Greetings, and welcome to the Ligand Pharmaceuticals Second Quarter 2014 Earnings Call. At this time, all participants are in a listen only mode. A question-answer-session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Erika, Luib Investor Relations, please begin.

Thank you, Kevin. Welcome to Ligand's Second Quarter Financial Results for 2014 and Business Update Conference Call. Speaking today for Ligand are John Higgins, President and CEO; Matt Foehr, Executive VP and COO; and Nishan DeSilva, VP of Finance and Strategy and CFO. As a reminder, today's call will contain forward-looking statements within the meaning of federal securities laws. These may include, but are not limited to, statements regarding intents, belief or current expectations of the company, its internal and partner programs, including Promacta, Kyprolis and Duavee and its management. These statements involve risks and uncertainties and actual events or results may differ materially from the projections described in today's press release and its conference call. Additional information concerning risk factors and other matters concerning Ligand can be found on Ligand's public periodic filings with the Securities and Exchange Commission, which are available at www.sec.gov. The information in this conference call related to projections or other forward-looking statements represents the company's best judgment based on information available and reviewed by the company as of today, August 04, 2014, and do not necessarily represent the views of GSK, Pfizer, Onyx, Amgen or any other partners. Ligand undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. At this time, I'll turn the call over to John. John?

Hey Erika thank you. And thanks to all of you for joining us on our second earnings call. The last few months have been an exceptional period for Ligand and the company truly has never been strong. We are firing on all cylinders. Looking at objective standards, investors can see our progress in four main areas; our financial growth, our research productivity, licensing achievements and balance sheet strength. We are pleased to have announced a share repurchase program and believe buying back our stock at these levels given the strength of the business is a good long-term investment. In terms of financial performance we are ahead of our outlook year-to-date now are raising guidance for the rest of 2014. Partners for our two main assets GSK and Amgen just announced record quarterly sales for Promacta and Kyprolis. A quarter-over-quarter sales increased for both products was substantial, approximately 15% for both products. Promacta reported $92 million up from $80 million in Q1 2014 and Kyprolis $78 million up from $68 million in the first quarter. An additional comment on Kyprolis, earlier this morning, we were very pleased to see Amgen's announcement regarding the Phase III results for the Kyprolis ASPIRE, trial given the duration of improvement over the combination treatment, the hazard ratio and the strong P value. With the data, Amgen announced they're on track for regulatory submission. Our financial growth potential is becoming increasingly clear. We enjoy good revenue mix from three main sources of revenue royalties, Captisol sale and license fees. Plus we have very high growth margins, low operating expenses and project our effective tax rate to be less than 5% for the next several years. We have increased visibility on the business and our financial growth. It is our expectation that revenues will continue to grow…

Thanks John. Q2 was a remarkable quarter for Ligand's partnered portfolio as well as for our current unpatented internal R&D assets. We announced impressive clinical data and also completed our first deals for our internally developed LPT platform technology with Omthera AstraZeneca. Additionally, our Captisol business is doing extremely well. Interest in the Captisol technology is at record high and we’ve added a number of new Captisol partnerships recently adding Medivis, Marinus and Celgene to our growing list of Captisol partners. There were a series of important medical meetings during the second quarter and Ligand assets were centeral to a number of them. It's clear when one attends these meetings that the partnered portfolio Ligand is ripening nicely and our partners have continue to invest heavily in advance -- to advance our fully funded program. At ASCO Sanofi presented first-in-human data for their MET kinase inhibitor SAR125844 which is Captisol-enabled. The results presented from a dose escalation study in patients with advanced solid tumors showed a favorable tolerance profile that's favorable PK profile and encouraging early clinical evidence of anti-tumor activity. We see this as a promising clinical stage asset that is in the hands of a very capable global player. DUAVEE which was launched very recently by Pfizer in the U.S. was a centerpiece of the ENDO of meeting, Pfizer has a significant presence there and it’s clear to us that they were focused on Duavee’s launch and are putting significant resource behind it, and note also that we expect EU regulatory action for Duavee in the coming months. Positive Phase III data PROMACTA in pediatric ITP which resented at (inaudible) and GSK announced at that time that they are pursuing global filings to expand PROMACTA’s Label and compete right now and also announced that they initiated a global…

