Ligand Pharmaceuticals Incorporated

This quarter, I'd like to turn our focus to a few programs we gained through the recent acquisition of Zoma that are expected to play meaningful roles in the ligand portfolio. First is the multi-billion dollar blockbuster treatment, Vibismo, which is the third best-selling product in Roche's portfolio. Vibismo is indicated for patients affected by wet age-related macular degeneration, diabetic macular edema, and Retinal Vein Occlusion, where treatment was recently approved to extend beyond six months. First half 2026 sales were approximately $2.6 billion, and analyst consensus peak sales are approximately $7 billion, which would represent a peak royalty of approximately $35 million to Ligand. Roche is currently conducting a large-scale prospective non-interventional observational trial evaluating the long-term real-world effectiveness and safety of Vibizmo. The trial was initiated in 2022 and aims to track over 6,000 patients. Interim data has already been presented showing significant functional and anatomical improvements as early as six months into treatment. The trial has the potential to be an incremental growth driver for Vibizmo. In July 2026, Roche announced the Phase III trial evaluating the bismuth in myopic choroidal neovascularization, or CNV, met its primary endpoint. A potential catalyst is expected in 2027, as Roche is expected to file a BLA in CNV. We look forward to following these key developments over the coming months. Turning to the next slide, Ojemda addresses an area of high unmet medical need in pediatric oncology. Ojemda is currently marketed in the US by Servier and recently gained marketing authorization in Europe and is being marketed by Ipsen as its ex-US partner. Servier acquired rights to Ojemda through its recent acquisition of Day One for 2.5 billion, further validating the commercial potential of this asset. Thank you so much for joining us. We are entitled to milestones and a tiered mid-single-digit royalty on worldwide net sales. Day one previously guided to 2026 sales of between $225 and $250 million, and day one analyst consensus peak sales were estimated to be in excess of $1 billion. In addition to our mid-single-digit royalty on net sales of Agenda, we are also entitled to regulatory milestones. Taking a step back to look at our portfolio as a whole, following our acquisition of Zoma, we are entering the most catalyst-rich period in our company's nearly 40-year history. Over the next 18 months, we have as many as seven pivotal trial readouts, alongside potential FDA approvals and geographic expansion opportunities for products already on the market. Each of these represents a potential royalty revenue stream being initiated, expanding, or accelerating for our shareholders. Of course, biopharmaceutical clinical development carries inherent binary risk, and we do not expect that every one of these pivotal studies will be positive. The strength of Ligand's model is that we have strategically and intentionally positioned our business to be resilient to this risk by creating a highly diversified royalty portfolio. Let's start with the expected pivotal study readouts. Orchestra Biomed's Avian Therapy, if successful, could represent a significant new royalty in cardiovascular disease. Ogenda's Phase III readout and frontline PLGG could result in a label expansion opportunity. Leona Bio's Lazofoxafine has the potential to capture significant market share in the metastatic ER-positive HER2-negative breast cancer market. Takeda's mesogidimab is being developed in both immune thrombocytopenia, or ITP, and IgA nephropathy, and Takeda has shared the IGAM data could read out as early as late 2027. Ozevanpator has several Phase III readouts expected in major depressive disorder. Resolute announced positive interim data for erosodotug in tumor hyperinsulinism in June, with top-line results expected in the second half of 2026. The Phase 2b trial of Velixibat in primary biliary cholangitis is expected to read out in the first quarter of 2027. In addition, they have announced positive Phase 2b data in primary sclerosing cholangitis and will hold additional discussions with the FDA prior to NDA submission. Velixibat has orphan drug designation and breakthrough therapy designations in both indications. Turning to FDA approvals, Palvella began the process of submitting a rolling NDA for cuturin rapamycin in microcystic lymphatic malformations, which is on track for completion by the end of 2026. Cuturin rapamycin has the potential to be approved in 2027, and if approved, would represent a major growth driver for ligand. Finally, we're tracking potential geographic expansion for commercial products already generating royalties today. Filspari has the potential to be approved in Japan and IGAN, Otuver in China, and Ojemda in Japan, which could significantly drive royalty revenue with potential milestone opportunities as well. In closing, with the acquisition of Zoma, we have never felt more confident about the potential of our portfolio, both in the near term and the long term. With that, I will turn the call back over to Todd for his closing remarks.

