Earnings call transcript: Ligand Pharmaceuticals Q2 2025 beats forecasts, stock rises

Ligand Pharmaceuticals reported strong financial results for Q2 2025, surpassing analysts’ expectations with an adjusted earnings per share (EPS) of $1.60 compared to the forecasted $1.43, marking an 11.89% surprise. Revenue also exceeded predictions, reaching $47.63 million against the expected $43.74 million, an 8.89% surprise. Following the announcement, Ligand’s stock rose 3.93% in pre-market trading, reflecting investor confidence in the company’s performance and future prospects. According to InvestingPro data, the company has demonstrated impressive revenue growth of 53.4% over the last twelve months, with a robust current ratio of 5.27 indicating strong liquidity position.

Key Takeaways

• Ligand’s Q2 2025 revenue increased 15% year-over-year to $47.6 million.
• Adjusted EPS rose 14% to $1.60, beating forecasts by 11.89%.
• Stock price increased 3.93% in pre-market trading.
• The company raised its full-year revenue guidance to $200-$225 million.
• Ligand’s diversified portfolio and strategic mergers bolster its market position.

Company Performance

Ligand Pharmaceuticals demonstrated robust growth in Q2 2025, with total revenue climbing 15% year-over-year. The company’s strategic focus on high-value assets and innovative products, such as ZELSUVMI and O2VARE, contributed significantly to its performance. Ligand’s diversified portfolio, comprising over 90 assets, positions it well against industry trends and competitive pressures.

Financial Highlights

• Revenue: $47.6 million, up 15% year-over-year.
• Earnings per share: $1.60, up 14% year-over-year.
• Royalty revenue: $36.4 million, a 57% increase.
• Cash and investments: $245 million at quarter-end.

Earnings vs. Forecast

Ligand’s Q2 2025 results exceeded expectations, with EPS of $1.60 surpassing the forecast of $1.43 by 11.89%. Revenue also outperformed projections, reaching $47.63 million compared to the anticipated $43.74 million, an 8.89% surprise. This marks a significant achievement for the company, reflecting its effective strategies and market adaptability.

Market Reaction

Following the earnings announcement, Ligand’s stock rose 3.93% in pre-market trading, reaching $148. This movement reflects positive investor sentiment driven by the company’s strong financial performance and raised guidance. The stock’s current price is near its 52-week high of $148.79, indicating strong market confidence. InvestingPro analysis suggests the stock is currently overvalued based on its Fair Value model, despite showing significant momentum with a 52.59% return over the past year. For deeper insights into valuation metrics and 12+ additional ProTips, consider exploring InvestingPro’s comprehensive research report.

Outlook & Guidance

Ligand has raised its full-year 2025 revenue guidance to $200-$225 million and adjusted EPS guidance to $6.70-$7.00 per share. The company anticipates significant growth from its products, with O2VARE expected to reach $2 billion in sales by 2029. Ligand’s strategic initiatives, including the merger of Pylthos with Channel Therapeutics, are expected to drive future growth. InvestingPro data reveals the company maintains a strong financial health score of GREAT (3.01), with analyst price targets ranging from $135 to $162. Subscribers can access detailed analysis of Ligand’s growth prospects and financial metrics in the Pro Research Report, along with expert insights on over 1,400 US stocks.

Executive Commentary

"Our new strategy at Ligand is working and producing tangible outcomes," said CEO Todd Davis. He expressed optimism about the potential of ZELSUVMI and highlighted the benefits of Merck’s global scale for the launch of O2VARE. Davis also emphasized the growing importance of royalty capital in the life sciences sector.

Risks and Challenges

• Continued price pressure in the pharmaceutical market.
• Potential supply chain disruptions impacting product launches.
• Regulatory challenges related to new product approvals.
• Market saturation in key therapeutic areas.
• Economic uncertainties affecting investment in innovation.

Q&A

During the earnings call, analysts inquired about the launch potential of ZELSUVMI and the strategic rationale behind retaining a significant stake in Peltos. Ligand’s management expressed confidence in the product’s market prospects and outlined plans for future business development initiatives.

Full transcript - Ligand Pharmaceuticals Incorporated (LGND) Q2 2025:

Conference Operator: Good day, and welcome to the Ligand Second Quarter twenty twenty five Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. Question speakers’ session. There And finally, I would like to advise all participants that this call is being recorded.

