Ligand Pharmaceuticals Incorporated

simply press start, followed by the number one on your telephone keypad. If you would like to withdraw your question, press start one again. Thank you. I would now like to turn the call over to Melanie Herman, Executive Director of Investor Relations. Please go ahead.

Good morning, everyone, and welcome to Ligand's first quarter 2025 earnings During the call today, we will review the financial results we released earlier today and provide commentary on our partnered pipeline and business development activity, followed by a question and answer session. Before we get started, I would like to point out that we will be discussing non-GAAP results, which excludes certain items such as stock-based compensation, amortization of intangible assets, amortization or impairment of financial assets, losses from derivative assets, and expenses incurred to incubate the PELPOS business, amongst others. I encourage you to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP measures, which can be found in today's release available on our website. We believe these suggested measures provide valuable insight into our core operating performance, both historically and going forward. 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 my own call today, our CEO, Todd Davis, Chief Financial Officer Tavo Espinoza, Rich Baxter, Senior Vice President of Investment Operations, and Vice President of Strategic Planning and Investment Analytics, Lauren Hay. 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. Ligand 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, 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 now turn the call over to Todd.

Thank you, Melanie. Good morning, everyone, and thank you for joining our call. I'm pleased to share that we have had a strong start to 2025, setting the stage for what we believe will be another solid year of growth and execution for Ligand. Over the past 15 months, we have experienced incredible momentum across our royalty portfolio, driven by 10 new investments and four FDA approvals. As we have mentioned in previous calls, we believe that Merck's Capvaxiv, Verona's Otuver, Trever's Filspari, Recordadis Carziba, and Peltos' Zelsubmi will be significant contributors to our royalty revenue growth in 2025 and beyond. We also continue to build a strong pipeline of Phase II and Phase III development stage assets, including DeFi, which we added to our portfolio in February of this year following our investment with Castle Creek Biosciences. This deal is exemplary of our approach where we look for quality teams combined with quality assets that are aiming to solve for areas of significant unmet clinical need. Our portfolio today consists of more than 90 assets and is diversified across various stages of clinical development and therapeutic areas. A few weeks ago, we executed a complex strategic transaction to merge our subsidiary, Pelthos Therapeutics, with Channel Therapeutics, while securing substantial financial backing. This investment will accelerate the commercialization of Zelsovmi, and FDA-approved prescription therapy for molluscum contagiosum, for which we are entitled to a 13% royalty. This accomplishment builds on our successful track record of identifying highly differentiated assets and executing customized transactions to maximize their value through equity and royalty rights. Investments such as this distinguish Ligand's business model and value creation strategy. Slide 3 summarizes our financial and portfolio achievements in the first quarter. We grew top-line revenue by 46% over the same period last year and grew adjusted EPS by 11%. Royalty revenue in the first quarter increased 44% over the same period in 2024. FlyGant has over $200 million in cash and investments, no debt, and access to a $125 million revolving credit facility, which we can upsize to $200 million. We invested nearly $250 million of capital in the last 15 months across 10 investments and continue to see robust activity in our business development pipeline. Paavo will provide more detail on our portfolio later on the call, but I wanted to touch on a few of our key commercial stage assets. Verona Pharma's O2 Ver continues to have a strong launch trajectory, reporting net sales of 71 million in the first quarter of 25, far exceeding the analyst consensus estimates, and we're seeing that many of Verona's analysts are increasing their peak sales estimates for O2 Ver. Travere submitted an SNDA for Felspari and FSGS in the first quarter of 2025. And if approved, Vilspari could become the first and only FDA-approved treatment for FSGS, a rare kidney condition and leading cause of kidney failure. Additionally, Travere plans to submit an amendment to the REMS SNDA that is currently under review for modification of the current liver monitoring requirements. The FDA indicated that this amendment is not expected to impact the review timeline and the company continues to expect a REMS modification PDUFA target action date of August 28th. We have also been very pleased with the launch trajectory of Merck's capped vaccine. Merck reported net sales of 107 million this quarter, nearly double consensus estimates. We are excited about the trajectory of these