Ligand Pharmaceuticals Q1 2025 Earnings Report

Ligand Pharmaceuticals EPS Results

• Actual EPS: $1.33
• Consensus EPS: $1.23
• Beat/Miss: Beat by +$0.10
• One Year Ago EPS: $3.84

Ligand Pharmaceuticals Revenue Results

• Actual Revenue: $45.33 million
• Expected Revenue: $37.84 million
• Beat/Miss: Beat by +$7.49 million
• YoY Revenue Growth: N/A

Ligand Pharmaceuticals Announcement Details

• Quarter: Q1 2025
• Date: 5/8/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, May 8, 2025
• Conference Call Time: 8:30AM ET

Ligand Pharmaceuticals (NASDAQ:LGND), a biopharmaceutical company, engages in the development and licensing of biopharmaceutical assets worldwide. Its commercial programs include Kyprolis and Evomela, which are used to treat multiple myeloma; Rylaze, a recombinant erwinia asparaginase for the treatment of acute lymphoblastic leukemia or lymphoblastic lymphoma in adult and pediatric patients; Filspari, a dual endothelin and angiotensin II receptor antagonist in development for rare kidney diseases and non-immunosuppressive treatment indicated for immunoglobulin A nephropathy; Teriparatide injection product for osteoporosis; Vaxneuvance for the prevention of invasive disease caused by streptococcus pneumoniae serotypes; and Pneumosil, a pneumococcal conjugate vaccine to help fight against pneumococcal pneumonia among children. The company also offers TZIELD, a CD3-directed antibody indicated to delay the onset of Stage 3 type 1 diabetes (T1D) in adults and children aged 8 years and older with Stage 2 T1D; Nexterone, a captisol-enabled formulation of amiodarone; Zulresso, a captisol-enabled formulation of brexanolone for the treatment of postpartum depression; and Veklury, an antiviral treatment for moderate or severe COVID-19. In addition, it provides Noxafil-IV, a captisol-enabled formulation of posaconazole for IV use; Duavee for the treatment of post-menopausal symptoms in women; Exemptia for autoimmune diseases; Vivitra for breast cancer; and Bryxta and Zybev for various indications. The company has alliances, licenses, and other business relationships with Amgen, Merck, Pfizer, Jazz, Takeda, Gilead Sciences, and Baxter International. Further, it sells Captisol materials. Ligand Pharmaceuticals Incorporated was incorporated in 1987 and is based in Jupiter, Florida.

Ligand Pharmaceuticals Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Thank you for standing by. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ligeland First Quarter twenty twenty five Earnings. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

[Operator]

Thank you. I would now like to turn the call over to Melanie Herman, Executive Director of Investor Relations. Please go ahead.

[Melanie Herman, Executive Director - Investor Relations and FP&A at Ligand Pharmaceuticals]

Good morning, everyone, and welcome to Ligand's first quarter twenty twenty five earnings call. During the call today, we will review the financial results we released earlier today and provide commentary on our partner 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 exclude 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 Peltos 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 adjusted measures provide valuable insight into our core operating performance, both historically and going forward.

[Melanie Herman, Executive Director - Investor Relations and FP&A at Ligand Pharmaceuticals]

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 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 Investors 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.

[Melanie Herman, Executive Director - Investor Relations and FP&A at Ligand Pharmaceuticals]

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. 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.

[Todd Davis, CEO at Ligand Pharmaceuticals]

Thank you, Melanie. Good morning, everyone, and thank you for joining our call. I'm pleased to share that we've 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 fifteen 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 Capvaxib, Varonis O2Ver, Trevyr's Filspari, Recordadis Carziba and Pylphos's Zilsudmi will be significant contributors to our royalty revenue growth in 2025 and beyond.

[Todd Davis, CEO at Ligand Pharmaceuticals]

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, Pylthos Therapeutics, with Channel Therapeutics, while securing substantial financial backing. This investment will accelerate the commercialization of ZELLSUVI, an FDA approved prescription therapy for molluscum contagiosum, for which we are entitled to a 13% royalty.

[Todd Davis, CEO at Ligand Pharmaceuticals]

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 three 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.

