Ligand Pharmaceuticals Incorporated

Thank you for standing by. My name is Brian, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ligand second quarter 2023 earnings webcast. All lines have been placed on mute to prevent any background noise. At 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 star 1. Thank you. Simon Latimer, Head of Investor Relations, you may begin your conference.

Thanks, Brian. Welcome to Ligon's second quarter 2023 financial results and business update conference call. Please note that there are slides accompanying today's call. For those dialing in on the phone lines, these can be accessed by going to the investor section of our corporate website, where you can find the link to the webcast on our 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 and forward-looking statements here on slide two. Additional information concerning risk factors and other matters concerning Ligon can also be found on our earnings press release and our periodic filings with the SEC that can be found on the investor section of our website at Ligon.com. Undertake no obligations 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 discussed and the closest GAAP financial measure can be found in our earnings release issued earlier today. Speaking today for Ligon will be Todd Davis, CEO, Tava Espinosa, CFO, and Matt Kornberg, President and COO. I would now like to turn the call over to Todd Davis.

Thank you, Simon, and good afternoon, everyone. Thanks for joining our second quarter 2023 earnings call. I'm pleased to have the opportunity to speak with you today and share some of my thoughts on the company's performance and recent developments. Let me begin with a snapshot of where Ligand stands today. Over the past several years, we've created a growing and diversified portfolio of royalties with a high margin operating model. Those investments have created our current strong balance sheet and a large portfolio of biopharmaceutical assets, including seven major commercial stage products that are delivering on our current growing financial performance, multiple key late stage assets that have near to intermediate term potential to further grow our commercial royalty base, and what we call our farm team of over 75 earlier stage assets that will feed into our later stage pipeline and drive long-term growth. This portfolio is driving our performance, including a solid second quarter, both operationally and financially. As Tava will describe in detail here shortly, today we are raising our adjusted EPS guidance to $4.85 to $5 when compared to guidance introduced at the beginning of the year of $3.10 per share to $3.30 per share. This increase is driven by 20 to 25 cents per share from the strength of our operating income and an additional $1.50 per share from the sale of Viking stock. Revenues for the second quarter of 2023 were $26 million, highlighted by over $20 million in royalty revenue. We ended the quarter with cash and short-term investments of $219 million. We have paid off the remaining balance of the convertible notes, and they're now debt-free. Tava will go into greater detail on our financial performance and developments. There were several positive developments across our commercial stage and pipeline products during the second quarter as well. Travere received FDA approval for Filspare and IgA Neuropathy in February. We believe that Filspare has the potential to be one of Ligand's most significant royalty assets. In June, Verona Pharma submitted an NDA for approval on encephentrine for treatment of COPD, which it approved could start contributing royalties in 2024. There were several significant clinical updates from our late-stage portfolio, and Matt will discuss a detailed portfolio update later in this call. In addition to the existing portfolio driving these results, We are also focused on new deals to grow the late-stage pipeline and further accelerate our financial growth. We have also added several talented business people and established a presence in Boston. This will allow us to broaden our partnering approach and increase our deal-making activity to drive growth and profitability. Slide six summarizes the expanded tactical approaches we use to grow our royalty portfolio. These are one, project finance, through which we provide development capital to fund clinical stage programs in return for royalty contracts on future sales. Two, royalty monetization, where we purchase existing royalty rights owned by inventors, universities, or companies. Three, M&A, where we buy companies with valuable assets or partnerships and realize the value of those assets while rationalizing the operations And four, platform technology acquisitions. We look for technology platforms with high operating margins and existing license contracts, and we seek to generate new royalties by operating those platforms. Let me expand on tactic number three, M&A, with regard to a recent transaction. On July 17th, we announced we entered into an agreement to acquire the assets of Novant Inc. for $15 million in cash while providing up to $15 million in debt or in possession or dip financing to support their Chapter 11 reorganization. The Asset Purchase Agreement is subject to approval by the Bankruptcy Court. Novant's lead asset, Berdasmere Jail, is in development for molluscum contagiosum with an NDA currently under review at the FDA with a PDUCA goal date set of January 5, 2024. We previously provided capital to Novan for a royalty interest in this program and believe it to have significant market potential. A large portion of the patient population is untreated, and this may be the first FDA-approved prescription drug treatment for Moleskine that can be used at home. There are also other indications in Asset Center development in their nitric oxide platform as well as a basket of commercial products. Ligand has focused a significant amount of effort this year in fortifying our business team, including a sharpening of our capabilities, expertise in credit, reorganization, and operations to execute on opportunities like this. Since becoming CEO in December of 2022, a priority has been to scale our business development and investment capabilities so that we can consistently originate novel deals with high-value clinical products with capable partners. This requires networks, execution and due diligence capabilities, senior-level relationships, and capital. We have made a number of important senior hires, strengthened our legal resources, added several investment analysts to the team, and expanded our geographical footprint. Our typical investment is in a product with high clinical value No more than four years to market launch with strong evidence of safety and efficacy. We believe there's substantial need for capital in the development space and an opportunity to generate superior risk profiles in this arena. We currently have term sheets out to a number of counterparties and expect that some of these will start to materialize in the second half of 2023. We have done this by rationalizing other areas of the business and improving our P&L by reducing overall expenses. To summarize, YGAN has a robust existing portfolio and pipeline that offers us significant financial growth. Additionally, we are executing on a broader business strategy to accumulate additional assets and drive further cash flow and profitability into our business. We have a strong balance sheet, no debt, and positive cash flows that can be invested in the assets that we expect to come through our BD pipeline. The other key execution element to grow earnings is to reduce our operating expenses. We have been able to achieve this by scaling up the business operation and expanding execution capability. The chart here on slide seven shows how the combination of increasing royalty revenues and a lean operating structure is expected to lead to growing profitability and cash flow for Ligand over the coming years. Now, Tavo Espinoza, our CFO, will provide more details on the Q2 financial results, a full year 2023 financial guidance. Following Tavo, our president, Matt Kornberg, will review progress in our portfolio operations and growth drivers. Tavo?