Thanks Matt. I'll recap just a few of the highlights from our earnings release issued earlier today. Total revenue for the quarter was 10.6 million, up 1 million compared to the same quarter last year, driven primarily by an increase in license and milestone revenue by 1.2 million and slightly higher royalties offset by lower Captisol material sales by 0.5 million. In addition, our cash, G&A and R&D expenses were virtually flat compared to the same quarter last year. Our cost of goods sold for the quarter was 1.2 million resulting in a gross margin on material sales of 66% driven by a higher proportion in material sales for using clinical products. Total gross margin taking to account all revenues was 89% for the quarter. For the quarter, we reported non-GAAP income from continuing operations on $5.2 million or $0.24 per diluted share compared to $2.5 million or $0.12 per diluted share for the same period last year. On the cash side, we ended the quarter with 23.3 million of cash, short-term investments and restricted cash, while paying off nearly 7 million of debt during the first six months of the year. As at the end of July, we have completely paid off our debt. On July 17th, we announced that the Board of Directors had authorized a share repurchase program of up to 10 million over the next year. These potential repurchases will be funded from our existing growing cash balance. Looking forward that we are increasing our guidance of total revenue to between 64 million and 66 million and non-GAAP earnings per diluted share to between $1.50 and $1.55, which is higher than previous guidance which called for revenue of between $62 million and $64 million, the non-GAAP earnings per diluted share of between $1.40 and $1.45. For the third quarter, we expect total revenues to be between $13 million and $14 million and non-GAAP earnings per diluted share to be between $0.26 and $0.29. Our non-GAAP earnings per share guidance for both the full year and the third quarter excludes changes in contingent liabilities mark-to-market adjustments for amounts owed to licensors stock-based compensation expenses. For the full year revenue outlook, we forecast that approximately 45% of revenue will be from royalties. The other revenue will be in mix as Captisol and licensing fees. Royalties and licensing fees carry a 100% gross margin and Captisol revenue carries approximately a 60% gross margin. Finally, on the expense side, we continue to run the business with approximately 20 million of cash expenses which is broken down as roughly one-third R&D and two-thirds G&A. With that I’ll turn the call over to the operator and open it up for questions.

Thank you. At this time, we will be conducting a question-and-answer session. (Operator Instructions). Our first question today is coming from Joe Pantginis from Roth Capital Partners. Please proceed with your question.

Hey guys, good morning and congratulations on a great quarter. I know there is a lot of working parts here. A few questions if you don’t mind and if I guess if too many, just let me know and I will jump back in the queue. With regard to -- let’s start with Promacta. Obviously there is a lot of working parts here. When you look at the hepatitis C market, obviously there has been a lot of attention to this lately. Maybe you guys can address the ex-U.S. tractions since it’s approved, like you said in about 50 countries since hepatitis C is primarily non-genotype 1 ex-U.S. So what it might be doing ex-U.S. since interferon still is going to remain a mainstay up therapy?

Yes, Joe, this is Matt. I can talk to that. Thanks for the question. Yes, as you say, the hepatitis C indication was the second at and on after adult IGP, it’s in 50 countries now that continuing to expand it more. GSK saw good growth across the brand, across all geographies in the second quarter. So, I think we're starting to see some impact of not only the label expansion, but also the geographic expansion of Promacta. And as you say, there are genotypic differences as one goes around the world and you would expect that to have some impact. Now Promacta has always been aimed at that sickest subset of patients that are so sick that their psoriatic, they are not producing platelets and the platelets support therapy, but GSK is obviously focused on expanding it.