[Todd Davis, CEO at Ligand Pharmaceuticals]

Ligand has over $200,000,000 in cash and investments, no debt and access to a $125,000,000 revolving credit facility, which we can upsize to $200,000,000 We invested nearly $250,000,000 of capital in the last fifteen months across 10 investments and continue to see robust activity in our business development pipeline. Pavel 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 O2Ver continues to have a strong launch trajectory, reporting net sales of $71,000,000 in the first quarter of twenty '5 million far exceeding the analyst consensus estimates. And we're seeing that many of Verona's analysts are increasing their peak sales estimates for O2VARE. Trevyr submitted an sNDA for VILSPARI and FSGS in the first quarter of twenty twenty five.

[Todd Davis, CEO at Ligand Pharmaceuticals]

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, Trevyr 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 28. We have also been very pleased with the launch trajectory of Merck's CapdaxiV. Merck reported net sales of $107,000,000 this quarter, nearly double consensus estimates.

[Todd Davis, CEO at Ligand Pharmaceuticals]

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.

[Todd Davis, CEO at Ligand Pharmaceuticals]

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 personnel 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.

[Todd Davis, CEO at Ligand Pharmaceuticals]

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 preapproval transactions. We closed two new investments, including Castle Creek and the final O2VARE in venture buyout and executed a transaction with Channel Therapeutics.

[Todd Davis, CEO at Ligand Pharmaceuticals]

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 Novan asset, Zil Sugi. 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.

[Todd Davis, CEO at Ligand Pharmaceuticals]

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 base. Our diversified and growing portfolio of royalty assets generate consistent and predictable revenues.

[Todd Davis, CEO at Ligand Pharmaceuticals]

We acquire or generate these royalty interest 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.

[Todd Davis, CEO at Ligand Pharmaceuticals]

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 Aperon 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.

[Todd Davis, CEO at Ligand Pharmaceuticals]

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 twenty two percent compound annual growth rate outlined at our Investor Day in December of twenty twenty four. This the existing portfolio alone supports royalty receipts CAGR of 18%.

[Todd Davis, CEO at Ligand Pharmaceuticals]

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 twenty twenty two. We are highly optimistic about our future prospects. I'll now turn it over to Rich Baxter for an update on our recently announced PELFOS strategic transaction.

[Richard Baxter, SVP, Investment Operations at Ligand Pharmaceuticals]

Thank you, Todd. I'm pleased to share an important update on our progress with Peltos Therapeutics in the Zelsuvni asset. Let me begin by providing a brief history of how we got here. As many of you know, our royalty portfolio included rights to Novan's lead asset, SB206, which is now commercially known as Zelsupi. In late twenty twenty three, just months before the scheduled January 2024 PDUFA date, Novan filed for bankruptcy.

[Richard Baxter, SVP, Investment Operations at Ligand Pharmaceuticals]

Recognizing the strategic importance of the asset, we acted swiftly. We completely re underwrote the position, undertook new diligence, checked our assumptions and provided DIP financing, restructured the company and ultimately secured the product, the platform technology and the company itself. Following FDA approval in early twenty twenty four, we established Peltos Therapeutics as a wholly owned subsidiary to lead the commercial launch of ZELSUVME. Our primary goal was to attract external capital, recruit an experienced management team and accelerate patient access, all while continuing to generate value for Ligand shareholders. That brings me to the strategic transaction we announced in April.

[Richard Baxter, SVP, Investment Operations at Ligand Pharmaceuticals]

Peltos will combine with Channel Therapeutics in a deal that raises $50,000,000 in equity capital and creates a newly public biopharma company focused on launching ZELSUMI. Under the terms of the agreement, Channel will acquire 100% of Peltos, change its name to Peltos Therapeutics Inc. And list on the New York Stock Exchange under the ticker PTHS. Ligand has committed $18,000,000 to the combined entity. And Merchants Inn, a Toronto based investor group is contributing $32,000,000 resulting in a $50,000,000 capital raise.

[Richard Baxter, SVP, Investment Operations at Ligand Pharmaceuticals]

On a post money fully diluted basis, Ligand will initially own approximately 55% of the new company. We chose Channel not only for its capital commitment, but also for its early stage pain programs, which we believe offer strategic synergies with Zelsumi. Looking ahead, Peltos is well positioned to pursue additional commercial stage assets. Importantly, we structured the transaction to preserve meaningful equity ownership in Zelsumi as we believe the market has yet to fully recognize its potential. Combined with our 13% royalty, Ligand shareholders stand to benefit from significant long term value creation.

