Ligand Pharmaceuticals Incorporated

Thank you for standing by my name is Pam and I will be your conference operator today at this time, I would like to welcome everyone to the ligand second quarter 2024 earnings webcast. All lines have been placed on mute to prevent any background noise after the speakers 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 cell phone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the conference over to Tavo Espinoza, the Chief Financial Officer of Ligon Pharmaceuticals, Inc. You may begin.

Good afternoon, everyone, and welcome to Ligon's second quarter earnings call. 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. followed by a question and answer session. Our earnings release and a link to today's webcast can be found in the investor relations section of our website at ligand.com. With me on the call today are CEO Todd Davis, Senior Vice President of Investments and Business Development Paul Haddon, and Senior Vice President of Investment and Head of Clinical Strategy Dr. Karen Reeves. This call is being recorded and the audio portion will be archived in the investor section of our website. On today's call, we will make forward-looking statements regarding our financial results and other matters related to the company's business. Please refer to the safe 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. To better understand the risks and uncertainties that could cause actual results to differ, we refer you to the documents that Ligand files with the Securities and Exchange Commission that can be found on Ligand's website at www.ligand.com or on the SEC's website at www.sec.gov. With that, I will now turn the call over to Todd.

Thank you, Thabo. On our last several calls, we have spent a fair amount of time talking about the steps we have taken to transform the company and strengthen and expand our royalty portfolio and team. I am pleased to report that during the second quarter, we committed $175 million to two new investment opportunities and added several commercial stage products to our portfolio that we believe will be meaningful contributors to our royalty revenue over the next several years. This includes two notable regulatory approvals of products with blockbuster sales potential. Merck's Capvaxiv, the first pneumococcal conjugate vaccine specifically for adults that was approved by the FDA on June 17th. And Verona Pharma's Otuver, the first inhaled product with a novel mechanism of action for the treatment of COPD maintenance in over 20 years. That NDA was approved by the FDA on June 26th. Our royalty portfolio now includes 12 major commercial stage products, many that are marketed by premier global pharmaceutical companies. This is double the number of key marketed products we had in the portfolio at the beginning of 2023 and underscores the capabilities of our business development team and successful implementation of our OPEC slight investment-focused corporate strategy. As a reminder, we also have more than 90 additional active pipeline programs in our portfolio that are in various stages of development. Paul and Karen will share additional updates on our pipeline later on the call. During the second quarter, we also added several new team members, which deepen our investment, business development, and operational bench. Michael Vigilante joined us in May as Vice President, Investments and Business Development. Michael served in a similar role at a Boston-based life sciences investment firm and brings significant transaction and company building experience. We've also added Ruben Flores Saib as senior director business development in April. Ruben is leading our business development efforts with the inventor community, having spent 12 years in industry and 10 years in the university technology transfer sector before joining LIGAN. On the operations side, we also hired Marge Fekovec as head of human resources. Marge has over 20 years of life sciences, HR experience, and will play a key role as we look to bring in additional talent to the company. These hires follow the additions of Rich Baxter, SVP of Investment Operations, and Dr. Karen Reeves earlier this year. As some of you may be aware, we filed an 8K on Friday announcing that Ligand's president and COO, Matt Kornberg, has decided to leave the company and pursue other opportunities. Matt has agreed to serve as consultant through the end of the year. We are grateful for Matt's many contributions to the company over the last nine years and wish him well in future endeavors. Tavo will do a deep dive into our financials for a second quarter and the first half of 2024. But let me provide a few financial highlights. Total revenue in the second quarter grew 58%, driven in part by milestone payments we earned following the approvals of O2 there and capped vaccine. which Karen will discuss in greater detail. Our royalty revenue growth trajectory continued in the second quarter, increasing 11% over the same period in 2023. We also announced an increase to our 2024 financial guidance in conjunction with the Epiron biologics acquisition. We now expect total revenue to be in the range of 140 to 157 million and Core Adjusted EPS to be in the range of $5 to $5.50 per share. Turning to slide four, we will discuss Ligand's strategic differentiation. We are a biopharmaceutical company that seeks to offer profitable and compounding growth. Our diversified portfolio of royalty assets generates consistent and predictable revenues. We target late-stage development assets where there is superior risk-reward profile. There is sizable demand for capital in the life science industry. This allows us to invest selectively as we offer differentiated capital solutions that traditional investors cannot provide. Our strategy is executed on by our highly experienced investment team that can source, diligence, and negotiate proprietary investments. Once originated, we can employ customized investment structures and novel tactics to create new investment opportunities, our acquisition of a pyrone is a prime example of this. Royalty investing is a small percentage of the total capital that is invested today in life sciences. We believe our model is scalable and offers immense growth potential for years to come. Turning to slide five for our royalty revenue outlook, We've made substantial progress to meet or exceed the longer-term growth goals that we outlined at our analyst day in December of 2023. During the second quarter, we saw an increase in Wall Street consensus estimates on several of our partner products, including Travere's PhilSparry. We also added several major new commercial products to the portfolio, including Capvaxiv and O2Var, which are expected to launch later this year. We believe our revenue growth is on pace to exceed the 22% compound annual growth rate that we previously shared in December. The existing portfolio alone supports a royalty revenue CAGR of 18%. Future investments should add at least 4% to this with potential upside on top of the current outlook. The operating leverage gain from our lean corporate cost structure is expected to result in adjusted EPS of greater than $10 per share in 2028. Before I turn it over to Paul, I wanted to provide an update on Pelphos. As I mentioned on our last earnings call, we created a new standalone company earlier this year called Pelphos Therapeutics to commercialize zelsovmi, which was approved by the FDA in January for molluscum contagiosum. The Pelthos team is preparing for the formal commercial launch of Zelsudmi in the first quarter of 2025. We anticipate this will be done in partnership with a capital provider and or a strategic partner, which is the same approach that we took with Viking Therapeutics and Primrose Bio. This is consistent with our strategy to reposition and maximize the value of highly differentiated and promising pharmaceutical assets by combining premier management teams and third-party funding sources in return for significant equity and royalty rights in the newly formed entities. In conclusion, we are proud of all that we've accomplished in the first half of 24, and we are very optimistic about our future prospects. I will now turn it over to Paul Haddon for a business development update. Paul?