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spk01: Thank you for standing by. My name is Benjamin, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Ligon first quarter 2024 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, press star one again. Thank you. I would now like to turn the call over to Michael Zhang, Investor Relations. Please go ahead.
spk04: Hello, everyone, and welcome to our earnings call for the first quarter of 2024. During the call today, we will review the financial results we released after today's market close and offer commentary on our partner pipeline and business development activity, after which we will host a question and answer session. Our earnings release and link to webcast today's call can be found in the Investor Relations section of our website at ligand.com. Participating on the call today will be our CEO Todd Davis, our COO Matt Kornberg, our CFO Ty West-Bernosa, our Senior VP Investments in Business Development Paul Haddon, and our Senior VP of Clinical Strategy Investments Dr. Karen Reeves. This call is being recorded, and the audio portion will be archived in the Investor section of our website. Today on our call, we will make forward-looking statements regarding our financial results and other matters related to the company's business. Please refer to this State Harbor statement related to these forward-looking statements, which are subject to risks and uncertainties. We remind you that actual events or results may differ materially from those projected or discussed, and that all forward-looking statements are based upon current available information. LIGAN assumes no obligation to update these statements. Better understand the risks and uncertainties that could cause actual results differ. We refer you to the documents that LIGAN files with the Securities and Exchange Commission, including our most recent forms, 10Q and 10K. With that, I will now turn the call over to Todd.
spk05: Thank you, Michael, and welcome, everyone, to our first quarter 2024 earnings call. I am pleased to report a strong start to 2024. We continue to deliver on our strategy of enabling the clinical development of high-value medicines by entering well-structured financial and licensing partnerships. I am happy to say that over the last year, we have executed on this strategy, which we expect will propel LIGAN into the next stage of growth. I'm excited about our prospects. Slide three summarizes our financial and portfolio highlights for 2024, some of which have already come to fruition in the first quarter. To recap, here's how we have supported our growth strategy so far this year and the outlook that we see for the remainder of 2024. First, we entered the second quarter with a strong balance sheet and a rich funnel of investment opportunities. As of March 31st, we had $311 million of cash and investments, including our holdings in Viking Therapeutic Stock. We are pleased with this balance sheet and expect to generate an additional $60 million in cash from operations in the remainder of the year. Adding this to our $75 million revolving credit facility capacity, we are in a strong financial position and able to continue execution on our strategy. In addition, we are reiterating our 2024 financial guidance as well as our longer term outlook. Over the next five years, we see a royalty revenue CAGR of over 20% and an adjusted EPS CAGR exceeding 25%. This growth projection is driven by three asset groups. Our current commercial assets, our existing portfolio of development stage assets and the new assets that we add into our portfolio through technology licensing and our investment activities. With the announcement of the genus investment this morning, we will have added more than 10 assets into our portfolio since mid 2023 when we began execution on this strategy. This is why we have significant confidence in our ability to deliver on our long-term financial growth objectives. TAVO will provide more detail around our financial performance for the quarter and the outlook for the year. Second, we announced the creation of Pelthos Therapeutics and the appointment of Scott Plescia to the role of CEO. In addition, we established the Pelthos Board of Directors with the main goal of making Zelsuvmi commercially available by the end of this year. We believe this product will bring significant improvements to the lives of patients living with tremendous unmet needs. Karen will provide a more detailed update, but just as a reminder, on January 5th, 2024, the FDA approved Zelsuvmi as a first in class medication for the treatment of Moldscum contagiosum in adults and pediatric patients one year of age or older. You may recall that we purchased 100% of the Zelsuvmi rights as well as rights to the broader nitric oxide platform and its additional clinical assets by navigating NOVAN's restructuring process in 2023. Third, we see important portfolio developments on the calendar for this year. Most recently, I want to highlight that in April our partner Travier Therapeutics gained European Commission conditional marketing authorization for Phospari for the treatment of adults with primary IgA nephropathy. We also have several other key catalysts including the potential FDA approval of Merck's V116 and Verona's encephentrine, both with PDUFA dates in June. Turning to slide four, we will discuss Ligand's strategic differentiation. We are a high margin biopharmaceutical business creating strong cash flows with a predictable and high rate of growth. We are aggregating royalties and targeting late stage development assets that are well characterized by data and offer superior risk reward. There is a high demand for capital and we're able to invest selectively with significant advantages with regard to information asymmetry. We originate, diligence and negotiate select investments with a highly qualified team complimented by a network of external