[Richard Baxter, SVP, Investment Operations at Ligand Pharmaceuticals]

We expect the merger to close between June 30 and August 30, pending SEC review. In the meantime, we are building out the commercial team and preparing for a U. S. Launch this summer. Please turn to Slide nine.

[Richard Baxter, SVP, Investment Operations at Ligand Pharmaceuticals]

Let's take a closer look at

[Richard Baxter, SVP, Investment Operations at Ligand Pharmaceuticals]

the condition we're treating, Molluscum contagiosum. This is a highly contagious pox virus and one of the most common skin infections seen by dermatologists and pediatricians. It affects an estimated sixteen point seven million people in The United States and spreads easily through contact or contaminated items like towels, toys and furniture. Children are particularly vulnerable, so are immunocompromised adults and people who are sexually active with others who have a molluscum contagiosum infection. Clinically, molluscum presents as raised flesh colored bumps on the skin, appearing on the face, trunk, genitals and even behind the knees.

[Richard Baxter, SVP, Investment Operations at Ligand Pharmaceuticals]

Patients may experience discomfort, secondary infections and significant social stigma. Please turn to Slide 10. Our market research underscored how disruptive this disease can be. We heard stories of children being excluded from daycare, school and sports and of siblings spreading the infection to each other. The emotional toll is real, especially for those affected for long periods of time, months if not years.

[Richard Baxter, SVP, Investment Operations at Ligand Pharmaceuticals]

Currently, the standard of care is often watch and wait. Most pediatricians don't treat molluscum actively, whether due to lack of training, limited tools or concerns about treatment safety. Eventually, many families are referred to dermatologists who may use cryotherapy or blistering agents, both painful and requiring multiple visits. Across our research and advisory boards, the message has been consistent. The market is ready for a safe, effective and at home treatment option.

[Richard Baxter, SVP, Investment Operations at Ligand Pharmaceuticals]

That treatment is ZELSUVME. Please turn to Slide 11. ZELSUVME is the first and only FDA approved at home prescription therapy for molluscum contagiosum. Approved for patients as young as 12, it is safe, effective and designed for at home use by parents, caregivers and patients themselves. That home use distinction is powerful.

[Richard Baxter, SVP, Investment Operations at Ligand Pharmaceuticals]

Providers are eager for solutions that don't rely on in office techniques. We believe ZELLSUMI will become the first line therapy by reducing lesion counts, minimizing the need for procedures and lowering the frequency of office visits. We're excited to bring this therapy to pediatricians, dermatologists and their patients. Please turn to Slide 12. From Ligand's perspective, selsutmi represents a compelling investment.

[Richard Baxter, SVP, Investment Operations at Ligand Pharmaceuticals]

It targets a large underserved market and stands as the only FDA approved treatment of its kind. It is backed by a robust intellectual property portfolio, including 14 Orange Book listed patents as well as significant manufacturing know how and trade secrets that extend those barriers to entry beyond 02/1937. We estimate that if just 100,000 of the sixteen point seven million affected patients received two prescriptions over a twelve week course, ZELSUVNI would become a highly successful product for both Ligand and Peltos. We have assembled the right team to execute and achieve that outcome. This transaction also exemplifies the kind of complex value creating strategies and investments that Ligand specializes in, particularly in distressed or special situations.

[Richard Baxter, SVP, Investment Operations at Ligand Pharmaceuticals]

We believe these opportunities will become more prevalent in today's market environment. In closing, we're proud to have executed this merger and financing and look forward to delivering ZELSUVME to patients, caregivers and providers. They deserve a new effective and accessible therapy to manage molluscum safely from their own. And with that, I'll turn it over to Tavo for the financial update. Thank you.

[Tavo Espinoza, CFO at Ligand Pharmaceuticals]

Thank you, Rich. I'm pleased to report a strong start to the year with the first quarter results that position us well to achieve both our 2025 financial guidance and our longer term growth objectives. Let me begin with a few highlights. Total revenue for the quarter was just over $45,000,000 driven by 44% growth in royalty revenue, which totaled $27,500,000 Adjusted earnings per share came in at $1.33 As Todd mentioned, we continue to maintain a strong financial position. We ended the quarter with $2.00 $9,000,000 in cash and investments after deploying $50,000,000 in cash toward our Phase III DeFi asset in partnership with Castle Creek.

