Ligand Pharmaceuticals Incorporated Q2 FY2025 earnings call

• Todd Davis mentioned the new strategy at Ligand is working with strong momentum in the royalty portfolio, including completion of Pelthos and Channel Therapeutics merger, partnership with Medtronic and Orchestra BioMed for cardiovascular therapies. - Paul Hadden discussed investment pipeline, including $40 million investment in Orchestra Biomed for two cardiovascular device programs, with details on AVIM therapy and VirtuSAB. - Octavio Espinoza reported strong financial performance, with total revenue growth, adjusted EPS increase, and outlined long-term royalty receipts outlook, including updates on programs like Ohtuvayre, Filspari, Qarziba. - Highlighted Ligand's focus on profitable compounding growth, diversified royalty asset base, and experienced team. - Case studies on Zelsuvmi and O2vir were presented, showing the power of the business model and potential of O2vir under Merck's ownership.

Total revenue for Q2 '25 grew 15% year-over-year to $47.6 million. Adjusted EPS rose 14% to $1.60 per share. Royalty revenue was robust, increasing 57% from the prior year to $36.4 million. We ended the quarter with $245 million in cash and investments, and with undrawn credit facility, approximately $450 million in deployable capital. Royalty revenue contribution was significant, growing 57% to $36.4 million, representing a major driver of the financial performance.

• Royalty revenue is expected to be between $140 million and $150 million, up from prior range. - Captisol sales remain unchanged at $35 million to $40 million. - Contract revenue increased to $25 million to $35 million, up from $10 million to $20 million. - Total core revenue is now expected to be in the range of $200 million to $225 million. - Core adjusted EPS is raised to $6.70 to $7 per share compared to previous range.

• Risks related to actual events or results differing materially from projections, including risks from forward-looking statements, such as regulatory changes, market competition, and execution of investments and partnerships may impact financial results.

Q: What can you tell us about your expectations for the Pelthos launch?

A: Todd C. Davis said they are very optimistic about the Zelsuvmi launch, noting a strong commercial team, high demand for the take-home prescription product, and the market with a dearth of current solutions.

Q: And can you also share some expectations for what you think the Filspari removal might do to improve uptake?

A: Lauren Hay said Filspari is moving into earlier-stage patients, the REMS modification should remove a barrier to utilization in earlier-stage patient segment as it aligns with routine monitoring frequency.

Q: When you think about the guidance that you provided, where it looks like at the middle of the range, we're up both around 12% for revenue and EPS. Can you tell us why we're not seeing, perhaps maybe a little bit more operating leverage in the model?

A: Todd C. Davis said factors include cautiousness with Pelthos spin-off, investments in business development, tax rate from foreign operations, and share count impact.

Q: The O2vir situation is very attractive, obviously. But we have seen some cases in this market of royalty ownership where we've seen an acquisition by a big pharma company that the big pharma company has also approached the royalty holder. Have you been approached by Merck to buy back the royalty on this asset?

A: Todd C. Davis said no, and they tend to be long-term royalty holders and not intending to sell royalties.

Q: Congratulations on the strong quarter. Maybe first up, a little more higher level, but given all of the changes and nuances coming out of Washington, how is that impacting your pipeline?

A: Todd C. Davis said their view is that descending price pressure in the pharmaceutical industry continues, and they focus on investing in drugs that deliver high clinical value and solve big problems.

Q: With the increase in contract guidance here for the rest of the year, roughly $15 million, how should we be thinking about the cadence?

A: Octavio Espinoza said in Q3 the out-license component and $5 million milestone on Zelsuvmi commercial launch are main drivers, with balance in Q4.

Q: In terms of the bottom-line increase, are you changing anything in terms of operating expenses?

A: Todd C. Davis said there are incremental increases in operating expenses, and also movement on shares outstanding impacts EPS.

Q: On the ZELSUVMI, I know you talked about $175 million kind of target ultimate sales goal. Just curious, are you actually building much into the back half this year?

A: Todd C. Davis said they have small expectations for this year as it's just getting started but view it as a long-term contributor.

Q: And how is the pipeline looking?

A: Todd C. Davis said pipeline looks strong with robust mix of accretive and pre-approval opportunities.

Q: And I wanted to ask a question about Merck's ownership of Verona and how it will add to O2vir's potential?

A: Todd C. Davis said Merck's global capabilities are expected to accelerate the global rollout of O2vir.

Q: Is it, I guess, assumed that Medtronic is going to provide the commercialization pathway for their pipeline therapies?

A: Todd C. Davis said yes, Medtronic is the commercial partner on the AVIM technology and Terumo is on the Virtu SAB balloon.