experts. We do most of our diligence under confidentiality agreements with access to confidential information. We expect superior outcomes on our ability to handicap products and their probabilities of success. With the 2023 restructuring changes and now focusing our capabilities into our investment channels, we have created a high margin, high growth business with lean operations and predictable steady future growth. Turning to slide five, we will cover our royalty revenue outlook. The first quarter was an excellent start to the year for Ligand in terms of our financial performance, continuation of our core strategy and investment activity. With these elements, we look forward to a strong and productive 2024. With the addition of seven new assets from a genus into our curated portfolio, we continue to create more upside in Ligand's portfolio. We continue to expect to meet or exceed our longer term outlook provided at analyst day. We spent the first half of 2023 restructuring the business and setting up the team to execute on this strategy. Just since then, we've added a total of 10 important new assets into the portfolio. We've spun out the Pelican platform to create Primrose Bio, acquired the Nitric Oxide platform from the Novan restructuring, which contains multiple programs and now created Pelthos Therapeutics to launch the lead program, Zilsoodmi, which is now approved for Molescum Contagiosum. All this has occurred in the last 10 months. Paul Haddon is joining us today and will speak next to cover today's announced partnership with a genus. I would also like to introduce Dr. Karen Reeves, who joined us approximately three months ago. She brings more than 20 years of significant experience at top pharmaceutical companies. This includes multiple leadership positions at Pfizer as Vice President of Worldwide Research and Development, Safety and Regulatory, and Head of Global Clinical Submissions and Quality. She also served as Head of Global Medical Science at Estellas. She brings extensive experience in all phases of drug development. Karen will follow Paul and provide an update around Zilsoodmi, Zilspari, Encephentrine, and V116. I will now turn it over to Paul.
spk02: Thank you, Todd, and good afternoon, everyone. Turning to slide six, we are excited about the genus investment, which IGAN will deploy 75 million upfront with an option to invest an additional 25 million. This investment is unique in that it combines our team's strong ability to value partnered clinical stage royalty assets while also supporting promising clinical stage programs using royalty structures. This non-dilutive capital infusion is exactly the type of partnership we hope to bring to other forward-thinking and creative biopharma companies like AGENIS, who have high-value clinical assets and strong operational teams. The AGENIS investment significantly increases Ligand's portfolio exposure to the next generation of Immuno-Oncology, or I.O. for short. Our $75 million investment will provide us access to economics on seven I.O. programs. I.O. as a category seeks to bring life-saving therapies to patients with terminal cancer. The I.O. category includes multibillion-dollar blockbusters such as Urovoi, Opdivo, and Keytruda. AGENIS' Bot-Bal is a compelling next-generation I.O. combination therapy utilizing the same mechanistic pathways as those blockbuster drugs, namely CTLA-4 and PD-1, seeking to offer significant improvements in both efficacy and safety. Dr. Karen Reeves will profile Bot-Bal in more detail, but suffice it to say our diligence team was impressed by Bot-Bal's clinical program in highly refractory colorectal cancer patients, as well as other solid tumors. The other six I.O. programs are partnered with primarily large biopharma companies who have deep oncology experience in franchises. These six partnered programs offer Ligand future potential royalties in the low single digits as well as over $400 million in potential milestones. Our investment team, which has significant healthcare domain and royalty investing experience, spent a considerable amount of time with the AGENIS team during our confidential due diligence process, including manufacturing site visits to AGENIS' Emoryville facility. Our team's diligence revealed excitement among key opinion leaders for Bot-Bal and the value it could deliver to patients and their families. By expanding the investment to the additional six partner programs, we diversified our risk, but also our exposure to this innovative category of therapeutics. AGENIS has the ability to raise an additional $125 million in the same structure, creating a very nice additional non-dilutive capital option for AGENIS. Turning to slide seven, the AGENIS transaction illustrates the type of opportunities we are looking for in our investment criteria. We have near-term potential cash flows with the potential accelerated approval for Bot-Bal and potential near-term milestones from the partner programs. The most recent clinical data referenced in AGENIS' April press release for Bot-Bal shows durable responses in a patient population that has extremely limited treatment options. There is significant royalty duration on each of these seven assets, far into the next decade by virtue of both patents and biologic exclusivity. LIGAN has good structural alignment with AGENIS, who retains a significant majority of economics in Bot-Bal and in the partner programs where oncology-focused and promising potential of highly innovative targets continue to provide enthusiasm for partners to invest in bringing these treatments to market. Ultimately, this yields an attractive risk-reward profile for LIGAN and provides non-dilutive capital at a key juncture for AGENIS to advance their Bot-Bal program. Now, I'll hand the call over to my colleague, Dr. Karen Reeves, who will continue the discussion of the AGENIS investment, as well as other LIGAN assets. Karen?
