue and the realized gain from sales of Viking Therapeutics common stock. As a reminder, I'd like to direct listeners to our first quarter earnings press release issued earlier today. which is available on our website for a reconciliation of our adjusted financial results to the GAAP results I talked about today. I'll turn the call over to Matt to provide an update on the business.
spk09: Thanks, Thabo. Today I'm going to review some of the highlights of our current key revenue drivers that led to the impressive first quarter results and also provide more details for investors on the way we're reviewing the exciting long-term growth prospects for Ligand. Over the course of the last 15 years, Ligand has aggregated a portfolio of over 100 partner programs, some of which are approved and commercialized, while others are in various stages of development or regulatory review. On slide 11, we list 11 products that are currently approved or in phase 3 development in a traditional pipeline format. We focused a lot of the dialogue with investors over the past 12 to 18 months on these programs. Today, I'll frame the way we're thinking about the total portfolio and how it will drive the long-term growth for Ligand. Slide 12 is a way to look at the important categories of growth drivers that Todd outlined in his comments. We see these as the principal ways that Ligand will drive shareholder value. Our current commercial portfolio is over 25 programs, but seven of those are significant enough that investors should focus on them in the near term. There are seven key pipeline programs that we see as potential drivers of growth over the medium term, one of which is an expansion of an already approved program, and six of which are new approvals. The farm team is a remainder of our existing portfolio, and it's comprised of over 80 programs that will continue to advance as partners move them ahead. We plan to highlight specific programs from this portfolio as they become nearer term or more prominent for LIGAN. Our platform technologies will continue to add new programs to the early stage portion of the portfolio, as they have been doing for years. And as Todd covered in detail, we'll continue to look to add to the portfolio through new deals across a number of different strategies, including M&A, project financing, and more. Turning now to slide 13, this slide provides details about the key commercial programs currently driving our growth. I'll touch on a few of the key highlights from the first quarter. As I mentioned on the last call, the biggest news from the first quarter was the PhilSparry approval in February. Trevere received approval for or Filspare in IgA nephropathy and immediately began marketing the drug. We will earn a 9% royalty on sales and we expect that this will be a significant driver of long-term growth of our . IgA nephropathy affects an estimated 150,000 patients in the U.S. and a similar number in Europe. Approximately 30,000 to 50,000 of the U.S. patients are expected to be addressable under the indication approved via the accelerated approval. Philspari is the first non-immunosuppressive treatment approved for this indication. Consensus cell-side analyst estimates for Philspari peak sales in IgA nephropathy exceed 1 billion by 2030, which, if that's achieved, would make Philspari Ligand's most significant royalty generator. For 2023, Travere's management has continued to point to the existing consensus estimates from the research community of about 35 million. Trevere indicated that the initial ramp will be gradual and that the full IgA nephropathy protect trial data, which is expected in Q4 of this year, should be a catalyst for a change in the label and a ramp in the sales. Just before this call started, we got a look at the press release, and Trevere reported 3 million in sales for their first six weeks, and they disclosed 146 new patient forms had been received, so a good launch. Also related to sparsentin, earlier this week, Travere announced that the pivotal data from the phase three duplex study in FSGS missed the EGFR endpoint. Secondary and top line exploratory endpoints all trended favorably, and a reduction of proteinuria was sustained through 108 weeks of treatment. Travere plans to engage with regulators to explore a potential path forward for sparsentin as a treatment for FSGS in both the U.S. and Europe. and we'll keep investors updated as more information becomes available for that indication. Another highlight from the first quarter was Kyprolis. Kyprolis is marketed by Amgen in a majority of the countries around the world, as well as by Ono in Japan and by Beijing in China. This is an important drug for treating multiple myeloma. In Q1 2023, Amgen reported record quarterly revenue of $358 million, and the product is on track to easily exceed the $1.3 billion of global sales realized in 2022. Rylase, marketed by Jazz, is a recombinant erwinia asparaginase used as a component of a multi-agent chemotherapeutic regimen for the treatment of children and adults with ALL or LBL. This product continues to do extremely well in a market that was historically constrained by supply issues. In Q4 of 2022, Rylase also reached a record level with 81 million in sales. We look forward to Jazz's Q1 commercial report later this quarter. VaxNuVance is a 15-valiant pneumococcal vaccine utilizing Ligand's CRM197 vaccine carrier protein produced using the Pelican Expression technology platform. Merck is