Thank you, Lauren. We are incredibly proud of the team at Ligand for their outstanding execution in the financing and the acquisition of Zoma Royalty. We have significantly scaled our Royalty portfolio and accelerated our long-term growth profile while adding a highly complimentary and diversified business to our platform. Additionally, we are pleased with the continued progress of our incredible partners and late-stage pipeline. While we are driving growth for our shareholders, it is very satisfying that we get to do so by helping our partners as they develop life-saving treatments and improve the lives of patients. Thank you for joining us today and I will now turn the call back over to the operator for questions.

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Matt Hewitt with Craig Hallam Capital Group. Your line is now open. Please go ahead.

Good morning. Congratulations on the strong quarter. I guess first up, it's almost a month since he closes on what transaction. I'm just curious if you found any surprises as you dug in a little more deeply into that portfolio of assets.

Yeah, good question, Matt. I'll have Lauren weigh in here, but I think yes. There have been a number of developments in the portfolio that are positive. And I would just set Lauren up by saying that when you're acquiring a royalty portfolio of this size, you value the entire portfolio on a subset of assets. And you value the rest of the assets at zero. It's kind of a triage approach to valuation. And we've had several positive developments on assets that we had originally valued at zero in that process. So go ahead, Lauren.

Yeah, thanks, Todd. I think, yeah, Todd's exactly right. We did focus our underwriting process on some of the later stage pipeline assets. And since the acquisition closed, we've been connecting with each of the partners in our new portfolio and finding some really interesting new investment opportunities, both within the kind of the mid stage pipeline, as well as some earlier opportunities. So I think, you know, related to our ongoing portfolio management strategy that we implemented this year, there's a tremendous amount of opportunity for us to provide further investment into some of those early to mid-stage pipeline assets. And we have a lot of conviction around some of those that we're starting to learn more about since the acquisition closed. So thanks for the question, Matt.

Well, thank you. And I guess as a follow-up, you know, Zoma had a different type of royalty investment, the financial royalty investment. What are some of the pros and cons between that structure and the way that Ligand has historically done it? And do you anticipate going forward that you might seek out more of those financial royalties versus the prior version? Thank you.

Thanks, Matt. I think, Matt, you're referring to the zombie... Thank you for joining us. One of the main motives there was acquiring the tax assets and net cash from companies that were looking for basically liquidity options. And we certainly have looked at that strategy. I think part of each Zoma's royalties and our strategy are driven by certain circumstances, scale, access to capital, et cetera. and I don't think that we would look at the very small deals where you're netting a couple million and a diminished amount of assets. But Zoma did a very good job of rolling up a number of these, which cumulatively we're benefiting from those now in terms of the tax assets that Thabo mentioned. But we are looking at a number of companies that do provide some tax benefits right now in our active pipeline. But our main focus is on the quality of the asset and the ability to monetize that in terms of royalty cash flows downstream.

Understood. Thank you.

Your next call comes from the line of Annabelle Samimi with Stiefel. Your line is now open. Please go ahead.

Hi, thanks for taking my questions and congratulations on this integration. So the composition of your royalty assets now post DOMA seems to have really stepped up quite a bit, and it might be hard to move the needle now with additional one-off product deals. So with this completion here and your coffers refilled, can you talk about your thoughts on deal type? Are you going back to asset-based type of deals? and more portfolio-like transactions. Just trying to think about how you're going to think about business development going forward.

Yeah, it actually, you know, while we have scaled the portfolio and accelerated the growth, the size of the market, the total available market that we're investing in, the sub $100 million market, is very, very significant in size relative to the amount of capital we're deploying. and we've kind of done some analysis around the required level of investment for us to continue really perpetuity levels of growth. And it's around 100 to $125 million per year at the yields we expect to generate off of those investments. But we're able to invest really very consistently in this market at the $200 million plus or minus level with this team on an annual basis. So I do think that we expect to continue to execute on the exact same type of deals, sub $100 million, typically in the 25 to $75 million range around specific royalty assets that we acquire or project financings that we do with partners. And in some cases, special situations, which can on average be a little bit larger but are typically also pretty deep value opportunities. So I would say expect to see more of the same.

Thanks. And if I could just ask a quick follow-up. You know, it looks like you can be shopping in your closet for a while here with some of the early stage assets. So anything, have you started digging into that early portfolio yet or are you still primarily focused on late stage assets and mid-stage assets here?

We have, and because financially we're a little bit more mature than Zoma and have more scale, more access to capital, it allows us to play the portfolio with a lot more optionality. And there are some, I think, pretty interesting assets in the portfolio that I'd say we're on the cusp of proving their value. So for very small levels of investment, In some cases, a couple to $3 million. You can validate some of these earlier stage assets in the clinic and make them very licensable. So we're pursuing a number of ideas like that. It's a little bit early to say which ones seem most promising and which ones we will actually make final decisions around follow-on investments in. But it's such a large target-rich portfolio that I think there will inevitably be a few of those coming out of it. And I would just ask Lauren if she has anything to add to that response.