[Tavo Espinoza, CFO at Ligand Pharmaceuticals]

Including our available credit facility, we have over $400,000,000 in deployable capital. Slide 16 provides a closer look at the numbers. Total revenue for Q1 twenty twenty five was $45,000,000 up from $31,000,000 in the same period last year. That's a 46% increase. Growth was broad based across all three revenue lines, but royalties drove the largest contribution.

[Tavo Espinoza, CFO at Ligand Pharmaceuticals]

Key drivers of that royalty growth included strong performance from Bironis O2Bear, Trevyris Rilspari, Recordati's Carziva and Merck's Cabaxas. We also saw increased Captisol sales primarily due to Gilead restocking of Veclary, their COVID-nineteen antiviral. Let me expand briefly on a few of these programs. We're especially encouraged by Varonis U. S.

[Tavo Espinoza, CFO at Ligand Pharmaceuticals]

Launch of O2VARE for COPD. They reported Q1 twenty twenty five sales of $71,300,000 almost double their Q4 results. As a reminder, we now earn a 3% royalty on O2VARE following our strategic investment of roughly $20,000,000 over the last year to acquire an additional 1% royalty interest. At our Investor Day last December, we projected that O2Ver would reach $1,200,000,000 in sales by 2029, implying annual royalty revenue of over $35,000,000 to Ligand. Some analysts now forecast hitting that milestone as early as 2027.

[Tavo Espinoza, CFO at Ligand Pharmaceuticals]

O2Bear is shaping up to be a major long term growth driver for us and we look forward to updating our long term projections later this year. Turning to FOLSPARI, Trevia reported first quarter U. S. Sales of $56,000,000 beating consensus and representing more than 180% year over year growth and 13% sequential growth. Ligand earns a 9% royalty on FILSPARI sales, including those generated in Europe via CSL V4.

[Tavo Espinoza, CFO at Ligand Pharmaceuticals]

We were pleased to see that EU's recent full approval of FILSPARI and we're closely watching two near term catalysts, the potential REMS modification within August 28 PDUFA target action date and an FDA update on the sNDA for FSGS, which could receive approval this fall. With a potential expansion into FSGS, Tulspari could become our largest royalty generating asset approaching $50,000,000 in annualized royalties by mid-twenty twenty six. Merck's Capaxib also posted strong results reporting $107,000,000 in Q1 sales. That's more than double the prior quarter and well ahead of expectations. We did see some offset from Kyprolis.

[Tavo Espinoza, CFO at Ligand Pharmaceuticals]

Amgen reported Q1 sales of $324,000,000 for Kyprolis, down 14% year over year, primarily due to competitive pressures. On the Captisol front, we recorded 13,500,000 in material sales this quarter compared to $9,200,000 in Q1 twenty twenty four. This growth was driven by timing of shipments and higher demand from Gilead for Veclery. We expect a more even shipment cadence over the remaining quarters. Turning to operating expenses, combined R and D and G and A increased this quarter primarily due to a one time $44,000,000 charge related to our royalty financing agreement with Castle Creek.

[Tavo Espinoza, CFO at Ligand Pharmaceuticals]

This supports the Phase three clinical study of D5 and is accounted for under ASC seven thirty-twenty research and development arrangements. Additional increases reflect headcount growth and continued investments in the Peltos business. For the quarter, G and A and R and D expenses were $19,000,000 and $50,000,000 respectively, compared to $11,000,000 and $6,000,000 in Q1 twenty twenty four. GAAP net loss for the quarter was $42,500,000 or $2.21 per share compared to net income of $86,100,000 or $4.75 per diluted share in the prior year. The variance is largely due to the gain we recorded last year from our investment in Viking Therapeutics versus the R and D charge we booked this quarter.

[Tavo Espinoza, CFO at Ligand Pharmaceuticals]

On a non GAAP basis, core adjusted net income for Q1 twenty twenty five was $26,600,000 or $1.33 per share. That's up from $21,800,000 or $1.2 per share in Q1 twenty twenty four, driven primarily by top line growth. Turning to the balance sheet, we ended the quarter with $2.00 $9,000,000 in cash and short term investments, including 24,000,000 of Viking stock. We believe this level of liquidity combined with our expected cash flow positions us well to fund our investment plans for the foreseeable future. Finally, we are reaffirming our full year 2025 financial guidance.