now marketing VaxNuVance in both the adult population and the pediatric population. Merck announced 106 million in VaxNuVance sales in Q1 2023, and commented that their strong ongoing pediatric launch was tracking with their expectations. We agree, and we see the first quarter results as a strong indication that the product is tracking to exceed the 2023 consensus sales estimates of about 300 million. Lastly, on this slide, I'll just mention that while we report our cap to sell sales on a separate line from our royalties, we internally think of this product line as another of our major drivers of revenue, profitability, and growth. At our 2023 current guidance level of $21 million for revenue, the gross profit from Captisol should equate to about $13 million, which would be in line with our largest current royalty other than Kyprolis. Slide 14 lists the seven programs that we currently view as key pipeline programs that will drive revenue growth in the way following our currently approved programs. As mentioned, one of the programs is an expansion of a currently approved program. Jazz Pharmaceuticals filed for approval of Rylase in Europe in May of 2022, and therefore we would expect to see a decision from the EMA later in 2023. In terms of new products and product approvals, Verona is developing encephentrine and COPD and announced positive top line results from both of its phase three enhanced trials. The company expects to submit their NDA for the first, in the first half of 2023. This is a very large market, and estimates for the program are in the range of $500 million to $1 billion annually. Novan has already submitted their NDA for Berdazemir gel and the PDUFA date, and received a PDUFA date of January 5, 2024. The programs at Palvella, Marinus, Viking, and Sermonix are all expecting data this year that we think will be validating for the programs and their probability of becoming approved drugs. Finally, on slide 15, I'll cover the drivers of longer term organic growth at Ligand. First, we have a group of programs that we're calling our farm team. This is the 80 plus programs that are in the portfolio already that we don't highlight for investors day to day. Many of these programs are disclosed in our 10K, but generally we don't talk much about them. Like any biopharma company portfolio, our expectation is that many of these programs will advance to the point where they join the key pipeline programs that we do regularly highlight and discuss. As we identify programs from this group that are becoming more promising, we'll add them to our key pipeline charts and discussions. The other driver of long-term organic growth is the company's platform technologies. Captisol and the Pelican Expression Technology platform are constantly attracting new partners and signing new license deals. While some of these programs could quickly transition into key pipeline programs, Most of these deals will be for earlier stage programs that take several years to mature into important contributors to the near-term LIGAN growth story. We'll continue to announce the new license deals that happen from these platforms, but then the programs will join the farm team and mature as part of the broader portfolio before we highlight them further. We're excited about the prospects for the overall growth of the portfolio and look forward to updating investors on the progress across all these growth drivers on future earnings calls and at healthcare conferences. And now I'll turn the call back over to the operator for questions. Operator?
spk00: Thank you. At this time, I would like to remind everyone in order to ask a question, press star then the number one on your telephone keypad. Our first question comes from the line of Larry Salo with CJS Securities. Your line is open.
spk06: Hi, good afternoon. It's actually Ligia Gota for Larry this evening. Just starting with the Viking stock that you sold during the quarter, can you talk to the rationale behind the timing of those sales and then how we should think about your intentions for the rest of your holdings there?
spk03: Sure.
spk05: A little hard to hear, but I think this was regarding the sale of Viking stock. I would just start off by saying that we are, this is Todd, sorry. But we are big believers in Viking, and we retain a significant shareholding. For us, equity is an important investment, but it's also an investment tool that enables us to support partners and enable deals like we did with the original creation of Viking. The key and strategic economics for us are contained within the license agreement in the form of royalties and milestones, which we view as longer-term assets. So therefore, equity for us is a source of cash, and we will sell it from time to time when we own it. This enables our key reinvestment strategy to further drive growth. And this is pretty consistent with what we've done historically, and we continue to hold on to the royalties in key programs like NASH.
spk06: Now, that's very helpful. One more just on... capital requirements in general. I think you had mentioned once you pay down the convert, you'll have about $200 million of net cash. And you've also spoken a lot about the various ways to deploy that capital, including M&A. What other liquidity is available to you all after eliminating the convert? And do you foresee needing additional financing beyond the $200 million of cash and whatever you're going to generate to fund all of your goals here?