Thank you. I’d now like to welcome Melanie Herman, Executive Director of Investor Relations to begin the conference. Melanie, over to you.

Melanie Herman, Executive Director of Investor Relations, Ligand Pharmaceuticals: Good morning, everyone, and welcome to Ligand’s second 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 Palpos 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 adjusted measures provide valuable insight into our core operating performance, both historically and moving 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 me on the call today are CEO, Todd Davis Chief Financial Officer, Tavo Espinoza SVP of Investments and Business Development, Paul Haddon 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 our 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 the SEC’s website at sec.gov. With that, I will now turn the call over to Todd.

Todd Davis, CEO, Ligand Pharmaceuticals: Thank you, Melanie, and good morning, everyone. Thank you for joining us today. When I took on the role of CEO in the 2022, we set out a new vision for Ligand. That vision was ambitious and it required growth as an organization. Today, am pleased to confirm that our new strategy at Ligand is working and producing tangible outcomes.

Our second quarter results reflect strong momentum across our expanding royalty portfolio evidenced by an increase to our 2025 financial guidance, which Tava will cover in detail later on the call. Slide three highlights our financial and portfolio achievements in the second quarter. Royalty revenue grew 57% over the same quarter last year and adjusted EPS increased 14%, reflecting strong performance across our portfolio. We ended the quarter with a strong balance sheet including approximately $450,000,000 in deployable capital factoring in our undrawn credit facility. I am very proud of our team’s execution and our continued commitment to disciplined capital investment.

During the quarter, we completed the strategic merger of Pylthos with Channel Therapeutics, which I will go into more detail on in a few slides. As part of a recent $40,000,000 investment commitment, we partnered with Medtronic and Orchestra Biomed to support development of two promising cardiovascular therapies, AVIM therapy and Virtu SAB therapy. Notably, Orchestra Biomed has received four breakthrough device designations from the FDA across these two programs. Recognition that underscores the potential of these innovations to address significant unmet needs in cardiovascular care. Paul Haddon will provide additional detail on these investments later in the call.

Finally, we are very pleased with Merck’s recent announcement of its planned $10,000,000,000 acquisition of Verona, and we are optimistic that Merck’s global scale and commercial capabilities will further accelerate the launch trajectory of o two Bear, where we received a 3% royalty on worldwide net sales. We would like to congratulate Verona on all that they have accomplished to bring this novel product to market and one of the most important advances in the treatment of COPD in history. Moving to the next slide, I’d like to provide some important updates on Ligand’s portfolio. Varonis partner in China, Nuance Pharma, announced positive data and completion of its Phase III trial in China. Merck’s entry into this arena should further fortify the global commercialization of the asset and continued U.

S. Launch, which has been the strongest COPD launch in history. Stating the obvious, one of the benefits of royalty investing is as the equity investors in Verona are cashed out in the acquisition, we as royalty investors continue to participate in what we hope will be the outperformance of O2 there as Merck continues to launch this product globally. Turning to FILSPARI, there are a few upcoming catalysts including the REMS modification PDUFA date of August 28, which will determine if IgA nephropathy patients can change from monthly to quarterly REMS monitoring. In Filspari’s second indication, FSGS, there is an upcoming advisory committee meeting in the 2025 to discuss the application.

The FDA has assigned a PDUFA date of 01/13/2026 to the FSGS indication. This approval has the potential to double the sales potential for this product. Record ID reported sales of Carziva grew 12% in the 2025, reaching €78,500,000 Ligand earns a high teens royalty on Carziva sales. In addition, the FDA granted Recordati orphan drug designation for Carziva in Ewing sarcoma and a clinical trial was initiated in the second quarter to evaluate safety, dosing and early signs of efficacy. Thus far, Carziva is significantly outperforming our initial underwriting assumptions from when we purchased this just one year ago.

In future development stage catalysts, Agenus announced that they’ve aligned with the FDA on their phase three trial design and have stated publicly that they anticipate they will initiate their phase three study in the 2025. They also entered into a partnership with Zydis raising over $90,000,000 of capital at closing with a potential for $50,000,000 in contingent payments, a very positive capital raise in what is a tough fundraising market. Palvella completed full trial enrollment ahead of schedule in their Phase three trial in microcystic lymphatic malformations in June 2025, with results anticipated in the 2026. Additionally, the Phase two trial results in venous malformations are expected in the 2025. Moving back to commercial stage developments, I would like to talk about two exemplary case studies that demonstrate the power of our business model, ZELLSUVI and O2Bear.

