SWK Holdings Corporation 9.00% Senior Notes due 2027 Q1 FY2024 earnings call

• Finance segment: Generated 24% year-over-year revenue growth to $11.5 million, with gross finance receivables portfolio up 10.3% to $274.5 million, 14.2% effective yield and 16.3% realized yield. Remained profitable despite $6 million loan book impairment, with $1 million GAAP net income and $2.7 million adjusted non-GAAP net income. - Enteris division: Signed exclusive option and asset purchase agreement with strategic partner, reducing Enteris' cash burn and expected to be breakeven or better during the agreement. - Share repurchase: Bought back 58,298 shares at $1 million during the quarter, and additional 19,000 shares for $300,000 since quarter close. Book value per share at March 31, 2024 was $22.46, a 5% increase. Non-GAAP tangible financing book value per share was $19.69, an approximately 17% increase from prior year. - Market outlook: Constructive on life science finance market, actively pursuing loan and royalty opportunities, noting increased competition in some pockets but focusing on less competitive sub-$25 million market as a differentiator.

The Finance segment saw a 24% year-over-year increase in revenue to $11.5 million, which is near an all-time high. The gross finance receivables portfolio of the Finance segment grew 10.3% year-over-year to $274.5 million. The Finance segment contributed significantly to the company's overall performance. The Enteris segment signed an exclusive option and purchase agreement with a strategic partner, receiving a low single-digit million-dollar option fee in April and expecting the first guaranteed revenue payment in the third quarter.

• Will prioritize selectively closing commercial stage life science loan and royalty transactions that fit underwriting criteria. - Work with nonaccrual borrower partners to realize positive outcomes. - Explore paths for additional capital and return capital to shareholders via share repurchase program.

• Loan impairment risk: Impairment of Trio loan, which was in restructuring with ongoing uncertainties. - Market competition risk: Increased competition in certain pockets of the life science finance market, with equity markets being an alternative for portfolio companies affecting loan origination.

Q: Could you touch on the impairment and the lending base or capacity?

A: The impairment was to the Trio loan carried at $9.6 million, situation in workout with restructuring ongoing. Lending capacity: revolver undrawn, with $50 million or so capacity, $200 million of proposals submitted year-to-date, $60 million of proposals outstanding, market more competitive with equity markets as an alternative for portfolio companies.

Q: Has any of your portfolio companies accessed the equity markets in terms of raising additional equity capital? Or how do you guys view broader capital markets right now?

A: Some private companies and one public company have raised capital recently, which is great for portfolio companies but makes originating new loans modestly more challenging.

Q: About Enteris and past Unigene related questions A: Enteris was purchased for $19 million with Cara license. The business was a cash burning situation, headcount reduced, new CEO Paul Shields refocused on classic CDMO operations. Still some efforts on Peptelligence licenses, but window for monetizing IP not as open as before. The Peptelligence technology is good but challenging to get someone to pay royalty as large pharma biotechs may have internal capabilities.