spk05: But I think we have significant access to the debt market still if we need it. But the $200 million plus capital that we have to invest should, I think, be more than adequate for our strategy over the next 12 to 18 months, at which point we'll reassess. We believe we have very good access to the capital markets, even in this environment, given our strong relative financial position.
spk06: Okay, great. I'll hop back in and let others ask some questions. Thanks.
spk00: And our next question comes from the line of Scott Henry with Roth Capital. Your line is open.
spk10: Thank you. Good afternoon. I'll start out with a big picture question for Todd, then get into a couple specifics. Todd, you've now been CEO going on 150 days, somewhere around there. I know one of your main drivers is to scale up dealmaking, and you've laid out how you want to do that. Can you talk about any other kind of near-term to mid-term initiatives you have, ways that you want to put your stamp on the business? I know you're on the board before, but any processes that you're looking at differently?
spk05: Yeah, I think that the company historically – has had an M&A orientation. They've done very well with that and created significant returns. And so the scaling up of the business development team is really you're talking about a handful of new hires that are very capable. We've done most of that at the senior ranks, and we have a handful of business analytic science and ClinReg evaluation folks that we have open positions on. And in the medium term, I think we're expanding. Although we've done almost all of these formats historically, we have not done them consistently. And I think what we want to do is scale the business development and investment side of this so that we can consistently originate novel deals on high value clinical products with a very capable clinical development partners. That's really the objective. That takes networks, execution, senior relationships, and capital. And that's what that team is going to be focused on. We're already executing on that strategy. We have about $700 million in asset opportunities on late stage pipeline that we're looking at, assessing, et cetera. And it's working its way through our pipeline. So that's where we are. We have a ways to go on the organization, but a lot of it's been achieved. And we're executing on the deal front now, looking at several deals that are kind of at the mid-stage of the deal process.
spk10: Okay, great. Thank you for that color. Just a couple of specific questions. First, the royalty guidance went up about, I think, $4 million. Could you talk about what came in a little better than expected?
spk02: Yeah, the key driver there was Amgen's, again, reported record sales, and that's the key driver as we look at how that extrapolates over the year.
spk10: Okay. And, you know, I know it's not your product, Sparcent, and you're the partner, but you guys are pretty smart guys, so I'd be curious to hear what you think of the FSGS data and how that impacts I mean, really three things, the way I think of it is, one, how does it impact the approval of that second indication? Two, how does it impact if it's not approved off-label prescribing? And three, does it have any impact on the IGAN indication? I recognize it's not your specialty, but I'd be curious what your bullet points are on the topic, if you would like to share them.
spk09: Thanks, Scott. I appreciate you giving me some credibility for being able to have a view on this, but we'll give it our best. But just remind everybody that really what we're doing is facing all of our comments I'm about to make on public information. We don't have any information from Travere that's confidential. We only get the public information. With that said, we do have views on all that based on listening to their earnings call, their call disclosing the data, and then reading their press releases, et cetera, and just talking with our own scientists. In kind of, I'm not sure I'll answer these in the order that you asked them, but I guess first off, the opportunity, as I mentioned in my prepared comments, for IgA nephropathy is more than a billion on its own. Without FSGS, I mean, roughly, 30 to 50,000 patients at approximately $100,000, a little bit less, but that's kind of a three and a half to $5 billion opportunity where they'd fully penetrate that market, even as currently approved. Obviously, no one expects them to fully penetrate that market, but I think people still see that as a billion dollar opportunity on its own. In terms of FSGS as a potential approval downstream, And Trevir was pretty clear when they announced it, but they're still planning to discuss a path forward with both the U.S. and European regulators. Given the significant unmet medical need and the positive trends, even in the EGFR data, but also in the other top-line data and the strong signals of efficacy that they saw in other data points, all to us means that we'd expect that hopefully there's a path forward both in the U.S. and in Europe. And then lastly, kind of in terms of read-through of the FSGS fully mature EGFR data to the IgA nephropathy data, just to remind investors, both trials were essentially run where they got an interim look at proteinuria data and an interim look at EGFR data, and then the fully mature data in FSGS was what was reported recently. So, as characterized by Travere, it's important to remember the diseases are different. FSGS is a relapsing remitting disease versus IgG nephropathy is a continuously progressive disease when you're talking about EGFR. It's one reason that you might expect different results in IgA nephropathy than you saw in the FSGS when you're talking about the EGFR endpoint. Also, the study designs were different, specifically around the washout period from other medications that was done in the FSGS trial, which wasn't done in the IgA nephropathy trial. And then lastly, the active control arms in both studies, particularly in the FSGS study, performed much better than they were expecting. So it made the hurdle for statistical significance even higher in the FSGS trial than they expected. So taking all that together, the company seems very confident, and we're equally confident that the IG nephropathy readout will be just fine.