[Tavo Espinoza, CFO at Ligand Pharmaceuticals]

We continue to expect royalty revenue between 135,000,000 and $140,000,000 Captisol sales between $35,000,000 and $40,000,000 contract revenue between $10,000,000 and $20,000,000 total revenue between $180,000,000 and $200,000,000 and core adjusted EPS between $6 and $6.25 We are of course continuing to monitor legislative and geopolitical developments. Based on what we know today, if tariffs were to be expanded more broadly into pharmaceutical products, we do not expect a material impact to our Captisol business or to Ligand more broadly. That concludes my remarks. I'll now turn the call back to Todd for closing comments.

[Todd Davis, CEO at Ligand Pharmaceuticals]

Thank you, Tavo. To sum up, we're off to a great start in 2025, and we're excited about the trajectory of the recently approved programs as well as our robust development stage pipeline. Additionally, our investment capabilities offer us the ability to materially grow our asset portfolio. Our diversified portfolio, including our major commercial royalty generating programs and the late stage pipeline, form the foundation of our growing success. On its own, the commercial portfolio should drive growth in the mid teens through the early 2030s.

[Todd Davis, CEO at Ligand Pharmaceuticals]

When you add in our development stage portfolio, including but not limited to Palvela's Qtorin, MLM asset, Trevyr's FSGS sNDA submission and our recent investment in DeFi with Castle Creek, we continue to expect EPS growth of over 20%. Through investing, we will continue to add to our commercial and late stage clinical assets as this portfolio provides us with substantial cash flow to reinvest in new high value enhancing royalty opportunities. We are well positioned to execute against our goals in 2025 and deliver attractive growth and shareholder returns over the long term. Thank you, everyone, for joining us for today's earnings call. I will now pass it back to the operator and open it up for questions.

[Operator]

Your first question comes from the line of Doug Ma'am with RBC Capital Markets. Your line is open.

[Douglas Miehm, Analyst at RBC Capital Markets]

Thanks very much. My question has to do with the and you touched on this, the current environment for the space. And one might also almost say that you've have an embarrassment of riches here in terms of identifying and potentially bringing in royalties to project financing or special situations. Would you say that you're seeing even more special situations these days? And if so, what the implications for the company may be?

[Douglas Miehm, Analyst at RBC Capital Markets]

Thank you.

[Todd Davis, CEO at Ligand Pharmaceuticals]

Thanks, Doug. That's a good question. There is an increasing number of special situations. Much of that is driven by difficult financing markets for biotech companies. And I think the implications for this, you know, are for these companies and the industry in general is recaps, mergers, the sale of some of these companies, and it provides a good opportunity set for us too.

[Todd Davis, CEO at Ligand Pharmaceuticals]

I mean, a key core thesis of our strategy is that, and this was part of the whole no, then, and they'll sue me view, is that sometimes really good assets get trapped in bad situations, and that's constantly what we're scouring for. So for us, that is a is a good event. But, of course, overall, we need a healthy market for for biotech going forward as as does everybody else on both the finance and industry side. But long term, you know, I I think that we will have that. There's gonna be a lot of changes.

[Todd Davis, CEO at Ligand Pharmaceuticals]

We're going through significant, short term disruption due to policy changes. But, again, the orientation of this company or of this administration, which views biotech as one of the strategic industries it's supporting, is to deregulate and try to get, you know, medicines good medicines to patients more quickly if possible. So that probably bodes well for us. Ultimately, I think your best defense in all of these situations is to make sure that the medicines you're focused on are really adding significant clinical value, especially if you're investing at the development stage because you don't have a label yet. Your forecast obviously had more assumptions in them, and so you really have to be solving significant clinical problems.

[Todd Davis, CEO at Ligand Pharmaceuticals]

And then, ultimately, when and if you do get the approval, you're going to have a much better conversation with both the payers and the regulators.

[Douglas Miehm, Analyst at RBC Capital Markets]

Excellent. Thank you.

[Operator]

Your next question comes from the line of Matt Hewitt with Craig Hallum. Your line is open.

[Matt Hewitt, Senior Research Analyst at Craig-Hallum]

Good morning and congratulations on the strong start to the year. Maybe first up, there's news that's broken here over the last twenty four hours. I realize it's pretty recent. But with the potential for most favored nation's status for drug pricing, it sounds like it would just be this is uncertain Medicaid or Medicare. But are you what do you think that, that would do to how your partners kind of look at where they launch, when they launch, those types of things?

[Matt Hewitt, Senior Research Analyst at Craig-Hallum]

What would be the potential impact from that, if any?