spk03: Thanks, Paul, and thank you, Todd, for the earlier introduction. As Todd mentioned, I'll be touching on a few of our pipeline programs, namely Zilzouzmi, Zilzpari, and Cifentrine and V116. But first, I'd like to just make a few comments on today's AGENIS announcement. Regarding AGENIS's Bot-Bal, this is an exciting program, and in my view, the potential impact on colorectal cancer is very promising. Approximately 900 patients have been treated with Bot-Bal in clinical trials across nine different -to-treat solid tumor cancers. The novel therapeutic regimen has demonstrated the potential to be combined with chemotherapy and other standard of care therapies, and as an immunotherapy-only combo, in colon-rectal cancer, one of the most prevalent solid tumors globally. In April 2023, AGENIS was granted fast-track designation from the FDA for the investigation of the Bot-Bal combination in patients with metastatic relapsed refractory, microsatellite-stable CRC with non-liver metastasis. Botin-silimab is an investigational, multifunctional, -CTLA-4 immune activator designed to boost both innate and adaptive anti-tumor immune responses. Its novel design potentially leverages mechanisms of action to extend immunotherapy benefits to cold tumors, which generally respond poorly to standard of care or are refractory to conventional PD-1 CTLA-4 therapies and other investigational therapies. Botin-silimab potentially augments immune responses across a wide range of tumor types by priming and activating T cells, down-regulating intratumor regulatory T cells, activating myeloid cells, and inducing long-term memory responses. Okay, let me move on to the next slide and focus now on Zlzuzmi. Zlzuzmi, approved by the FDA January 5th, 2024, is a -in-class nitric oxide-releasing product for the treatment of molluscum contagiosum, a highly contagious viral skin infection predominantly affecting children with no other approved at-home treatment. Molluscum is a pox virus causing chronic dome-shaped skin papules with a central indentation and can appear as multiple lesions anywhere on the body, lasting from six to eight months and even up to five years. Zlzuzmi is approved for pediatric patients one year of age and older and adults. Molluscum affects an estimated six million children and up to 5% of the general population in the US. This FDA-approved treatment can be applied by patients, parents, or caregivers at home outside of the physician's office. One of the challenges of treating molluscum has been the available destructive therapies such as cryotherapy and -a-targe have major drawbacks, especially for children, such as pain and potential for scarring. Zlzuzmi is a much more patient-friendly treatment. Even though molluscum can affect quality of life, cause social distress, and persist for many months or years, approximately 70% of children go untreated. Therefore, the at-home treatment is a distinct advantage for both treatment and compliance. Zlzuzmi's ease of use, as well as being available for children as young as one, will hopefully open the doors for more treatment for this disfiguring, contagious viral illness. As recently disclosed in our press releases, we have created a new standalone company called Pelphos Therapeutics that will commercialize Zlzuzmi. This company creation effort is very similar to our prior efforts related to Viking Therapeutics and Primrose Bio. Pelphos will be operated fully independent of Ligand, although we expect to own a significant equity stake in the business at inception. We are excited to have attracted the talented leadership of Scott Pleasher and our two highly experienced independent directors, Peter Greenleaf and Matt Paul. Let's turn to encephentrine with an FDA-PDUFA date of June 26th. Verona Pharma is developing and commercializing encephentrine, a novel selective dual inhibitor of phosphodiesterase, PD3 and PD4, for maintenance treatment of COPD by inhalation therapy. Both phase three efficacy and safety trials, Enhanced 1 and 2, met the prerequisite for primary bronchodilation FEV1 endpoint. Improvement of symptoms