Ligand Pharmaceuticals Incorporated

good morning my name is aaron and i will be your conference operator for today at this time i would like to welcome everyone to the ligan third quarter 2024 earnings call 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 and if you would like to ask a question during that time simply press star followed by the number one on your telephone keypad if you would like to withdraw your question Just press star followed by the number one again. Thank you. With that, I would like to turn our call over to Melanie Herman, Senior Director of Financial Planning and Analysis. Melanie, you may begin.

Good morning, everyone, and welcome to Ligand's third quarter earnings call. During the call today, we will review the financial results we released before today's market opened 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 Head of Clinical Strategy, Dr. Karen Reeve, and Chief Financial Officer, Tavo Espinoza. 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 this safe harbor statement related to these forward-looking statements, which are subject to risk and uncertainty. 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. Legan 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 filed with the Securities and Exchange Commission, or SEC, that can be found on Ligand's website at ligand.com or on the SEC's website at sec.gov. With that, I will turn the call over to Todd.

Thank you, Melanie, and welcome to everyone on the call. I'm delighted to report one of the best quarters of performance and Ligand's history. Slide three summarizes our strong business momentum in the third quarter. We grew total revenue by 58% over the prior year and we increased guidance for the second time this year. We are well capitalized with access to over $300 million in capital to continue to execute on our strategy of acquiring high value, royalty generating assets. Our growing roster of major commercial programs gives us predictable and growing royalty revenue that is the foundation for our strong financial performance this quarter. Tavo will delve more into our financial performance later on the call. I'm extremely proud of our team and the many accomplishments we've achieved in the last 18 months. We have invested almost $300 million since last fall and have added several programs to our pipeline, including Carziva, that came from our immediately accretive acquisition of Opiron Biologics this summer, and our transaction with the O2VeR inventors, increasing our royalty rate on that drug to nearly 3%. Additionally, our efforts to incubate Peltos and Radiesl Sudme for commercial launch continue in earnest, and we aim to select a partner that can launch Selsudme in the first half of 2025. This drug addresses significant unmet need in Mollicum contigiosum as the first at-home prescription product for this condition. On our second quarter earnings call, we talked about two important FDA approvals within our portfolio, Verona Farmer's O2Ver and Merck's Capvaxif. We are pleased to report that both products were successfully launched during the third quarter. Merck announced in October that the CDC's Advisory Committee on Immunization Practices, or ACIP, has recommended Capvaxie for adult pneumococcal vaccination in adults 50 years of age and older. The ACIP's recommendation lowers the current age-based recommendation from 65, and as stated by Merck, has the potential to be a practice-changing milestone that may improve vaccination rates. Analysts estimate that both O2Bear and Capaxi have blockbuster sales potential, and we believe these products will be meaningful contributors to our royalty revenue over the next few years. Dr. Karen Reeves will provide more details on these and other programs later in the call. Another important milestone this quarter was the full FDA approval and label expansion of Travere's PhilSparry. This therapy has the potential to become foundational care in IgA nephropathy, a rare kidney disease that affects up to 150,000 people in the U.S. and is one of the most common glomerular diseases in Europe and Japan. We continue to see more widespread adoption of this groundbreaking therapy as evidenced by the recent Swiss approval of TOSPARI and look forward to the continued European launch in the coming months. We are also excited about PhilSparry's potential indication expansion into focal segmental glomerular sclerosis, or FSGS. FSGS is a rare kidney disease that has a high risk of progression to kidney failure. There are no FDA-approved therapies for FSGS. Dr. Karen Reeves attended the Parasol scientific workshop meeting last month, which convened various stakeholder groups, including the FDA, to discuss endpoints for the FSGS clinical trials. We are encouraged by the outcomes from this meeting and Travere's plan to reengage with the FDA later this year about a potential path forward for Felspari in FSGS. All of these recent developments reinforce what we believe Felspari will be a significant driver of revenue for us over the next several years. Ligand has a 9% royalty on all indications of Tospari. Turning to slide four, I would like to remind our listeners about Ligand's strategic differentiation. We are a biopharmaceutical company that seeks to generate profitable, diversified, compounding growth. We target late-stage development assets and commercial assets with superior risk-reward profiles. Our highly qualified team brings decades of investing experience, along with clinical, operational, and regulatory expertise, as well as strong origination networks throughout the industry. We continue to execute on our strategy of acquiring high growth, low OPEX assets, a plan we outlined nearly two years ago. There is a sizable demand for royalty capital in the life science industry, which allows us to invest selectively. as we offer a differentiated capital solution that traditional investors do not typically provide. Our capable team originates, diligences, and negotiates proprietary investments with customized investment structures and novel tactics to create investment opportunities. Our acquisition of a pylon is a prime example of this. It is also important to emphasize that we do this while maintaining low operating expenses. Our structural approach to investing is a very small percentage of the total capital that is invested in life science companies today. Therefore, we believe our model is differentiated, scalable, and offers immense growth potential for years to come. Turning to slide five for our royalty revenue outlook, we've made substantial progress towards meeting or exceeding the longer-term growth goals we outlined at our analyst day in December of 2023. Our investment origination seeks and identifies high-value clinical products that will offer significant positive clinical impact. Looking at the third quarter, we see the result of this focus as we saw an increase in Wall Street consensus estimates on several of our partner products, including Trier Stillsparry, which, as I mentioned earlier, has received full approval by the FDA and has been granted conditional approval by the European Commission and Swiss authorities. We also added several major new commercial products to our portfolio, including Carzeba, Gapdaxy, and O2VeR, which will positively impact our royalty revenues over the coming years. We will provide an updated long-term view that incorporates these recent events at our investor day on December 10th. As I've shared previously, we believe our long-term royalty revenue growth is on pace to exceed the 22% compounded annual growth rate we outlined last December. The existing portfolio alone supports a royalty revenue CAGR of 18%, which is above our previous estimate of 16%. Further investments should add at least 4% to this, with potential upside on top of the current outlook. Our business development team is constantly searching for attractive new investments. In conclusion, we are all proud of what we've accomplished since we began restructuring and executing on this new strategy in the fourth quarter of 2022, and we are very optimistic about our future prospects. Ligand's pipeline remains robust. We are currently reviewing over 20 investment opportunities representing an excess of $800 billion of investment potential. The operating leverage gained from our lean corporate cost structure is expected to result in adjusted EPS of greater than $10 per share in 2028. I'll now turn it over to Dr. Karen Reeves for a portfolio update. Karen?