Okay. No, that's helpful. Thank you. And I guess a question for you, John. When you talk about your business model, you have like you said about over 100 shots-on-goal right now. And I do get a lot of questions from investors with regard to this model with Ligand’s desire to still go out and potentially acquire companies for their pipelines et cetera. And is it something that would still remain at the top of your list or you sort of look to develop all of these internal products now? So, where does it sort of fit in your business model?

Yes. Joe, our business as you know is focused on answering key technical questions, either they are technology based or drug discovery based; and then seeking partners at the earliest inflection point. With acquisitions, we over the last, four years, five years, we've seen opportunities either because of companies that were severely undervalued or in other cases where we just saw a very good fit with bolting on technology to drive new licensing deals. We will continue to look for acquisitions. We don’t want to add a lot of cost, a lot of cash burned to our P&L but if we can find businesses that we can bolt-on in efficient, good valuation acquisitions, we’ll do that. What has changed in the last year, year and half for us in a very positive way, the market right now is so strong for financings, obviously valuations are up across the board in biotech but there is so much new money that’s going into this industry which is driving new interest, partners coming to Ligand seeking licenses for our programs. This is -- frankly was unexpected a couple of years ago but it now is arguably the largest driver of our deal making, not acquisitions but partnering with these new companies. A good example of Sage Therapeutics, company is essentially founded three years ago around an early license with Ligand. They have demonstrated very good data in coma patients and we’re public in a very successful IPO to just about a month ago. We did a deal with TG Therapeutics for IRAK-4. So, this is an example where the model is versatile. It can pursue acquisitions if to the rightsize and structure or in this market in a much stronger economy we’re finding a chance to grow our pipeline through licensing and that really -- those two avenues has really been what’s defined the growth in our portfolio.

That’s really helpful. So, obviously you still have the optionality to look at many different things. And then maybe I’ll just ask one quick one on Captisol. So, maybe for Matt or and Nishan. In the past and correct me if I am wrong, you sort of described the revenue growth for Captisol potentially being a little choppy just based on the timing of orders. But when you combine this with your today’s discussions about the growing interest for the drug and more interesting you've ever had, just wanted to know if you might be looking more towards some smooth growth?

Yes, I can comment on that and Nishan can add any color as well Joe. I mean they're with Captisol in terms of material sales side as what you are obviously getting at. There is always an element of lumpiness and that's just part and parcel, because every program maybe they're using a different amount of Captisol, maybe they're starting Phase III trial, may be they're starting the Phase I. So we see that. We're getting a lot of visibility based on ordering and order and planning with our partners. So there is an element of lumpiness that exists even with the growing nature of the interest around Captisol. I will say the inbound request for samples of Captisol and these don’t all translate into licensing partnerships but it says a lot about the interest in the technology. We’re up over 40% compared to first half of year last year and first half of the year this year. So there is a lot of interest out there but I do think there is still an element of lumpiness that can exist within the Captisol business. I don’t know Nishan if you want to add anything there.

Yes and I agree I think Joe as you think about the partners that are running their clinical programs and clinical studies there is always the degree of unpredictability there in terms of new studies that have to be done that come online and timing of that, and that is kind of one of the factors that adds in to the lumpiness of the orders.

And importantly our commercial partners also uniformly are seeing their needs as increasing, which is always great to see.

Guys, really helpful thanks a lot.

Thank you, Joe.

So our next question is coming from Matt Hewitt from Craig-Hallum. Please proceed with your question.

Good morning gentlemen.

Good morning Matt.

A couple of different topics First, you mentioned Captisol during the quarter, you signed some new deals there obviously seeing strong request. How many different entities or partners have you received request from when you look at, I guess over the last couple of years? So I mean, we're talking about hundreds of different companies or is it a lot of times, the same partners for different programs that they're looking at?

Yes, I'll say, it's definitely in the hundreds. We've got a lot of difference and a lot of unique new partners sometimes we get core request from players we've, new companies that we’ve never heard of, but it is definitely in the 100 span.