was shown across trials and the rate and risk of exacerbation were reduced in a clinically meaningful and consistent manner in the trials. Many COPD patients remain symptomatic, even on multiple therapies. Encephentrine can be used in combination with other approved products and potential competitors, and there is no need to take into consideration smoking status or eosinophilia. Verona estimates there are over 8 million COPD patients currently receiving chronic treatment in the US alone, over half of whom are dissatisfied with their current treatment regimens. If approved, encephentrine could offer an effective add-on or alternative treatment with a good safety profile to address both symptoms and exacerbations. Verona is currently building its commercial infrastructure to prepare for launch following potential approval in June. Ligand will earn a milestone of approximately $5 million upon approval and $14 million upon launch of encephentrine. Ligand benefits from a low single digit royalty on encephentrine, and we believe the program could be another of our key growth drivers. Moving on to Phil Spari. The FDA granted an accelerated approval in February 2023 as the first and only non-immunosuppressive therapy for primary IgA nephropathy in patients with a urinary protein to crass new ratio equal to or greater than 1.5 gram per gram. And Trevier filed a supplemental NDA for full approval March 11th, 2024 here in the US. In the EU, Phil Spari received the European Commission approval for a conditional marketing authorization for the treatment of adults with primary IgA nephropathy with a urine protein excretion equal to or greater than 1.0 grams per day. Or urine protein to creatinine ratio or greater to 0.75 gram per gram. Phil Spari is a once daily oral medication that directly targets glomerular injury in the kidney by blocking two critical pathways of IgA nephropathy progression, endothelin-1 and angiotensin-2, with potential to be a mainstay for those who don't respond to single agent ACE or ARB. Just yesterday, Trevier announced that the FDA granted priority review of their SNDA to convert Phil Spari from accelerated approval to full approval for the treatment of IgA nephropathy in the US. The FDA assigned PDUFA target action date is September 5th, 2024. Phil Spari is one of our key growth drivers. Trevier reported Q1 revenue numbers yesterday afternoon and the quarter came in nicely with sales of $19.8 million. Trevier also continued to disclose the momentum on new patient recruitment. Trevier had 511 new patient forms submitted in Q1, bringing the total since launch to 1,963. The continued steady addition of potential new patients provides good evidence of future revenue potential. Phil Spari appears to be on track to meet consensus estimates for 2024, which are at approximately $110 million of revenue for the year. In Europe, CSL V4 expects to launch Phil Spari in the second half of 2024. We earn a 9% royalty on net sales and we expect that this will be a significant driver of long-term growth for our royalties. Moving on to Merck's V116. V116 is a 21-valent pneumococcal vaccine for the prevention of invasive pneumococcal disease and pneumococcal pneumonia. It is potentially the first pneumococcal conjugate vaccine specifically designed for adults, including eight unique serotypes not in any currently approved vaccine. According to Merck, V116 is specifically designed to prevent adult invasive pneumococcal disease and the serotypes covered account for approximately 83% of pneumococcal disease in adults 65 and older for CDC data from 2018 to 21. Immune responses were seen to all 21 serotypes in a diversity of adult patients, regardless of immune status or previous vaccine status and higher than comparators in immune response for the serotypes unique to V116. The FDA granted V116 priority review and we await the fast approaching PDUFA date, June 17th. We will earn a low single-digit royalty on V116. We would earn a $2 million milestone upon the approval of V116. And with that, I will turn it over to Matt for more comments on the portfolio.