[Todd Davis, CEO at Ligand Pharmaceuticals]

Yeah. That's a great question, Matt. And, although this news just broke this morning, you know, there has been, I think, your dislocation in the pricing markets based on different policies across the globe. And for, you know, a couple decades at least, if not more, The US has paid premiums for medicines compared to other countries. And as you know, this administration is also very focused on fair trade, and they also have a reputation for starting out with really big asks and then trying to get to some deal making resolution of some sort.

[Todd Davis, CEO at Ligand Pharmaceuticals]

So I expect that that's the direction that this announcement will go as well. And, ultimately, though, I I think that The US is the main market. Most of the partners we are partnered with, not all, because Carziba's launched in Europe, obviously, and across the globe really, but not in The US. But most of our partners are focused first on The US market and then follow on in the other markets. But I think, you know, in terms of expectations, there's gonna be a period of significant short term disruption as this is sorted out and trade policies around pharmaceuticals are negotiated.

[Todd Davis, CEO at Ligand Pharmaceuticals]

But long term, I think it's probably a good thing.

[Matt Hewitt, Senior Research Analyst at Craig-Hallum]

That's helpful. And then maybe as a follow-up question, given and you noted this at a couple of different times in the prepared remarks even, but given some of the disruption that we're seeing and the challenges that potential partners are having on the funding side, has your as you look at your investment opportunities, has the sizing changed at all? Or are you still kind of looking kind of as those bite size $10,000,000 20 million dollars type investments and spreading your strong balance sheet over multiple shots on goal? Or would you consider something larger? Thank you.

[Todd Davis, CEO at Ligand Pharmaceuticals]

Thanks, Matt. I think for for the general audience here, would just say that we're trying to create a very diversified portfolio. And so the general guidance that we're following now at our current market cap and our current portfolio size is that, you know, we believe that 50,000,000 is about the most we wanna invest in a binary risk situation. And so that's about the most we're going to do in a binary situation that was the size of our investment at Castle Creek. We syndicated in the other 25,000,000 for that for that reason.

[Todd Davis, CEO at Ligand Pharmaceuticals]

And that's just a portfolio math. We're trying to create a diversified portfolio. Not everything will work, and we think that the math really works well at that size. Where we will upsize is in significantly derisk situation. And the best recent example we have of that is a Pyron that was already a a launched product that had been on, the market in Europe and the rest of world for over three years had significantly entrenched become become significantly entrenched in clinical practice.

[Todd Davis, CEO at Ligand Pharmaceuticals]

And the clinical safety and efficacy profile was very well known in a broad population with very high clinical need. So really about as derisked as you can get. By the way, the marketer here is very good, Record. So we felt really good about that. That was a $100,000,000 deal.

[Todd Davis, CEO at Ligand Pharmaceuticals]

And so we will upsize on really derisked situations that do not have binary risk. And then long term, as our portfolio grows, proportionately, we will move up our diversification limits, consistent with our view on the portfolio math.

[Matt Hewitt, Senior Research Analyst at Craig-Hallum]

That's very helpful. Thank you.

[Operator]

Your next question comes from the line of Trevor Allred with Oppenheimer. Your line is open.

[Trevor Allred, Biotech Analyst at Oppenheimer & Co. Inc.]

Hey, good morning guys. Just had a couple of quick questions. Is there anything you can say on Karzeeva expectations and the activities Riccardi is doing there to expand use? And can you also talk to, where these blossom can take you if some patients are most primarily seen? Is it pediatric, terms, or is it pediatricians?

[Trevor Allred, Biotech Analyst at Oppenheimer & Co. Inc.]

Or what what's the, I guess, referral patterns that that might happen there? Thanks.

[Todd Davis, CEO at Ligand Pharmaceuticals]

Thank you, Trevor. I'm gonna ask Lauren Hay, who's on the call with us, to address the first question regarding Carziba as, she's tracking that from a portfolio management perspective. And then I'll have Rich Baxter answer your question on most from contagios. Lauren?

[Lauren Hay, Vice President - Strategic Planning & Investment Analytics at Ligand Pharmaceuticals]

Sure. Thanks for thanks for

[Lauren Hay, Vice President - Strategic Planning & Investment Analytics at Ligand Pharmaceuticals]

the

[Lauren Hay, Vice President - Strategic Planning & Investment Analytics at Ligand Pharmaceuticals]

question. So as you may be aware, Recordati has recently started disclosing KORSUVA sales in their three year projection presentation a couple of weeks ago. That showed impressive growth of 23% between 2023 and 2024. And then they also increased the peak sales guidance for the oncology franchise. They bumped that up from EUR $250,000,000 to EUR 300,000,000 to EUR $350,000,000.