Yeah, I think I would reiterate Todd's points and just add that the opportunities that we're focused on in the earlier stage portfolio are still very well aligned with our investment criteria, which include ability to address high medical need, Evidence of efficacy and safety, strong alignment with our partners. We're looking to invest with great teams. So we're definitely finding opportunities in the earlier stage of the portfolio that while they may be a little bit earlier than we would historically look at, the assets themselves and the teams themselves are completely aligned with our overall strategy in terms of the types of assets that we're looking at. So hopefully more to share publicly a little bit later on this year, but we're busy and excited about what we're seeing. Great. Thanks a lot.

Your next question comes from the line of Gigal Nocomovitz with Citigroup. Your line is now open. Please go ahead.

Hey, Todd, Tavo, and team. Thank you for taking the questions and also congrats on a very good momentum. I was also curious about Zoma. Obviously, you have a lot in the early stage pipeline. You mentioned over 100 preclinical and clinical assets, but with regard to the 14 late stage ones, could you speak to those a little bit more? Which ones would you call out as potentially most interesting or most promising? And of those 14, were some of those, was a subset of those, or all of those included in the evaluation during the underwriting process, or were some of those also sort of Zeroed Out, as you referenced earlier. Thank you.

Yeah, good question, Yigal. And I'll hand this one off to Lauren, but just by stating and leading in that a strategic part of our organizational changes over the last couple of years has been to put in place a sophisticated portfolio management opportunity or opportunity system, which allowed us to absorb the ZOMA assets with a de minimis amount of absorption of their existing infrastructure. So Lauren is overseeing that. She heads our portfolio management system and is engaged in detail on the late stage assets, the analysis of those, and additional follow-on activities where it makes sense. Lauren?

Yeah, sure. Thanks for the question. I think we've talked about what we're uncovering in some of the earlier stage pipeline. So I think I'd respond by saying, you know, what we're most excited about in the near term are probably some of the assets that we highlighted in our prepared remarks. related to upcoming pivotal study readouts. So we're looking at Ojemda and frontline pediatric low-grade glioma. And then we have data expected for mezogidamab, ozodampetor, volixibat, and PVC, as well as air soda tug. So there's a number of shots on goal here when you look at just the late stage portfolio. you know, as we shared in the prepared remarks, we don't expect all of these to be positive, but I think when you think about the volume of catalysts that we have in the next 18 months in the late stage, Zoma portfolio relative to say what we had this year, we had one major data readout with Palbellas, Cuturin, Rapamycin and microcystic lymphatic malformations, which really, you know, delivered exceptional results. When you think about that compared to up to seven potential pivotal study readouts in the next 18 months across both the Zoma and Ligon portfolio. It really is gonna be a busy, exciting time for us. And so we're most focused at the moment on some of those later stage assets. So thanks for the question, Egal.

Okay, great. And then just one follow up, obviously with the recent $700 million transaction with a very low cost of capital, I'm just wondering if that impacts or changes your thinking in terms of what you'd be willing to accept or transact with regards to deal size or hurdle rates, or is the underwriting discipline essentially unchanged despite obviously a very attractive cost of capital on that tranche of money? Thank you.

Yeah, you call, that's a great question. Our strategy and our underwriting criteria as well as Target Returns remain unchanged. The lower cost of capital just allows us to deliver greater alpha and a spread for our investors. And the deal sizes will remain in the same ballpark as well because we're really focused on the market that needs this type of capital the most. And we think the sub $100 million deal size, which is our typical range that we're in, at least that's our limit, say per asset, is quite target rich. There's lots of small cap companies, late stage private companies, even some mid cap companies where this is a very good fit. And we're focused on really serving that market. So this is really where we've focused the engine that we've built is in that market. Got it. Thank you, Todd.

Your next question comes from the line of Jason Zemanski with Bank of America. Your line is now open. Please go ahead.

Hi, this is Jackie on for Jason. Congrats on the quarter and thanks for taking our question. So can you quantify the ZOMA revenue and cash flow contributions contributed in your revenue projection, or sorry, in your projections in the second half EPS accretion, including the principal commercial assets driving the contribution? Ultimately, how much of the $1.5 is expected in the 2027 representing underlying revenue road to growth versus cost and tax benefits? Thank you.

Go ahead.