spk10: Thanks, Karen. Today, I'll provide some additional comments on a few of the other significant updates from the first quarter across our portfolio in both commercial and development stage programs. A reminder for investors that Ligand's portfolio includes more than 85 partner programs that drive our royalty revenue, our cap to sell material sales, and our license milestone and contract revenue. Slide 14 shows our key commercial programs that drive the significant majority of our royalty revenue. Our current commercial portfolio includes over 25 different royalty streams and 30 commercial drivers overall. But these eight programs are expected to contribute over 95% of our royalty revenue in 2024. Starting with Ryalase, it's marketed by our partner, Jazz Pharmaceuticals, and is a component of a multi-agent chemotherapeutic regimen for the treatment of children and adults with ALL or LVL. This product continues to do extremely well in a market that was previously constrained by supply issues. Last week, Jazz reported its Q1 earnings, including 103 million in Ryalase sales, and Jazz continued to highlight Ryalase as one of its potential growth drivers. Having received approval for Ryalase in Europe in September 2023, Jazz confirmed the ongoing rolling European -by-country launch. Next on Vaccin Advance, it's a pneumococcal vaccine utilizing Ligand's CRM197 vaccine carrier protein produced using our former Pelican Expression Technology platform. Merck is now marketing Vaccin Advance in both the adult population and the pediatric population. Merck announced $219 million in Vaccin Advance sales in Q1 2024. Ligand earns a low single-digit royalty on Vaccin Advance sales. For TZild, Ligand purchased a royalty on Sanofi's TZild in November of 2023 from an inventor. We're very happy with Sanofi's continued investment in TZild and its commitment to the first-ever launch of a disease-modifying therapeutic for type 1 diabetes. It is still early in a launch, and diagnosis remains a focus. Sanofi has recently stated that they continue to see growth in screening and infusion rates, and they're encouraged by the growing infusion rates in pediatric patients. Sanofi continues to describe TZild as one of its key launches for the organization and is in discussions with regulatory agencies about expansion into the stage 3 type 1 diabetes patients. Transitioning to a few of the pipeline programs in the portfolio, Kieran already touched on Zilsumi and Zafentrine in V116, so I'll cover VK2809, Ceticlostat, and Gnaxalone. Viking recently announced that in the first quarter this year, they completed the 52-week biopsies for the Phase 2B Voyage Study of VK2809 in biopsy-confirmed NASH and fibrosis. As Viking has previously disclosed, the study successfully achieved its primary endpoint after 12 weeks of treatment and affirmed VK2809's potent effect on liver fat along with its favorable tolerability and safety profile. Viking plans to report data on the histologic changes assessed after 52 weeks of treatment later in the second quarter. Ligand earns a .5% to .5% royalty on potential sales of VK2809, as well as significant clinical, regulatory, and commercial milestones. NASH is a very large potential market, and if Viking is successful in their development of VK2809, the program will be addressing a multi-billion dollar market opportunity. Ticada is developing Ceticlostat, which is the first in class novel compound with the potential to reduce seizure susceptibility. Ticada is currently running two Phase 3 trials and expects to report top line data by September 2024 and file for approvals in Q1 2025. Ligand earns a tiered royalty of up to .6% on this drug if commercialized, as well as up to 86 million of milestones. There remains high unmet need in rare pediatric epilepsies, and we believe Ceticlostat is uniquely positioned to deliver value to patients and caregivers through its demonstrated seizure reduction capability, as well as its strong safety profile and ability to be combined with a broad range of anti-epileptic treatments. Marinus Pharmaceuticals provided an update on the Phase 3 RAISE trial evaluating the safety and efficacy of iVegan Axelone in patients with refractory status epilepticus. The blinded interim analysis did not meet predefined stopping criteria, and Marinus has completed RAISE enrollment at approximately 100 patients, with top line results expected in the summer of 2024. Future development of iVegan Axelone in refractory status epilepticus will be assessed following the review of the final RAISE results. We will remain in dialogue with Marinus on the future of the program, and we'll pass along any updates as Marinus provides them to the market. With that, I can turn the call over to Tavo for the financial update. Tavo?