[Lauren Hay, Vice President - Strategic Planning & Investment Analytics at Ligand Pharmaceuticals]

They're continuing to invest in geographic expansion, which is driving that upsized peak year estimate. They launched in South Korea last year. Latin American launch is expected this year. And then as you're probably aware, they are continuing to pursue approval in The U. S.

[Lauren Hay, Vice President - Strategic Planning & Investment Analytics at Ligand Pharmaceuticals]

And the next planned FDA interaction on that front is midyear. So we'll be looking forward to an update there. Those are some of the shorter term growth drivers. And then in terms of medium to longer term, they're investing in expanding the use of KORSUVA to induction therapy both in frontline and in the relapse refractory setting. And then in the longer term, they've recently announced a program to expand the use of Carceva to Ewing sarcoma patients, which would, if approved, provide pretty dramatic revenue upside in the longer term.

[Lauren Hay, Vice President - Strategic Planning & Investment Analytics at Ligand Pharmaceuticals]

So I think we continue to

[Lauren Hay, Vice President - Strategic Planning & Investment Analytics at Ligand Pharmaceuticals]

be very optimistic about Carceva and Recordati's commercial success with this product. I'll turn it to Rich for your second question.

[Richard Baxter, SVP, Investment Operations at Ligand Pharmaceuticals]

Thanks, Lauren.

[Richard Baxter, SVP, Investment Operations at Ligand Pharmaceuticals]

Molluscum contagiosum is primarily seen initially by pediatricians. As the condition worsens, these they get referred to pediatric dermatologists for children and dermatologists for adults. So initially, the target market is going to the sweet spot of the target market are pediatric dermatologists and dermatologists and pediatricians will be critical for the product going forward.

[Trevor Allred, Biotech Analyst at Oppenheimer & Co. Inc.]

Great. Thanks.

[Operator]

Your next question comes from the line of Annabel Samimy with Stifel. Your line is open.

[Annabel Samimy, Managing Director at Stifel Financial Corp]

For taking question. Congratulations on a good quarter. Just following on the biopharma environment and the number of opportunities that you have. I appreciate your desire to remain relatively diversified. Any thoughts as to the investment capacity you're willing to put out every year?

[Annabel Samimy, Managing Director at Stifel Financial Corp]

I think you've talked about 150,000,000 to 200,000,000 in total capital allocations for the year. Any thought to increasing that and taking advantage of the environment? So that's the first question. And the second is regarding NitroSil. Now that you have Palthos off until about to launch, can you dive into how you might leverage the NexSol platform to new products or licensings?

[Annabel Samimy, Managing Director at Stifel Financial Corp]

And what are your next plans for that technology? Thanks.

[Todd Davis, CEO at Ligand Pharmaceuticals]

Sure. Thanks, Annabel. Sure. On investment capacity, I I think there's probably a pretty good chance we invest at above our normal pace this year just given the environment, the number of good opportunities we're seeing. As was mentioned in the earnings call, about half of what we're looking at is currently commercial, but still is offering, you know, significant returns, you know, you know, above what we would consider normal market returns.

[Todd Davis, CEO at Ligand Pharmaceuticals]

So those we are interested in as well, and that could result in a higher deployment level. That said, you know, we're gonna observe our diversification limits on the deal size, and it takes just as much work to do a $5,000,000 deal as it does a $75,000,000 deal and get it right. So we have certain bandwidth restrictions as does any investment team, and we're gonna go the pace that we're capable of. But everybody here is working pretty hard given given the opportunity set right now. So that's what I'd expect on, you know, the the investment pace.

[Todd Davis, CEO at Ligand Pharmaceuticals]

And in terms of the Nitrocell platform, that's a great question. I think that I would just comment that this is a special situations. Sometimes the special situations require more work and therefore consumes more bandwidth, And therefore, there can be more opportunity cost with them. And that's the case with Novan. So so the reason that you do that is because of potential outsized returns.