First, we will discuss ZELLSUVI. Our commitment to bringing ZELLSUVI to patients has required vision, scale, and commitment. Through our special situation strategy and talented team, we accomplished the following. We acquired the Novan nitric oxide platform out of bankruptcy for $12,000,000 at the 2023. This is a broad platform that enables the use of nitric oxide in a breadth of topical therapies.

Almost $400,000,000 had been invested in the development of this asset. We also set up a subsidiary to incubate and hold the assets to maximize optionality. Zelsusmi, the lead product, achieved FDA approval at the 2024 in the indication of molluscum contagiosum, a highly contagious, primarily pediatric skin infection with no other take home prescription treatments available. We restarted manufacturing, hired a world class commercial leadership team to focus on the approved asset, and recruited two highly experienced commercial board members. We engaged in market planning to position this important infectious disease product properly in the market and begin market launch planning.

Finally, we ran a financing process which culminated in a $50,000,000 financing coincident with a reverse merger to form a newly traded public company, Pylphos Therapeutics. Peltos has now launched ZELSUSME into the market. The result, Peltos is now publicly traded on the New York Stock Exchange under the ticker PTHS. The current market value of Ligand’s equity stake in Peltos is approximately $100,000,000 Following the recent commercial launch of Zelsuni, Ligand earned a $5,000,000 milestone payment. After just eighteen months, Ligand has public equity today worth substantially more than our invested capital, an attractive 13% royalty on an exciting product.

We’ve retained strategic ownership of a nitric oxide platform, which can produce new products and royalties in the future and a pipeline of late stage clinical programs with potential in wound care, on conical mycosis, and atopic dermatitis that offer the potential to generate multiple new royalty streams in the future. Telfus’ initial forecast estimates peak sales of $175,000,000 in revenues. That assumes they capture just under 100,000 patients in a market with sixteen point seven million patients. At a $175,000,000 peak sales estimate, that would be approximately $23,000,000 per year to us in royalties in The US market alone. We are optimistic.

In summary, what our team accomplished in a difficult fundraising environment was nothing short of outstanding, and we’re excited about the prospects with Peltos and zilfugni. Next, we will discuss the O2VARE case history. As Verona’s launch of O2VARE gains momentum, I’d like to provide a brief overview of our investment history in this asset. In October 2018, Ligand acquired Vernalis, a UK based drug discovery biotechnology company with a broad portfolio of partnered programs, including Verona’s ensifentrine now marketed as O2VARE. The acquisition cost was $10,000,000 net of cash on the Vernalis balance sheet.

After operating the research business for two years, Ligand sold the Vernalis R and D operations to HipGen, a Chinese based company for $25,000,000 while retaining the economic rights to several fully funded and partnered programs, including O2Ver. During 2024 and early twenty twenty five, Ligand further strengthened its position by accumulating an additional 1% royalty interest in O2Ver from several of the original inventors, increasing our total royalty to 3%. We expect meaningful long term revenues from O2VARE, making it one of the most capital efficient royalty assets in our portfolio. Turning to the next slide, Varonis O2 there is on track to achieve blockbuster status by 2027. For context, our previous long term royalty outlook had anticipated reaching this level of sales by 2029.

In July, Merck announced its acquisition of Verona for $10,000,000,000 We believe Merck’s global scale and commercial strength positions them to further accelerate O2VARE’s launch trajectory. Some analysts now project peak sales of 5,000,000,000 to $6,000,000,000 for O2Vera, which would be meaningful upside to our current long term outlook. Moving to the next slide, I would like to highlight what strategically differentiates Ligand. The first is focus. Our guiding objective is to deliver profitable compounding growth.

We pursue this by remaining disciplined in our investment approach and identifying underappreciated but high quality assets that address significant unmet need. Second is our asset base. We manage a diversified and growing portfolio of royalty assets that generate consistent and predictable revenue. Our royalty interests are acquired or originated in late stage development and commercial stage assets where we see a superior risk reward profile. Third is our team.