Okay, thank you. And then I would assume that in some of the lumpiness in material sales is kind of a delta that we're seeing versus our estimates with the Q3 guidance that you guys gave this morning, it was just a matter of timing. Obviously the full year guidance went up, so your confidence that those orders will hit in the fourth quarter?

That's right, yes. We got, as you know good visibility on royalty trend lines. We book on a one quarter lag and have a pretty good sense of trends certainly over the next few quarters for royalties. The Captisol result revenue again commercial sales, long-term forecasting, good planning around debt, clinical trials really do drive the timing and as we've discussed first quarter was a strong period of orders there, some major clinical trial events are actually ahead of schedule. But overall as Matt indicated the Captisol revenues are going up. Back to your first comment or question about the volume of request. As Matt said, highly diversified across a vast array of companies. What's interesting is that, the success of Captisol is driving more and more interest. As Matt alluded to, new patents have issued, new claims are being allowed in Europe, that’s creating more feasibility. There are more partners publishing data with Captisol based programs than ever before at these medical conferences. We see more interest not only in I.V. but oral and ophthalmic, topical. So we are seeing and that’s the part of the business that may not be as obvious to investors, but what is very clear to us the last 6 to 12 months is that the more successful cash flow is becoming, the more it’s used by partners like Amgen for Kyprolis, the more awareness is out there and that’s driving more interest in sampling. So overall really a very solid environment right now for Captisol.

Alright, great, thank you. Maybe two more and kind of bouncy around here a little bit but glucagon, you had some great data that came out earlier this summer, what’s the next step there, is it announcement of licensing or maybe multiple licensing deals or do you think you should need to garner a little bit more data to really drive a licensing deal?

Yes Matt I will take, this is Matt. The data as I said, the data has been seen as uniformly positive, we are very excited as the data came for the trial and we are really pleased to present it, really biggest IV stage versus the ADA meeting in June, that’s created inbound interest in for the asset and as we talk to people about the data the reception is uniformly positive. We are going to assess that interest as we move towards this initiation of multiple ascending dose trial in the coming months. So as we have done with other programs as we are progressing them we obviously entertain interest, but we will assess that as we progress.

Alright. And then last one on the Amgen news, obviously fantastic on the ASPIRE trial data meeting at the primary endpoint. They did mention in there the secondary end point is not yet mature. Did they need to wait for their secondary end point? Or did they have enough at this point that they can file the new regulatory submissions?

Yes, Matt. They said in their release, Amgen said that the results they announced today will form the basis of regulatory submissions throughout the world in the first half of next year. So, they are planning, based on that, they are obviously planning on filing Kyprolis around the world with the positive data they presented this morning. So, anything further than that I would obviously direct you or anyone to Amgen.

Alright, thanks. And congratulations it's a great quarter guys.

Yes. Thanks.

Thank you. Our next question today is coming from Irina Copper from Cantor Fitzgerald. Please proceed with your question.

Hey, good morning and thanks for taking the questions. I why to explore the 100 partner programs a little bit more. Would you be able to provide an update on what percentage of those programs are early stage like Phase I, Phase II versus later stage programs?

Sure. Yes, Irina generally I'll describe how we provide that information and Matt can add any more color. Every quarter, the last really eight quarters we've been actively licensing Captisol probably driving two-thirds of our licensing, but we've done another third of our licensing deals around new technologies or noble molecule. The updates actually are presented in our investor presentation, about every three to six months, whenever we think there is a meaningful change or update. We'll update the pie charts we use that show the program by phase of development, preclinical all the way through marketed. And we also show pie charts that indicate the composition of the portfolio by company; [Big pharma, biotech, tech pharma] and Ingeneric. So those pie charts evolve the mix of licensing is fairly uniform from early stage all the way through Phase 2 or Phase 3, so there are several changes in this pie chart but so that’s really where investors would get the information.