spk11: Thanks, Matt. First, I wanna highlight that I will be discussing non-GAAP results, which exclude certain items, including stock-based compensation, amortization of intangible and financial assets, unrealized gains from short-term investments, our share of losses absorbed from accounting for our investment in Primrose Bio under the equity method, expenses incurred to incubate Peltos, amongst others. In addition, to further focus our investors on the core business results, we adjust for realized gains from the sale of Viking Therapeutic stock. I encourage you to review the GAAP reconciliation of these non-GAAP measures, which can be found in today's release available on our website. Also, I'd like to point out that starting with this quarter, we are updating how we report royalty revenue to provide increased transparency and better align with our evolving business model. We will now show two lines with one labeled as revenue from intangible royalty assets and the other labeled as income from financial royalty assets. Historically, most of our royalty revenue has been earned from programs where we have rights to the underlying intellectual property. We will now refer to this royalty stream as revenue from intangible royalty assets. And starting with this quarter and for prior periods presented, we will also report royalties generated from programs where we do not have rights to the underlying IP as income from financial royalty assets. The amounts recorded to this line item were previously captured in contract revenue and have been relatively small, but we expect it will become a larger portion of our royalty asset portfolio in the future. For additional details, please refer to footnote one in our form 10Q that we expect to file with the SEC tomorrow. We kicked off the year with strong results in the first quarter of 2024 both on the top and bottom line and are on track to meet or exceed our 2024 financial guidance. On the top line, royalty revenue grew 8% to $19 million year over year. And on the bottom line, we recorded adjusted EPS of $3.84, which includes $2.64 from the sale of Viking stock. Excluding the Viking stock sales, our core adjusted EPS for the quarter was $1.20. As Todd mentioned, we have a strong balance sheet with $311 million in cash and investments as of March 31st. Moving over to slide 17, this slide frames up our financial results in more detail. We reported total Q124 revenue of 31 million versus $44 million in the prior year quarter. The year over year decrease was driven by the $15 million milestone that we earned upon the approval of Trevier's Phil Sparie in Q123. Royalty revenue increased 8% in Q124 to 19.1 million from 17.6 million in Q123, driven by strength in Phil Sparie, Rylase, Papralis and Vax Nubans, partially offset by weakness in Evamella due to generic competition in China. In Q124, Trevier reported continued growth in Phil Sparie with sales of 20 million. Jazz reported Rylase sales of 103 million, which is a 20% increase. Amgen reported Kaif-Pralis sales of 376 million, which was 5% above the prior year and they attributed the increase to volume growth outside the US. Merck announced total sales of 219 million for Vax Nuban, which is a 107% increase over the prior year period. We expect these products will continue to drive royalty revenue growth in the future. Capcysol sales were 9.2 million in Q124 versus 10.6 million in Q123, with the change due to timing of customer orders. Contract revenue this quarter was 2.7 million versus 15.7 million in Q123. As mentioned earlier, last year's quarter included a 15 million milestone payment we earned from Trevier upon the FDA's accelerated approval of Phil Sparie. Total R&D and G&A operating expenses decreased by 3% in the first quarter due primarily to lower headcount related expenses associated with the spin-out of the Pelican business, offset by investments made to incubate the Peltos business and to build up our business development and investment team in Boston. G&A and R&D expenses were 11 million and 6 million in Q124 versus 10.9 and 6.7 million in Q123, respectively. Gap net income from continuing operations in the first quarter of 2024 was 86.1 million or $4.75 per diluted share versus gap net income from continuing operations of 43.6 million or $2.43 per diluted share in the prior year quarter. The increase in gap net income is due largely to the increase in value on our holdings of Viking therapeutic stock. Excluding the impact of gains from the sales of Viking stock, core adjusted net income was 21.8 million or $1.20 per diluted share versus 23.4 million or $1.33 per diluted share in Q123. The decrease in core EPS is due to the $15 million Trevier milestone which was earned in Q123 as referenced earlier. Turning to the balance sheet, as of March 31st, 2024, we had cash and short-term investments of 311 million, which includes $82 million of our holdings in Viking common stock. We expect that our current cash plus annual cash flow generation will be sufficient to fund the investment activity we anticipate over the foreseeable future. Turning now to guidance, we are reaffirming the 2024 financial guidance we introduced at Investor Day in December. We expect 2024 royalty revenue will be in the range of $90 to $95 million, sales of cap to sell in the range of $25 to $27 million, and contract revenue in the range of $15 to $20 million. These revenue components result in total revenue guidance of $130 million to $142 million and core adjusted earnings per diluted share of $4.25 to $4.75. And as Todd mentioned, we also introduced in December for the first time and we reiterate today a longer term outlook where we see royalty revenue growing at a compound annual growth rate of above 20% from 2022 to 2028 and adjusted core EPS growing even faster at a compound annual growth rate above 25%. I'll now turn the call over to Todd for closing comments.
spk05: Thank you, Tavo. We are very pleased at our strong start to 2024. I'm enthusiastic about the progress we've made to take Ligand to the next stage of growth. We've entered the second quarter with a strong balance sheet and continue to generate more cash, which provides us the power to invest in high margin royalty assets, like a genus investment announced earlier today. I'm excited about the potential significant catalyst in the coming months with Pelphos' Zelsubmi, Verona's Encephentrine, Merck's V116 and Takeda's Cetichlostat. As our 2024 guidance and longer term outlook imply, we look towards significant long term revenue and EPS growth. Thank you and with that, we will open it up to questions.