Ligand’s highly experienced team brings decades of expertise across investing, clinical development, operations, regulatory strategy, and deal structuring. Coupled with strong origination networks, this enables us to source and close high quality royalty investments in areas of significant clinical value with relatively low risk. We are outcome oriented and remain focused on executing our strategy of acquiring high growth, high margin assets that require de minimis operating expense investment. Today, royalty capital still represents a small fraction of the total capital deployed across the life science sector. We believe that our model is highly differentiated, scalable and positioned to drive significant growth for years to come.

In conclusion, the strength of our investment portfolio of over 90 assets has never looked better. Through our disciplined investment approach, we continue to create and unlock shareholder value through innovative strategies and we are highly optimistic about the future of Ligand. I’ll turn it over to Paul Haddon now for an update on our investment pipeline and our recently announced investment in Orchestra Biomed.

Paul Haddon, VP of Strategic Planning and Investment Analytics, Ligand Pharmaceuticals: Thank you, Todd. In the 2025, we continue to execute on our strategy of partnering with companies, both public and private, to provide creative non dilutive capital solutions. In the first half this year, we saw record setting origination activity. We remain focused and disciplined, deprioritizing investments that lack sufficient return potential for a strategic portfolio fit. We currently have approximately 25 active investment opportunities under review, representing an even balance between accretive and preapproval transactions.

Since the start of the year, we closed four new investments including Castle Creek, the final O2Verner inventor buyout, the merger of Pelfos Therapeutics and Channel Therapeutics, and our most recent investment with Orchestra Biomed. I would note that all four investments exemplified our flexible investment strategy including royalty monetization, project finance and special situations investments. I’d like to highlight our most recent investment with Orchestra Biomed, a NASDAQ listed company. Last week, we announced a $40,000,000 tranche investment in two of Orchestra’s innovative FDA breakthrough designated medical device programs, AVIM therapy and Virtu Serialimus Angio Infusion Balloon or SAB for short. Medtronic, Orchestra’s development and commercial partner for the AVIM program also committed $31,000,000 in new capital.

Orchestra also raised $40,000,000 in public offering bringing the total committed capital to $111,000,000 for the largest medical device capital raises this year. Our investment helps fund the development of these two breakthrough technologies, which are in late stage development. The first program, Avion Therapy, is partnered with cardiac pacemaker leader Medtronic and has already begun its pivotal trial. It was granted FDA breakthrough designation just this past April. AVIM Therapy, a simple firmware upgrade, is designed specifically to leverage the pacemaker’s existing capabilities to manage blood pressure without additional hardware changes.

As a result, AVIM therapy occupies a specialized niche in treating hypertension in patients already indicated for a pacemaker. The second program Virtu SAB is partnered with Japanese medical technology company Terumo and is nearing pivotal study initiation. As mentioned, it too received FDA breakthrough designation. Virtu is an innovative first in class medical device designed for the treatment of arterial diseases, particularly coronary in stent restenosis. It represents a significant advancement over traditional drug coated balloons and stents because it does not rely on a surface drug coating.

Instead, Virtu uses a proprietary non coated microporous balloon to deliver the drug. Our $40,000,000 investment consists of a $20,000,000 payment at closing, an additional $15,000,000 to be funded at the nine month anniversary from closing, And we also invested an additional $5,000,000 to purchase shares of Orchestra common stock. In exchange, we will receive a high teens royalty on the first $100,000,000 of Orchestra revenues annually from these two licenses and also a mid single digit royalty on Orchestra’s license revenues greater than $100,000,000 per year. Our strategic collaboration with Orchestra reflects our commitment to investing in innovative de risked late stage therapies. This partnership expands our diversified portfolio of potential royalty generating assets into the medical device space and moves us closer to our goal of delivering innovative therapies to patients.

With that, I’ll turn the call over to Tavo. Thank you, Paul.

Tavo Espinoza, SVP of Investments and Business Development, Ligand Pharmaceuticals: I’m pleased to report another strong quarter of financial performance. Total revenue for Q2 twenty twenty five grew 15% year over year to $47,600,000 Adjusted EPS rose 14% to $1.6 per share, reflecting solid execution and continued operating leverage. Royalty revenue was robust, increasing 57% from the prior year to $36,400,000 underscoring the strength and momentum of our partnered programs. We ended the quarter with $245,000,000 in cash and investments. When factoring in our undrawn credit facility, we have approximately $450,000,000 in deployable capital to support our growth initiatives.