Hi, Jackie. Thanks for the question. The contribution from the ZOMA acquisition is entirely reflected in the increase in guidance that we announced a couple of months ago upon the announcement of the ZOMA deal. It does include the top-line contribution as well as cost synergies that we expect, and obviously that all takes effect starting in the third quarter. and then obviously the full year contribution in 2027. So yeah, that $1.50 is 100% tied to the top line contribution from Zoma plus the significant synergies that I referenced in my prepared remarks. Thanks for the question.

Understood. Thank you. Your next question comes from the line of Leland Gershel with Oppenheimer. Your line is now open. Please go ahead.

Great. Thanks. Good morning. And adding my congratulations as well to Todd and the team. A couple of questions from us. Want to ask, you know, as Legand has grown its presence in the royalty aggregator space with these acquisition, I want to ask, you know, how your ability to be competitive may be enhanced by not just having a larger presence in terms of assets, but also some of the key members of the Zillman team as part of the Double Egg M team. Thank you.

Yeah, I think in general, in terms of the landscape, the competitive landscape, our ability to execute within the markets, the overall amount of royalty capital involved in financing pharmaceutical companies, biopharmaceutical companies is less than 9%. On the development side, and now this is my own estimate, so this is rough, but it's less than 5%, I would say well less than 5%. and there's only a few players that really do this consistently and they all have their different approaches. So it's a very early stage market and it's pretty low competition in terms of providing non-dilutive capital in the form of royalty finance. That is exactly why we proactively and initially focused on the market that we focused on, which is development stage, Sub $100 million deals, mostly small cap companies, but late stage private and some mid cap as well. And there's a very, very high demand and low supply of capital in the space in general. But even the players that do it consistently as part of their core business have very different approaches. So we haven't really been head to head on any royalty financings. We do invest in very capable partners. They have to have good management teams so that we don't have to manage it. That allows us to achieve very high operating leverage. So they usually almost always have alternatives. Those alternatives, there are other options in the equity markets, access to debt, et cetera. So that keeps everybody honest and it keeps the market pretty level, but it's a very good market. There's a high demand for what we do.

Thanks. and just maybe one question for Tavo. You'd mentioned on the 110, more than 110 million of the tax credits and NOLs to be utilized over the next few years. Any cadence to the utilization of those as we think about benefit to your cash generation and any limitations on their utilization? Thanks.

Yeah. Thanks for the question, Leland. Yeah, so the Section 174 R&D tax credits that came about from the big, beautiful bill, the sponsor, the holder of the asset has the option of either taking 100% write-off against their taxable income or deferring it over five years. The The vast majority of the sponsors that generated these assets under the ZOMA, these are assets that came over from ZOMA, obviously. They elected to defer them over five years. So we will continue with that cadence, if you will. And the bolus of the value will be, and many more. are cash generation meaningfully. You heard me say in my prepared remarks that we expect to generate approaching $300 million in 2027. And some of that is informed by this tax asset, this tax attribute that comes over from the Zoma acquisition. That's helpful. Thanks very much.

Your next question comes from the line of Joe Pantagenis with HC Wainwright. Your line is now open. Please go ahead.

Hey, everybody. Good morning. Thanks for all the details today. So my two questions. First, Todd, I guess I'm going to approach Zoma from the opposite end. With so many opportunities there, you say you might be looking to invest in some of the smaller opportunities that you're looking more into. Is there anything now, since you can talk 100% freely about ZOMA since it's closed, that you might be looking to unload or spin off at this moment?

Nothing that I can really talk to, Joe. I think in terms of how we monetize assets, and I'll use this great question as a platform to make, I think, an important point. A lot of and what we value the ZOMA were partnered assets and it was a subset of the total number of assets. There are many assets, in fact, a significant majority of the assets that we either did not have enough information about or they were just very early. So we valued those at zero. So again, it took kind of a triage approach. Now, Lauren, through the system that she set up to manage these is going through the full portfolio. There are also unpartnered assets. And so when we look at these opportunities to create upside beyond our original underwriting, we're looking at certain technologies and assets that may be very promising, but require really a de minimis amount of investment to establish proof of concept, which would then make them very licensable or partnerable. So that is a whole other area that is pretty target rich for us. And I can't name anything specifically yet because it is early in our analysis in that regard, but I'd be surprised if we don't get a couple or several opportunities like that that are pretty compelling. And so we can continue to farm basically some of the unpartnered assets that come along with the portfolio. In terms of the already partnered assets, just as we do with our existing portfolio, We basically will participate, as Lauren mentioned earlier, as she reestablished the Lazifoxifene opportunity within a new company platform, in a new financing. We'll participate in those financings, as we did with the Agenis financing as well, to support those companies and facilitate the robust... kind of nature of the programs to make sure they're properly capitalized. So you need to stay engaged with these assets from a partnership management perspective and support the companies. So in many cases, like with Palvela, I think we have followed on in every equity financing they've done to give them basically strength from the insiders as they've gone out for additional equity rounds. and that's a sign of confidence, of course, in the team and the asset. But we will do that to support our companies on the equity side. Even though we're not equity investors as a core business, we will use that as a tool to make sure that our partners have financial strength, which ultimately leverages the value of our royalty asset. So that's how we think about managing these things and we're constantly reassessing, reprioritizing the portfolio as news, as data rolls out.