Okay, got it. And then on the Kyprolis, obviously good news from Amgen, but relative to consensus estimates, consensus estimates for ‘15 model fairly big uptick in revenues. Is there anything in today’s press release that would change that outlook for example timing of these regulatory submissions or is that drug still expected to grow really robustly and there is no change based on the ASPIRE data, how do you think about that?

Well, a good question. And we are not only pleased to see the data, obviously we saw it just minutes before the rest of the world saw it this morning. Amgen has sent us a courtesy release. So this really is very new information we’re processing. The data what we’ve read really looks quite positive, the improvement in the duration of response over the combo therapy, the hazard ratio, obviously P-value. Amgen is signaling the filings. As far as the market uptake, we’re going to be looking at the analysts who publish research on Amgen. We expect those to be out within one to two weeks coming off their quarter call but also with this data. That really is what informs our view of sales potential. And there is a broad range of outlook. Generally, what we have been seeing and this is just general overview is the run rate for Kyprolis this year is about $300 million or so in underlying sales, that’s third line use U.S. only and sales are growing as we saw this past quarter-over-quarter. What we are seeing consensus outlook before this ASPIRE data came out was at the low end, sales were going to peak in the $700 million to $800 million range. So a doubling; may be close to a tripling of underlying revenue that was -- those are the lower estimates that we've seen. The higher estimates showed Kyprolis in the $2 billion to $2.5 billion range as peak sale. So in any scenario, the numbers we’ve looked at show Kyprolis growing but the question is the quality of the data and the timing of the submissions. Given our review of the press release, this data looks positive, this mission is going to be on track for worldwide filings in the first half of 2015. So we’re eager to see how the new analysts -- or I’m sorry, the analysts record the data points in terms of their models. But in any scenario this appears to be positive data and should support continued growth of the brand worldwide.

I mean just as a follow-up to that, the data, will it sort of insight physicians to start using the drugs that can line before its approved, so that would lead to increased use next year or it’s not clear yet whether that is going to happen?

Well in the U.S., this drug is already approved and we physicians have considerable experience with the drug. But how patients and doctors use the drug, it’s probably an area we're not going to comment on; we would direct those questions to Amgen.

Okay, got it. And then just a quick follow-up on financials for the quarter. So you previously guided to $0.11 to $0.13 on EPS and then obviously beat very strongly. So, what do you attribute the beat to over there?

Nishan?

Sure. So Irina, I think there were a few key different factors. We had a review with TG Therapeutics which brought in an upfront of 1.2 million which is 100% gross margin. And then we also did well on the cost containment side in terms of keeping our cost flat. I think it was a combination of few different factors that enabled us to Captisol.

Was a TG Therapeutics, that 1.2 million was that in stock?

Yes. It was an equity molecule.

Okay. Okay, thanks. Those are all my questions.

Thank you. We reach end of our question-and-answer session. I'd like to turn the call back over to Mr. Higgins for any further closing comments.

Thank you. Again, appreciate everybody dialing in today. We are halfway through I guess now end of July early August, a little bit more than halfway through 2014, but are very pleased with the business. We've started the year in January and news and what we knew now, we would have considered to this to be an excellent start to 2014 and are quite please with where does this stand. Generally our view is that the things that we control, we are on or ahead of schedule on. We're driving tremendous productivity out of our research team. We're driving it’s a banner year now in terms of licensing and in terms of managing expenses and just overall financial management, again the business is doing very well. Beyond that, the part of the business that we don't control, the investment and research, the progress by our partners also is very strong. We seen -- as we've described, strong quarterly sales reports out of Amgen and GSK for our lead programs, but they are just in a very strong cadence of news flow and data coming out of our partnered program. So we're seeing positive data that defines of success of our programs and technologies but also underscores a portfolio that's advancing. Not only is it getting larger by new licensing, but we're seeing meaningful advancements through their clinical stages of development. So on balance, we're pleased with the business, we're delighted to have our investors listen to our calls and participate in our story. Thank you very much.

Thank you. That does conclude today’s teleconference. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.