Based on our performance year to date and the impact of the Peltos transaction, we’ve raised full year 2025 revenue and adjusted EPS guidance. I’ll walk through the details later in the presentation. Moving to the next slide. Key drivers of royalty revenue growth include strong performance from Varonis Otovir, Trevyr’s Filspari, Recordati’s Carziva and Merck’s Cabaxiv and Vaxnuvanse. Expanding on a few of these programs, we continue to be highly encouraged by the launch of O2Ver for COPD.

Verona reported a 45% sequential increase in Q2 twenty twenty five, sales of $103,000,000 and we anticipate its strong launch trajectory to continue throughout 2025 and beyond. Turning to Felspari, we continue to see strong commercial momentum. Trevya reported Q2 sales just last night in line with our internal estimates and representing robust year over year growth. This performance underscores the growing adoption of FILSPARI in IgA nephropathy. Merck’s CapXiv and Vaxnuvan also grew this quarter reinforcing Merck’s competitiveness in the pneumococcal vaccine space.

CapXiv generated $129,000,000 in sales, a 21% sequential increase after more than doubling sequentially in Q1. And Vaxnuvanse generated $229,000,000 in net sales, representing a 20% year over year increase, driven by favorable public sector activity in The U. S. And stronger demand in select international markets. Jazz reported Rylae sales of $101,000,000 and Amgen reported Kyprolis sales of $378,000,000 representing a 717% sequential increase respectively.

On Captisol, we recorded $8,300,000 in material sales this quarter compared to $7,500,000 in the 2024. The increase was driven primarily by demand from Gilead for Veclery. Turning to operating expenses. R and D and G and A combined expenses increased in the second quarter, primarily due to headcount growth and investments made to incubate the Peltos business. For the quarter, G and A and R and D expenses were $6,600,000 and $20,200,000 respectively, versus $5,400,000 and $17,600,000 in Q2 twenty twenty four.

We expect GAAP operating expenses to decrease in the second half of the year given the deconsolidation of Peltos effective July 1. GAAP net income for the quarter was $4,800,000 or $0.24 per diluted share compared to GAAP net loss of $51,900,000 or $2.88 per share in the prior year period. On a non GAAP basis, adjusted net income for Q2 twenty twenty five was $32,000,000 or $1.6 per share, up from $25,800,000 or $1.4 per share in Q2 twenty twenty four, driven primarily by royalty revenue growth. This next slide reflects the long term royalty receipts outlook we introduced at our Analyst Day in December 2024. At that time, we outlined a path to achieving a 22% compound annual growth rate and royalty receipts from 2024 through 2029.

That projection is supported by our existing commercial portfolio, which we expect to grow at a 13% CAGR and our risk adjusted development pipeline referred to as the PharmTeam, which adds another 5% CAGR. The model reflects contributions from key programs, including Fulspari, O2VARE, Carziva and ZELZUVME with all inputs grounded in conservative assumptions. The balance of growth is expected to come from future deals and investments which remain a meaningful upside lever. While we continue to view this framework as a solid base case, several recent developments give us increased confidence that upside to this outlook is achievable. Turning to the next slide, I’ll highlight a few notable updates, each of which has a potential to meaningfully enhance our long term royalty projections.

First, O2Vera is tracking well ahead of initial expectations. As I mentioned earlier, Verona’s Q2 sales grew 45% sequentially and consensus forecast now project $2,000,000,000 in sales by 2029, up from $1,200,000,000 previously. As a 3% royalty holder, Ligand stands to benefit materially from this upside. Second, Tulspari continues to perform well commercially and we’re closely watching the upcoming PDUFA decision in IGAN later this month, along with a potential AdCom in the fall for FSGS. If approved, the FSGS indication could significantly expand FOLSPARI’s market opportunity, potentially north of $1,000,000,000 in FSGS alone according to sell side analysts.

As we track data readouts, regulatory events and commercial progress over the coming quarters, we’ll evaluate whether updates to our long term model are warranted and plan to share a refreshed outlook at our twenty twenty five Analyst Day in December. Before I turn to our financial guidance, I want to touch on the deconsolidation of Peltos, which became effective on July 1 and informs part of our updated outlook. We now own approximately 50% of Peltos outstanding shares, which will be reported on our balance sheet beginning in Q3. These shares will remain restricted until the six month lockup period expires. As of today, the estimated fair value of our stake in Peltos is approximately $100,000,000 Now turning to guidance.

