Hello, and welcome to the Ligand Pharmaceuticals Q1 2019 Earnings Call. My name is Ian, and I will be your web event specialist today. [Operator Instructions] And my pleasure to turn webcast over to Todd Pettingill. Todd, the floor is yours.

Welcome to Ligand’s First Quarter of 2019 Financial Results and Business Update Conference Call. Speaking today for Ligand are John Higgins, CEO; Matt Foehr, COO; and Matt Korenberg, 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 intent, belief or current expectations of the company and its management regarding its internal and partner programs. These statements involve risks and uncertainties and actual events or results may differ materially from the projections described in today’s press release in this conference call. Additional information concerning risk factors and other matters concerning Ligand can be found in Ligand’s earnings press release and 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 represent the company’s best judgment based on information available and reviewed by the company as of today, May 2, 2019, and do not necessarily represent the views of any other party. 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 Higgins.

Todd, thank you. Good afternoon and thanks for joining our call. Ligand is well positioned for the short, the mid and the long-term. Considering our updates at our Analyst Day last quarter and development since then, we believe we are in a promising period of growth and expansion for the Company. Now as investors evaluate the business they should consider the breadth and diversity of our asset base, the quality of our technologies and our outlook for financial growth. In terms of diversity we have the most partnered assets or shots on goal under license with the most companies ever. Over 200 shots and over 110 partners. We have programs targeting a broad array of human disease, we have three streams of revenues; royalties, material sales and contract payment with a balanced mix of payments coming in across all three of the categories. We have four main technology platforms available for license and that is up from just one about five years ago. As for these main technologies they are all best in class, they are all very high quality, that’s OmniAb, Captisol, VDP and LTP. There is good IP, there’s good data, evidence of technical success with each of the offerings and they continue to drive new deal flow at little or no cost to Ligand. The new deals further expand our portfolio and create potential upside. Finally, in terms of our financial growth, our outlook is for meaningful top-line growth on a relatively flat cost structure. The growth outlook is fuelled by increased revenue from existing commercial products, new product launches and more milestone payments as we expand the portfolio. We believe the existing business we’ll realize attractive revenue growth and increasing gross margins over the next few years. With our technology licensing model, we can keep costs…

Thanks, John. Our portfolio of partnerships continues to expand the number and to increase in diversity. We have some important updates today and we’ve noted a few new regulatory approvals recently. In March, we saw the FDA approval of Sage Therapeutics’ ZULRESSO, also known as brexanolone injection that uses our Captisol technology in its formulation. ZULRESSO is the first and only treatment specifically indicated for postpartum depression or PPD and its approval was based on results from three pivotal clinical trials, showing that treatment provided significant and rapid reduction of depressive symptoms within days. Postpartum depression is the most common medical complication of childbirth and is estimated to affect approximately 400,000 women annually in the U.S. This is a license that dates back to 2011, which we struck shortly after our acquisition of the Captisol technology. Our partners at Sage expect to launch ZULRESSO late this month, early next month, excuse me. And we look forward to seeing it on the market. CASI Pharmaceuticals announced it received approval to market Captisol-enabled EVOMELA in China. Because of Ligand’s investment in clinical stage R&D for the program years back, we earn a 20% royalty on global sales for EVOMELA. We’re impressed with the management team at CASI, and their focus on the asset. CASI has stated publicly that they see revenue potential for EVOMELA in China of more than $35 million annually. Daiichi Sankyo received approval in Japan for esaxerenone now referred to by the trade name MINNEBRO for hypertension, and announced last week that they launched the product this month. In addition to the hypertension indication, we note that they’re now running a pivotal Phase 3 study of MINNEBRO in patients with diabetic nephropathy, also known as diabetic kidney disease. Many of our other partners are also progressing towards data readouts…

Thanks, Matt. I’ll begin today by diving right into a review of the financials contained in our earnings release issued earlier today. Total revenues for the first quarter of 2019 were $43.5 million, as compared to $56.2 million in the year-ago period. Royalty revenue in Q1 2019 was $19.5 million, compared with royalty revenue of $20.8 million in Q1 2018. We sold our Promacta asset and royalty to Royalty Pharma as of March 6. So included in these numbers is a partial quarter for Promacta in the 2019 quarter resulting in $14.2 million of royalty revenue and a full quarter of Promacta in the 2018 quarter resulting in $15.6 million of royalty revenue. Milestone and license revenues were $15 million in Q1, 2019 versus $30.9 million for the year-ago period with 2018 including the $20 million upfront payment related to out-licensing our GRA program. Captisol material sales were $9 million in Q1 2019, compared to $4.4 million in Q1 2018. Timing of a couple of larger orders contributed to the higher than expected increase in sales. Regarding gross margin, our Q1 gross margin for Captisol sales were lower than the previous year. As you know, our mix of commercial and clinical material sales shifts from quarter-to-quarter and from year-to-year resulting in changes to gross margin. Our material sales cost translated to an overall corporate gross margin of 91% for Q1 2019. On the expense side, R&D in Q1 was $11.3 million, excluding stock comp and other non-cash charges, R&D was $7.1 million. For G&A, our Q1 total was $11.1 million and excluding stock comp and other non-cash charges, G&A was $7.7 million. Taken together, total cash operating expenses for the quarter were $14.8 million, which was in line with our expectation. Turning to net income, GAAP net income for Q1…

[Operator Instructions] We have the question from Larry Solow from CJS Securities. Your line is open.