spk01: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you're called upon to ask your question and are listening via loud speaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, press star one to join the queue. And your first question comes from the line of Matthew with Craig Hallam Capital Group. Please go ahead.
spk06: Good afternoon and congratulations on the strong start to the year. Maybe first up on the Agenis partnership, congratulations on making that deal. I guess a couple of things. One, walk us through the process on how you kind of got engaged with them and where you see the most excitement within those six different properties or programs. And then secondly, what will be the deciding factor in the follow on $25 million investment and how long do you have to make that decision?
spk05: Yeah, Paul, why don't you go ahead and take that.
spk02: Yeah, so great question. Process wise, we've been in direct discussions with the company for several months. We had reached out to them, given where they were in the space in Bio Pharma, recognizing they've got a number of different royalty assets and obviously we're developing BotBal themselves. So that covers the process question you asked. In terms of what's exciting, obviously Karen alluded to our excitement about BotBal and I touched on it. And that's obviously an important asset in the mix. But the basket also is quite interesting as well in terms of the partners that are involved there, the different mechanisms and the fact that it's multiple products in the bag in terms of the overall portfolio. So we kind of view it as a very broad basket in that respect and so that's I think the attractive aspect of it. And then your third question, I think there is a time limit. I have to go back to the 8K in terms of what's been disclosed about the option to invest further, but obviously it's at our option and potentially future events, future clinical events, data would be an influence or decision as to whether or not you invest more capital. Yeah.
spk06: Got it. And then maybe a separate question regarding the PELTHOS opportunity, I guess is the way to call it. Are you still having discussions with potential partners on that or at this stage of the game, are you looking to just kind of run that and see how it goes for a while?
spk05: Yeah, we are exploring all options to optimize the value of the asset for our shareholders, Matt, that includes strategic discussions as well as the spin out pathway, which you've seen us execute on historically with Viking Therapeutics and things like Primrose Bio. So both of those work very well and we have built this as a standalone company so that we have as much optionality around the asset as possible. So that whole process is underway at PELTHOS. And I would just add on to Paul's answer, Matt, from before, most of these deals, just to remind the investors here, are not marketed deals where there's a large process around them. We have to proactively identify assets that we're interested in and go meet with the company. So these deals are created and we're looking, we have a very tight screen, we're looking for high clinical value on late stage assets that are well characterized with data in terms of safety and efficacy. That allows us to get into our analysis and kind of the handicapping process as well as the deal discussions with the counterparties. So it's a very outbound oriented proactive process that we execute on.
spk06: That's very helpful, thank you.
spk01: Your next question comes from the line of Balaji Prasad with Barclays, please go ahead.
spk07: Hi, good afternoon, this is Xiao An for Balaji. Thanks for taking our question. So regarding your Agenius deal announced this morning for the low single digit royalties on the Bolt-Bel combo, given that the combo, where the combo stands on the regulatory process now, how much of it should we factor into the 230 million royalties revenue goal you have for 2028? Thank you.
spk11: Yeah, first of all, thanks for the question. We don't expect these deals to contribute anything here in 2024 and then we haven't, we haven't disclosed how much of this will contribute in the outer years, but we'll come back at a later date and provide that level of
spk10: granularity. Yeah, and I think Tavo, I would just add that on that five year chart that we've shown was in today's slides, there's a slice of that that is intended to capture all the capital we deploy in the new deals that we'll invest in and this deal would be one of those, right? So we've got a bar in there that's intended to capture kind of the potential for these future deals and we'll continue to add to that bucket with all the capital we deploy and if it's appropriate at a time in the future, we'll update that chart to reflect the amount of deals that we've done and the potential for that future, but for now we're maintaining our sort of 2028 outlook as Tavo described in his comments.
spk07: Got it, very helpful, thank you.
spk01: Your next question comes from the line of Larry Solo with CJS Securities, please go ahead.
spk08: Hi, this is Justin on for Larry. First question on Kip Rollis, you mentioned growth slowed to 5% as reported by Amgen and in Q1, was this consistent with your expectations and then can you update us on the two to three year outlook as this will go off patent in 2027?
spk11: Yeah, on Kip Rollis, the sales figures came in line with consensus and also pretty much in line with what we were expecting in our internal models and we have been messaging consistent with what Amgen has been saying about Kip Rollis that we expect in late 2027 for the generic competition to come in and take share.