In Q3, we expect to recognize a gain on the sale of Peltos to Channel Therapeutics, reflecting the difference between the fair value of the consideration received and the net carrying value of Peltos’ net assets. This gain includes the upfront consideration received on the ZELZUMI out license component, which we intend to retain in our adjusted earnings. The remainder of the gain, along with prior incubation costs, will continue to be excluded from our non GAAP guidance and results. With that context, here’s how our revised full year 2025 guidance is shaping up. Royalty revenue is now expected to be between $140,000,000 and $150,000,000 up from the prior range of $135,000,000 to $140,000,000 Captisol sales remain unchanged at $35,000,000 to $40,000,000 Contract revenue, which is where we’ll capture the value of the upfront fee on the CellXumi out license component has increased to $25,000,000 to $35,000,000 up from 10,000,000 to $20,000,000 Total core revenue is now expected to be in the range of 200,000,000 to $225,000,000 up from 180,000,000 to $200,000,000 And we’re raising core adjusted EPS to $6.7 to $7 per share compared to the previous range of $6 to $6.25 per share.

These updates reflect not only the impact of the Peltos transaction, but also strong underlying growth and increased visibility into our royalty streams, particularly from O2Bear, Tulspari, Carziva and CapActive. That concludes my remarks. I’ll now turn the call back to Todd for closing comments.

Todd Davis, CEO, Ligand Pharmaceuticals: Thank you, Tavo. Last year, we saw an unprecedented number of new approvals across our portfolio, including ZELSUVNI, CAPACTIV, O2VER and the full approval of VILSPARI. In 2025, we are pleased with the strong launch trajectories of these therapies and are confident this momentum will continue. We are optimistic that Merck’s global scale and commercial expertise will further accelerate the launch of O2VARE and we couldn’t be more encouraged by the progress the Peltos team has made with selSubme. Our investment platform continues to provide us with the ability to meaningfully expand our portfolio.

With a diversified foundation of commercial royalty generating programs and a robust late stage pipeline, we are well positioned to execute on our strategic objectives and deliver sustained growth and long term value for our shareholders. 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.

Conference Operator: Thank you. We will now begin the question and answer session. And your first question comes from the line of Trevor Allred of Oppenheimer. Congrats

Trevor Allred, Analyst, Oppenheimer: on the great quarter. What can you tell us about your expectations for the Peltos launch? Are these most severe kids seen at pediatric dermatologists? Can you say anything about your prior market research that might suggest initial market demand?

Lauren Hay, Vice President, Ligand Pharmaceuticals: Yes. Thanks for the question, Trevor. We’re very optimistic about the launch here around ZELSUMI. First of all, and kind of core to our strategy is we partnered with a very strong team here. Commercially, this is a very experienced team.

It’s done multiple product launches in their career, and we have a lot of confidence in their ability to navigate the product launch with payers, the promotional activities, etcetera. Our research over the last year and a half has really shown high demand for this product. There are current treatments that are executed as in office procedures. They work, but they are inconvenient and sometimes painful. And the ZELSUMI product is prescription product, which is much more convenient.

We have a very motivated patient group here in the form of the parents, often of the kids with this highly contagious skin infection, which is disruptive to their lives and ability to participate in activities at school and things like that. So we are pretty optimistic. And then finally, would just say also, I think the forecast expectations here are very reasonable and in fact conservative because at 175,000,000 in peak sales, which is what they’re currently targeting. That captures fewer than 100,000 patients in a market with approximately 16,700,000 patients and a dearth of current solutions. I mean, So, we’re just very optimistic about the potential for this product.

Trevor Allred, Analyst, Oppenheimer: Got it. Yeah. That’s helpful. And can you also share some expectations for what you think the Vilsparri RINs removal might do to improve uptake? Have you guys done any internal diligence there to see what the potential step up in revenue could be?

Lauren, Vice President, Ligand Pharmaceuticals: Yeah. Hi, Trevor. This is Lauren. Thanks for the question. I think it’s a a very timely one.

So Trevere has not shared a quantitative estimate for their expectations for increased uptake, but I can give you sort of a directional sense for for where we see this headed. You know, as we know, FILSPARI is really expanding its usage in earlier stage patients. As a reminder, when FILSPARI was under accelerated approval, the treatment could only be used in thirty percent of IGAN patients due to label restrictions that limited its use to patients with proteinuria over one point five grams per gram. And with full approval, FILSPARI is now kinda moving into the full spectrum of IGAN patient severity, kinda moving into earlier lines of treatment. So Trevyr has recently shared that over half of patients who are now starting FILSPARI have proteinuria in the less than one gram per gram less than 1.5 grams per gram segment.