Great, thanks. It’s a couple on your commercial and a couple on the pipeline. Just on Kyprolis, I think sales grew 10% in the quarter and that seems like that’s about consensus for the year. Can you maybe just discuss when we might see some new data for earlier stage multiple myeloma? Obviously, I think in combination with DARZALEX. So you look at – I don’t know if there’s anything coming up at ASCO, where we might see some of that new data?

Yes, Larry, thanks. This is Matt Foehr. Yes. Amgen reported just yesterday, strong unit growth year-over-year driven primarily by growth in what they described as the key markets including the U.S. and specifically the U.S. at 12% growth. One of the things they’re highlighting is increased adoption of the once weekly dosing that they invested significantly in over the last couple of years. And they now see that approaching 20% of the share for Kyprolis in the U.S. As I said in the prepared remarks, we do see more data coming at ASCO, just kind of continuing to add to the dataset around Kyprolis, but Amgen’s highlighted additional data that will come later this year in combination studies as well as in broader treatment settings, that’s earlier line or in other treatment settings. So we’re continuing to keep an eye out for that and continue to see really impeccable and just top-notch clinical work done on the part of Amgen.

Okay. And Larry, Matt Korenberg, I’ll just add it. Folks should always keep in mind that Amgen reported already Ono, who also collect royalties on doesn’t record for another week or so. So, we’ll make sure to combine those two numbers as we think.

It’s a pretty small minority piece right of the total?

Yes. It’s usually relatively small, I think last quarter was about $12 million, but on that order of magnitude.

All right. And just on the Metavant, you mentioned the Roivant, the RVT-1502. So, this is a – was a – I guess, sort of Phase 2 – early Phase 2, Phase 2a, I guess proof of concept type study that, that they were planning on. And they’re also in Type 2 Diabetes, just remind me where it – or it was just the one pathway that it was seeking right now.

Yes. The trial that we were referring to earlier and that I mentioned in the prepared remarks was a Type 1 Diabetes trial. So, they’re going into – they had plan to go into Type 1 Diabetes patients. You’ll recall Ligand had obviously done some Phase 2 work in Type 2 Diabetes earlier.

All right.

What we can say, essentially the FDA came back to Metavant requesting more studies. The study they’ve requested are non-clinical in nature, which is not uncommon in drug development, but it’s clearly a development for the program, and we wanted to be sure to update investors to say that, that trial that we had originally saw at starting this year will not be. So that’s – the extent we know now, we expect Metavant will provide a further update and we’ll be keeping an eye out for that.

And they haven’t advanced any other – that they haven’t done any other trial or are they seeking to start other trials in Phase 2, more at Phase 2, I mean, Type 2 diabetics or this is the...

Yes, their initial plan was to do – to go into the clinic in a Type 1 diabetes setting. That was their initial plan. And so, that’s kind of where they are now.

Okay, got you. All right, just on the – just quickly on the capital for that, I guess, the cost of goods. Matt, you kind of touched on it little bit, but seemed unusually high, but I guess, like you said, I guess was – must have been related to a larger order and somehow – I don’t know, make the mix shift, obviously makes it changed, but it seemed pretty dramatic even though it’s a small number I get.

Yes, good question. I think we do see this from time-to-time when the mix shift in a way that causes a higher cost of goods and a lot of it that will happen in one quarter or another. Our outlook for the year is still the same margin wise for Captisol. This order we planned at some point during the year and it just happened to come in Q1.

Okay. And just lastly on the Iohexol. Would your plan – maybe you don’t know your plan yet, but after you do this study, the small study, would you go – you’re able to go right into sort of a later stage Phase 2 or even a pivotal trial or is that not known yet?

Yes, Larry, we’ll have data from the trial that we just announced enrollment completion on in Q3. That trial enrolled faster than we expected.

Right.

And after we have that data, generally, our model is to partner early, but there are – any time there are questions, we think we’re well-positioned to invest in answers too. And that can translate into better downstream economics. We generally think about doing that, and that could be the case here as well, we may decide we want to answer or do a little more clinical work around it. But in the meantime, we’ll get the data in Q3, we’ll assess the data and announce it at top-line data and then at medical meetings and go from there.

Got it. Okay. Great, thanks.

Okay. Well, thank you. Really appreciate the turnout and questions here on the call. I want to give a preview, we have a couple of conference events coming up. We’ll see investors on the road at Craig-Hallum in Minneapolis is having their annual investor confab May 29. And then we will be in New York area for the CJS Conference on July 9. So those are two investor events coming up. Really appreciate your time and attention and we’ll keep you updated as the business rolls forward. Thank you.

Thanks to all participants for joining us today. We hope you found this webcast presentation informative. This concludes our webcast. You may now disconnect. Have a good day.