spk08: Okay, that's helpful and then on Phil Spari, can you remind us what you size the opportunity in the US market, is that still around three billion and then pending the second half 24 launch in Europe, what's the opportunity there, thank you.
spk10: Yeah, thanks for the question Justin. A reminder to investors that Phil Spari is approved for IgA nephropathy in the US and now in the EU and the patient population in the US is about 140,000 of which Phil Spari has said publicly that about 30 to 50,000 are applicable for treatment with Phil Spari. They haven't given the same corresponding numbers in Europe in terms of the applicability but the patient population is in the same neighborhood. From a market sizing standpoint, based on the pricing that Phil Spari is there, certainly the potential if they got every single patient would be in that neighborhood of three billion that you described, so that's more of a TAM if you will for the current approved indication and applicable patient population. If you look at the research consensus estimates that are out there for the Phil Spari covering analysts, they top out more in the 500 to 750 million range for potential sales and I think Tavo had said on our analyst day back in December that our five-year model incorporates those 500 to 700 million dollar type estimates.
spk08: That's helpful, thanks a lot for taking the question.
spk10: Of course.
spk01: Your next question comes from the line of Joe Pangeanis with HC Wainwright. Please go ahead.
spk09: Everybody, good afternoon, thanks for taking the question. So also I wanna add my congratulations for the Agenis deal today and I think I wanna ask my question, hopefully it's a self-fulfilling prophecy. You had very important cash deployment today that you announced and I guess the obvious question to me is to your earlier strategy changes that you've made that you're choosing opportunities but it's agnostic with regard to the level of investment that you make, is that correct now? It just seems to be so.
spk05: Yeah, thanks for the question, Joe. We're not really agnostic to the level of investment. I mean, we view ourselves as a portfolio. We're trying to build a very risk-mitigated predictable growth portfolio for investors. So like any portfolio manager, we're managing our exposure the same way a portfolio manager would. So we essentially try to stay in the neighborhood of about $40 million per product of exposure. If something's significantly less risky, we'll upsize on it and conversely, if it's a high upside, but a little more risky, we'll downsize on it. And in the case of the Agenis deal, of course, with the number of shots on goal, the $75 million of exposure here we think is quite appropriate for us with the type of portfolio exposure we're trying to build. If that, does that answer your question?
spk09: It absolutely does. Thanks for that, Todd. And then I have two logistical questions. So first on Peltos, I just wanted to check on the future impact on the P&L. Will this be analogous to your Viking investment? Where your investment is directly on the P&L aspect or any other impacts to consider?
spk11: Yeah, so we are, thanks for the question, Joe. In terms of how we account for the investment in the incubation of Peltos, it is consistent with the adjustments that we book for Viking in that we take out the gains on Viking therapeutic stock gains. We're also removing the operating expenses associated with incubating Peltos. And you'll see that in our gap to non-gap reconciliation. The run rate that you saw in Q4 is pretty much what we're seeing here this quarter.
spk09: Great, thanks for that. And then the other housekeeping question is with regard to how you're viewing the current Captisol mix with regard to research use and commercial use and how do you view the current inbounds with regard to inquiries with regard to the asset, thanks.
spk10: Yeah, thanks, Joe. The Captisol business continues to be very strong. I'll address your second part first. The inbounds on licensing and interest in the platform continue to be as strong as ever. We obviously saw a significant increase in those inbounds during the COVID pandemic, but we've kind of returned to the normal pace of those where we've tended to do five or six different new partnerships every year on average over the life of the time we've had the technology. We're still continuing to see that level of interest and hope to do that many deals this year if we continue out the rest of the year. In terms of the mix between commercial and clinical use, it continues to be about where it has been the last couple quarters. There's nothing material one way or the other. Obviously our larger commercial partners, Kyprolis and some of the others continue to grow. And so the commercial use is growing. The clinical use is somewhat dependent on the timing and pacing of the clinical work and some of the larger phase three trials that have gone on over time.
spk09: Great, thanks for all the added color guys.
spk10: Thanks Joe.
spk01: We have no further questions at this time. This concludes today's conference. Thank you for participating. You may now disconnect. We have no further questions at this time. This concludes today's conference.
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