That's very helpful, Collar. I appreciate that. And then my follow-up is maybe a question for Lauren. So both Ligand and Zoma participated in a very interesting and powerful deal with regard to Castle Creek. Just wanted to see if there was an update there because the profile for Deb patients has really increased significantly over the last several years with Crystal and Aviona.

Yeah, thanks for the question, Joe. So we continue to have a lot of conviction in DeFi. We think that 5GVEC has been a great introduction for the dev community because historically there were no FDA approved treatments and it's been a great first step. There are some limitations with that product that we think DeFi can address. Those include the body surface area that you're able to treat. The types of wounds. So, you know, could we be looking with an injectable treatment and addressing some of the chronic wounds that patients have or different locations of the body? So we think the unmet need here still remains. We think there's a great opportunity for combination therapy as well. Now that we have a second product in the market with Aviona. But we think that these are nice complementary programs that really the dead community has been waiting for for quite some time. When you think about especially the R-dead patients and some of the more severe folks, they have extensive body surface area coverage with wounds. So we continue to have a lot of conviction in this program. Zoma did as well. So our royalty rate increases a little bit, and we will look to see additional developments in the coming months. Great. Thank you.

Your next question comes from the line of Sahil Dhingra with RBC. Your line is now open. Please go ahead.

Hi, good morning. Thank you for taking a question. My first question is related to the $2.3 billion of potential milestone opportunities from the ZOMA portfolio. Can you frame for us the probability value? How much is tied to the Phase III readouts in the next 18 months versus longer-dated commercial milestones? And how would your contractor venues look in 2027 and beyond versus the 2026 contractor venue guidance of 10 to 20 million?

Sahil, thank you for the question. Yeah, frankly, very... Excited about the potential upside here from the magnitude of milestones that we have contractual rights to. It's $2.3 billion, you're right, as you said, that have been disclosed. You could see that figure in Zoma's previous filings. We're still digesting the various contracts and getting our head wrapped around The timing of, the potential, the probability of success, the stage of these milestones ranges from as you would imagine, preclinical, early development stage, and yes, even some that we see coming through potentially as early as later this year. We're not prepared to give further visibility to the quantum or the partners that these are attributable to, but we do plan to provide more visibility and greater detail when we discuss this more broadly at Investor Day in December.

Okay, thanks. And then the follow-up question is related to Miriam's call last time. They disclosed that the FDA recommended the Phase 3 for VoIP-3 back in PSE at their pre-Indian meeting. So how does this change your timeline and risk adjustment for the product? Can I leave it there? Thank you.

Yeah, sure. I'm happy to take that question. So we were certainly disappointed to see that news last night. We continue to have a tremendous amount of conviction in this asset, both in PSC as well as PVC. I think, you know, with regards to PSC, you know, our partner executed the largest randomized study to date in this indication, and there are no FDA approved treatments. The company remarked that they thought it was potentially due to a new review team, not data deficiencies. And then interestingly, they got breakthrough therapy designation after the meeting. So there's a little bit of mixed signals, if you will. So it pushes it out a little bit in terms of the potential approval date. They're now targeting iterative discussions with the FDA that they get through the breakthrough therapy designation. and then a submission in the first half of next year as opposed to the last half of this year.

So move things out a little bit.

We think this is an indication that the company continues to believe strongly that they'll get approval here without another phase three study being required. And then they also continue to believe that the 2B that they're completing, the Vantage study in PBC remains on track. Disappointing news for sure. We've seen this delay earlier this year with Phil Sparey in January when there was a major amendment pushed out the approval to April. No major changes in terms of our projections and we'll hope for good news here as they continue to engage with the FDA and hopefully clear up some of the miscommunication.

Great. Thank you so much.

We have reached the end of the Q&A session. This concludes today's call. Thank you for attending. You may now disconnect.