spk10: Okay. That was great. I appreciate that color on that topic. Final question, and it's a quick one. With regards to the Viking Gain, first, congratulations. It Nice when it works out that way. The question is, you know, if I want to pull that out of the quarter, I have to assume a tax rate. How should I think about it if I want to get a kind of a comparable number going forward and looking backwards?
spk02: Yeah, the tax rate on the Viking Games is going to be a little bit higher than the non-GAAP rate we've been applying to operating income. You can apply 22% to that, Scott.
spk10: Okay, great. Thank you for taking the question.
spk00: And our next question comes from the line of Matt Dwitt with Craig Holland. Your line is open.
spk04: Good afternoon. Thank you for taking the questions and congratulations to the strong start to the year. Maybe first one, Keptosol, very strong quarter. If I'm hearing you correctly, it sounds like there was maybe some orders that came in a little earlier than you had anticipated for the year. is that the case? And that's why you've elected to leave the $21 million number for the year. And then I guess the follow-up to that is how should we be thinking about cadence for the remainder of the year, uh, for the other, call it 10, 10 and a half million dollars.
spk09: Yeah. And Matt, um, uh, thanks for the question. Yeah, exactly right. The, um, the first quarter was quite strong compared to, um, the guidance for the year. And, uh, you hit the nail on the head. One of our larger customers ordered a significant amount of their expected orders for the year in the first quarter. As we always say on almost every quarter, these orders are lumpy. Customers frequently will move their order pattern around like this. We do think there's potential for some strength later in the year, but for the same reason that some folks accelerated orders this quarter, We don't want to raise the guidance before we're pretty certain that folks are going to finish off with stronger demand than expected for the rest of the year. So there may be some strength, but for now, we think it's most appropriate to leave it at the current guidance.
spk04: Got it. And then as far as the deal pipeline is concerned, you gave us a couple different data points of ways to look at that. is that, you know, given the environment that we're seeing right now, particularly with small pharma and biotech, um, company funding essentially drying up, is that creating, um, a lot of opportunities and given the size of your team, how are you, how are you finding or structuring, um, projects to, to dig into those opportunities and, and how should we be thinking about the cadence, um, of you signing some of these new agreements, um, you know, over the next couple of quarters, not only in signing the agreements, but then will you be looking at the opportunities themselves as far as, you know, okay, well, this one's going to have a phase three trial this year, this one will have a phase three trial next year. So you're kind of staggering the goalposts, if you will, on the other side.
spk05: Yeah, that's a good question, man. This is Todd. And I think, you know, in terms of the pipeline and I would just emphasize this is a strategy that works in a strong capital market environment. But you're right, in a challenging capital market environment where you have the issues with SVB, people that have debt having to refinance it at significantly higher rates, and then just the normal need for access to capital in biopharmaceutical industry with fewer debt and equity alternatives available, it is an especially robust and opportune time for us. And there's a pretty big void that we can fill right now. So I like the position that we're in as a result of that. I can tell you that although we are still building the team, as is mentioned, we have several capable people here and it's a bit of a fire hose right now. So the key is to be very selective on what you work on, which means high quality screen up front. So we're really looking at assets with very high clinical value, things that are within about at least four years of approval, that's typically phase two-ish or beyond, and that have significant evidence of safety and efficacy where we think we can obviously price these not only above our own cost of capital, but where we can price them in excess of the risk we're buying so that there's significant alpha that we're creating on a product-to-product basis. So this is a great environment for this. The cadence is I wouldn't want to commit to anything because when you're investing, you want to do it right, not fast. But there's a lot on our plates right now, and inevitably some of this will start to come to fruition over the next several months. The volume is pretty high in terms of what we're looking at, and there's a lot of very good assets out there. But importantly, you need a really good team on the other side. We're not in the clinical development business. So when we partner with somebody, we're also assessing the team, their ability to execute, et cetera. That's really important.