[Todd Davis, CEO at Ligand Pharmaceuticals]

And on the single lead asset, Zelsumi, which is now approved, On the overall investment there, we're gonna make, I think, very nice equity like returns on a single asset, but we do own the intellectual property in in in across the board in multiple potential therapies. And we've got about three different therapies that the team is looking at now. Doctor Karen Reeves is looking at that with her team and analyzing what we think will be the best opportunities. I suspect what we will do there is look for partners to, to develop those as well. And I think it's early, but the opportunity set there is pretty robust.

[Todd Davis, CEO at Ligand Pharmaceuticals]

I expect you know, my expectation is we'll end up with at least two commercial products out of this, but hopefully three or four.

[Operator]

Great. Thank you. Your next question comes from the line of John Vandermosten with Zacks. Your line is open.

[John Vandermosten, Senior Analyst at Zacks Small Cap Research]

Great. Thank you. And another question on Paltose. Is the initial launch timing for XelFu be dependent on when the deal is able to close the channel or is independent of that?

[Todd Davis, CEO at Ligand Pharmaceuticals]

It's fairly independent at this point, but I think the Venn diagram overlaps pretty nicely there. We're expecting, as Rich said, to close the merger to close at least the two standard deviation normal ranges between June 30 and August 30. And we already have the skeleton of the team. We even have some regional sales managers in place. They're all preparing for the launch.

[Todd Davis, CEO at Ligand Pharmaceuticals]

The manufacturing team has been in place and is manufacturing commercial supplies. So the next step will be to hire sales rep. We're gonna have significant feedback from the SEC in the next two to three weeks, I think, after our initial submission. That's gonna tell us a lot about the length of the pathway, and we'll probably dial in a little bit our rate of hiring on the sales reps as we get that information. So that's that's the the plan currently, John.

[Todd Davis, CEO at Ligand Pharmaceuticals]

I think the financing is secured. The merger target along with the required number of votes is secured. So really, for the most part, this is a matter of timing, which we don't totally control with the SEC.

[John Vandermosten, Senior Analyst at Zacks Small Cap Research]

Okay. And then looking at FOLSPARI, you had mentioned that, it had shifted from conditional marketing approval standard to marketing approval in Europe. And does that change any reimbursement or access for the product?

[Todd Davis, CEO at Ligand Pharmaceuticals]

I'll let Lauren Hay comment on that.

[Lauren Hay, Vice President - Strategic Planning & Investment Analytics at Ligand Pharmaceuticals]

Yeah. I think, John, it's a great question. I think we're expecting to see kind of continued momentum from Traverse partner CSL before. I think probably doesn't dramatically change the trajectory. They're continuing to secure country by country reimbursement approvals and further invest in the launch.

[Lauren Hay, Vice President - Strategic Planning & Investment Analytics at Ligand Pharmaceuticals]

So we'll continue to see, I think, growth in the coming quarters from them and certainly an encouraging development for CSLV-four and Trevyr as well.

[John Vandermosten, Senior Analyst at Zacks Small Cap Research]

Okay. And last one for Talbo on revenue trends for the year. We expect to see something similar to last year where a little bit lower in the first quarter and then a jump in the second quarter and kind of slowly trend up? And I noticed contract revenue played somewhat of a role there, but ignoring that line, how do we think it's going to, I guess, the cadence, so to speak, of revenues for this year for the rest of this year?

[Tavo Espinoza, CFO at Ligand Pharmaceuticals]

Yes. Pretty John. Yes, pretty balanced cadence on the Captisol. I mean, you see that we're reiterating guidance, so you can do the math pretty straight line from here on to the end of the year on Captisol. And then just given the nature of some of the royalty arrangements with the tiered royalty rates with Kyprolis and a couple of the others, you should expect to see kind of a gradual uptrend as is typical on the royalty line.

[John Vandermosten, Senior Analyst at Zacks Small Cap Research]

Great. Thank you.

[Operator]

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Participants

Executives

• Melanie Herman, Executive Director - Investor Relations and FP&A
• Todd Davis, CEO
• Richard Baxter, SVP, Investment Operations
• Tavo Espinoza, CFO
• Lauren Hay, Vice President - Strategic Planning & Investment Analytics

Analysts

• Douglas Miehm, Analyst at RBC Capital Markets
• Matt Hewitt, Senior Research Analyst at Craig-Hallum
• Trevor Allred, Biotech Analyst at Oppenheimer & Co. Inc.
• Annabel Samimy, Managing Director at Stifel Financial Corp
• John Vandermosten, Senior Analyst at Zacks Small Cap Research