So it is moving earlier in the treatment paradigm. And with that, what we see is that the REMS modification should help to remove a barrier to utilization in that kind of earlier stage patient segment. The quarterly monitoring aligns pretty well with the the kind of routine monitoring frequency of visits to the office anyways. So we’re optimistic about the opportunity in this earlier stage segment that sort of aligns with the natural progression of usage of VILSPARI with the full approval.

Trevor Allred, Analyst, Oppenheimer: Got it. Thanks for taking my questions.

Conference Operator: And your next question comes from the line of Doug Maem from RBC Capital Markets. Please go ahead.

Doug Maem, Analyst, RBC Capital Markets: Thank you and good quarter. Tavu, 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? The products are doing better than anticipated. I’m just curious why this isn’t following more down to the bottom line and to cash flow.

: Yes. Thanks, Doug. Appreciate the question. A couple of factors driving that dynamic, you will. One, on the operating expense side, we’re just being a bit cautious as we spin off the Peltos operation.

On top of that, we are looking to make some investments in our business development function given the richness of the funnel there, if you will. Separately, and probably more more impactful here are the the tax rate. We’re getting more more revenue coming in from foreign operations in

Tavo Espinoza, SVP of Investments and Business Development, Ligand Pharmaceuticals: The UK for for O2Ver.

: That’s a UK legal entity that we have to pay taxes into into that country. And then also for for the Pyron acquisition, which is an Austrian Austrian company, that the tax rate that we pay into Austria is also a little bit higher than our statutory rate and the mix of revenue there is coming a little bit higher given the outperformance of those two products. And then separately, the share count as our stock price goes up, the dilution our forecasted dilution as a result has moved up. And so that’s also causing a little bit of a drag towards the bottom line.

Doug Maem, Analyst, RBC Capital Markets: Okay. That’s really helpful. And then Todd, the O2Ver 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?

Lauren Hay, Vice President, Ligand Pharmaceuticals: Yes. The asset is no. And we tend to be long term royalty holders here. We don’t really have an intention of selling any of our royalties at this point. So it’s just not core to our strategy.

Doug Maem, Analyst, RBC Capital Markets: Yes. No, that’s great to hear. Thank you very much.

Conference Operator: And your next question comes from the line of Matt Hewitt with Craig Hallum. Please go ahead.

Melanie Herman, Executive Director of Investor Relations, Ligand Pharmaceuticals0: Good morning. 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? How are you looking at opportunities given the constant news flow regarding various products and markets?

Lauren Hay, Vice President, Ligand Pharmaceuticals: Well, I think our view on that, Matt, is very macro in that there’s been descending price pressure on the pharmaceutical industry that’s been pretty heavy for the last fifteen years, and we expect that to continue. And maybe over the next ten years, we’ll even get to kind of pricing parity with Europe and other markets here in The US market. And that’s just our long term view. That’s what we put in our models. And the best position to be in in that kind of environment, of how it comes down specifically, is to be investing in drugs that really deliver very high clinical value and solve big problems because, ultimately, that puts you in the best position to negotiate with payers.

And so that’s one of the reasons we’re very focused on investing in things like Pavilis products, the Peltos product, both of those are zero to one. Zero treatments, first treatments in categories. We really like those kinds of opportunities and that’s really the best position you can be in, in what will be a challenging payer market for the entire industry going forward.

Melanie Herman, Executive Director of Investor Relations, Ligand Pharmaceuticals0: Got it. And then maybe a question for Tavo. But with the increase in contract guidance here for the rest of the year, roughly $15,000,000 how should we be thinking about the cadence? It sounds like the bulk of that will hit in Q3 with the Palfos transaction, but how should we split up that $15,000,000 of incremental revenues there?

: Yes, Matt. What you can expect in Q3 is that out licensed components, that’s the that’s the main driver of the increase to that category or that that line item, if you will, in the guidance. We also earned a $5,000,000 milestone on the commercial launch of ZELZUMI. And so that’s also going to be coming through in q And then the balance you’ll see in Q4.