spk04: That's really helpful. Maybe one minor one, and then I'll hop back into Q. As far as the Riley's opportunity, does the EMA approval, would that trigger another milestone later this year?
spk09: No. I don't think we've disclosed specifically whether there's a milestone or not on the EMA around that contract, but there's typically very low milestones for this program outside the U.S. that may be triggered around that.
spk03: All right. Thank you.
spk01: And our next question comes from the line of Balaji Prasad with Barclays.
spk00: Your line is open.
spk11: Hi, good afternoon. This is Xiao on Foblogy. Thanks for taking our questions. Just a quick one on Kyprolis. And you have in the street currently, you know, modeled, you know, annual revenue of around like $1.3 billion to $1.4 billion for 2023, which will translate to around $40 million royalty revenue for Ligon. Do you think this is, you know, range within the ballpark of your estimates? Thank you.
spk09: Yeah, thanks for the question. This is Matt. I agree that's the same consensus we see for the Kyprolis revenues in that 1.3 to 1.4 level. Just a reminder, I mentioned in my prepared comments as well, but folks should aggregate both the Amgen sales the Ono sales, and then Beijing sales in China. So all three contribute, and we get paid a royalty on the aggregate sales across that. And in terms of the math, I don't know the exact number, but the exact royalties are disclosed in the Ks and Qs we present. So it's 1.5% on the first 250 million, and then it's 2% for the next 250, 2.5 for the next 250, and then 3% for everything over $750 million. Your math sounds about right, and there are a few adjustments from what they report to what we actually get paid on through currency changes and things like that. But for estimation purposes, it sounds like your math is pretty close.
spk11: Got it. Very helpful. Thank you so much. Thank you.
spk00: And our next question comes from the line of Joe Penginnis with H.C. Wainwright. Your line is open.
spk08: Hey, guys. Good afternoon. Thanks for taking the question. Todd, I wanted to ask about the evolution of your thinking around strategy here, especially since you took over, but, of course, you've been with the company for a while. Your initial comments had some nice breakout of how you're thinking about things, and the Q&A has touched upon it, but I guess I want to approach it from this way. Ligand obviously has a long history. So curious, based on all the different kinds of deals that you've done previously, what do you think some of the best performing deals have been with regard to structure, the fundamentals, the science, or what have you? And how are you looking to apply those learnings to the new deals going forward?
spk05: Great. Good question, Joe. The company historically has executed on almost every deal format I've mentioned, royalty acquisition, project finance, M&A, and platform acquisition. But it has been predominantly M&A that they've executed on. So M&A has created the majority of our returns. The company is very good at this. But I would just say that even in the M&A deals, really, The lens that we look through is it is the products that drive value. So you're really selecting the right products in these situations. We're very product and team focused. We look at platforms opportunistically, of course, but structure is a tool. And so M&A is one approach and really one structural approach, as is project finance, as is royalty acquisition, et cetera. And the more tools you have, the more opportunities you will have to get to high-quality teams and high-quality assets, which means you'll get more high-quality deals done and have greater growth. So that's the way we're looking at it and approaching it.
spk08: Appreciate it. Thanks a lot.
spk01: And there are no further questions at this time. Todd Davis, I'll turn the call back to you.
spk03: Thank you.
spk05: I want to thank everyone for joining our first quarter earnings conference call. What we are offering investors is high growth in the biopharmaceutical segment, but with a broad portfolio that mitigates the typical volatility and binary risk nature of drug development that is inherent in narrower portfolios. Instead, we are making these product by product investment decisions with the benefit of confidential information shared from our drug development partners. This gives us a significant information advantage in the aggregation of a broad portfolio of royalty cash flows where no single asset determines our fate. And with that, I'll turn it back to the operator and thank everybody for joining us today. Thank you.
spk00: And this concludes today's conference call. You may now disconnect.

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.