programs and the upcoming growth drivers in 2025. Before I move on to the next slide, I wanted to touch on the current biopharmaceutical financing environment. With fewer IPOs and a more difficult landscape for private fundraising, it has become challenging for biotech companies to raise the capital they need to develop their pipelines and launch new drugs. Royalty financing is another tool in the financing toolkit for these companies. So it is no surprise that we're seeing a significant increase in demand for this type of financing. While we continue to be highly selective in the investments we pursue, we believe this trend represents a positive tailwind for Ligand as we move further into 2025. Furthermore, there's been significant activity regarding restructuring and personal changes in government institutions, including the FDA. While these changes may cause disruption and uncertainty in the short term, We have heard many encouraging comments from the new FDA leadership, which infers intent to reduce unnecessary regulation while keeping the key oversight requirements in place. Specific comments have been made about ways to get medications for severe and rare diseases through the regulatory process more quickly. This would be very good for patients in dire need, and that orientation is potentially beneficial to our development stage portfolio and investment strategy as well. Turning to slide four, I'd like to discuss a few of our recent investments and current investment pipeline. This quarter, we saw record-setting origination activity. Our team has leveraged their extensive experience across therapeutic categories and technologies to identify the highest value opportunities. We have 38 active investment opportunities under review, representing an even balance between accretive and pre-approval transactions. We closed two new investments, including Castle Creek and the final Haute Touvere in venture buyout, and executed a transaction with Channel Therapeutics. I would note that three deals exemplified three different investment approaches from our talented team. The first was a royalty monetization. The second was a project financing, often referred to as synthetic royalty. And the third was our special situations approach, which in this case involved the acquisition, incubation, and setup, followed by the financing and spin-out of the former Novant asset, Zil Sudmi. I feel extremely positive about the performance of our strategic planning and investment teams and what they have been able to accomplish in just a few short months. Moving to slide five, I would like to remind investors of our strategic differentiation. First is our focus. The guiding objective is to deliver profitable and compounding growth. From that guiding principle emerges our strategy and all investment decisions. Second is our existing asset Our diversified and growing portfolio of royalty assets generate consistent and predictable revenues. We acquire or generate these royalty interests in late-stage development assets and commercial assets where there is superior risk-reward. Third is our team. Our highly qualified team brings decades of royalty investing, clinical, operational, regulatory, and deal structuring experience as well as strong origination networks throughout the industry. This enables us to originate and close royalty investments that are targeted on areas of high clinical value with relatively low risk. We are outcome oriented and continue to execute on our strategy of acquiring high growth, low OPEX assets. There is sizable demand and low supply for royalty capital in the life sciences industry which allows us to invest selectively as we offer a differentiated capital solution for our partners. Our team works thoroughly to source diligence and negotiate investments with customized structures to create proprietary opportunities. Our 2024 acquisition of a pyrone is a prime example of this approach. We can achieve this while maintaining a low level of operating expenses and high operating margins. Overall, royalty capital is a very small percentage of the total capital invested in life sciences today. We believe our model is differentiated, scalable, and offers immense growth potential for years to come. Turning to slide six, I would like to look ahead to 2029 and discuss our five-year royalty receipts outlook. As we shared during our most recent investor and analyst day, We believe our long-term royalty revenue growth is on pace to meet or exceed the 22% compound annual growth rate outlined at our investor day in December of 2024. The existing portfolio alone supports royalty receipts CAGR of 18%. Future investments should add at least 4% to this with potential upside on top of the current outlook. As I mentioned earlier, Our business development team is constantly identifying attractive new investment opportunities, and we anticipate another productive year on the investment front. In conclusion, I feel very good about all that we've accomplished since we began executing on our new streamlined and focused strategy in the fourth quarter of 2022. We are highly optimistic about our future prospects. I'll now turn it over to Rich Baxter for an update on our recently announced Pelthos strategic transaction.