Melanie Herman, Executive Director of Investor Relations, Ligand Pharmaceuticals0: Got it. All right. Thank you.

Conference Operator: And your next question comes from the line of Larry Solke of CJS Securities. Your line is open.

Melanie Herman, Executive Director of Investor Relations, Ligand Pharmaceuticals1: Great. Joined a little late. Just curious the just a follow-up on the guidance question. The in terms of the revenue increase, in terms of the bottom line increase, are you changing anything in terms of operating expenses? I know you guys have been investing more in the business development team.

But it looks like just if I do the math, actually, the revenue increase, if I kind of flow that through the normalized tax rate, it should be about $0.75 So it looks like maybe that’s all pretty much flowing to the bottom line, right? It doesn’t look like there’s much change on the expense assumption. Is that fair?

: Some incremental increase on operating expenses, but yes, it’s just incremental. And then there’s also some movement, as I mentioned earlier, some movement on the shares outstanding that impacts the EPS. But in terms of just net income, it’s going to be the operating expenses and the tax rate that’s moving up a little bit.

Melanie Herman, Executive Director of Investor Relations, Ligand Pharmaceuticals1: Got you. And on the Xelsuvamy, is that I know you talked about $175,000,000 kind of target ultimate sales goal. I imagine that’s like a three to five year maybe a little maybe five year target or something like that. Just curious, are you actually building much into the back half this year? I imagine it takes a little while to gain traction or just anything anecdotally you could provide?

Lauren Hay, Vice President, Ligand Pharmaceuticals: Yes. No, I think launches are hard even though we’re very confident in this team. So we have pretty small expectations for this year as they’re just getting out of the block, but view it as a very good long term contributor, Larry, as you pointed out.

Melanie Herman, Executive Director of Investor Relations, Ligand Pharmaceuticals1: Got you. And just lastly, just on M and A business development. Obviously, you guys have been super active in the last couple of years, and kudos to you on that. And an interesting little recent deal as well. Just how’s the pipeline looking?

Obviously, your balance sheet remains really strong. Just curious if lots of opportunities in front of you, any thoughts on that? Thanks.

Paul Haddon, VP of Strategic Planning and Investment Analytics, Ligand Pharmaceuticals: Yes. Thanks for the question, Larry. Pipeline looks strong. I think we’ve been pretty consistent this entire year that’s been robust. The mix of both accretive and preapproval opportunities and the team remains hard at work.

So thanks for the compliment, but we definitely are working through that pipeline and looking to bring in attractive assets for the balance of the year.

Melanie Herman, Executive Director of Investor Relations, Ligand Pharmaceuticals1: Excellent. Thank you. I appreciate it.

Conference Operator: And your next question comes from the line of John Vandermosten of Zacks SDR. Please go ahead.

Melanie Herman, Executive Director of Investor Relations, Ligand Pharmaceuticals2: Great. Thank you. And, appreciate all the detail on the movement there in the income statement coming up in the future. Wanted to ask a question about Merck’s ownership of Verona and how it will add to OTOVERA’s potential? And specifically, what can they do to expand the market given their dominance as one of the largest pharmas?

Lauren Hay, Vice President, Ligand Pharmaceuticals: Well, I think what we’re really seeing there is kind of their global capabilities. Obviously, Verona was a smaller company. I think in general, the expectations around a smaller company’s ability to execute globally is obviously a slower rollout. And in the hands of Merck, I think the as well as Verona did, by the way, we think they did an amazing slash outstanding job. Globally, Merck is very strong, and so we expect the rollout globally to accelerate in their hands.

Melanie Herman, Executive Director of Investor Relations, Ligand Pharmaceuticals2: Okay. And question on Orchestra Biomed. Is it I guess assumed that Medtronic is going to provide the commercialization pathway for their pipeline therapies?

Paul Haddon, VP of Strategic Planning and Investment Analytics, Ligand Pharmaceuticals: So, yes, correct. Medtronic is the commercial partner on the AVIM technology and then Tarumo is commercial partner on the Virtu SAB balloon. So there’s two partners involved there.

Melanie Herman, Executive Director of Investor Relations, Ligand Pharmaceuticals1: Okay. Thank you.

Conference Operator: And this does conclude our question and answer session. I would like to thank our speakers for today’s presentation, and thank you all for joining us. This now concludes today’s conference call. You may now disconnect.

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