Ligand Pharmaceuticals Incorporated (LGND) Q1 2018 Earnings Report, Transcript and Summary

My name is [indiscernible] and I will be your event specialist today. [Operator Instructions] And please note that today’s webcast is being recorded. During the presentation we will take questions via the phone line. [Operator Instructions] It is now my pleasure to turn today’s program over to Todd Pettingill, Director of Corporate Development and Investor Relations. Todd the floor is yours.

Welcome to Ligand's First Quarter of 2018 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. Information on this conference call related to projections or other forward-looking statements representing – represent the company's best judgment based on information available and reviewed by the company as of today, May 8, 2018, 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 the conference call. At this time, I'll turn the call over to John Higgins.

Welcome and thanks for joining our earnings call. 2018 is off to an excellent start. Our lead partnered assets are performing very well, we entered the largest licensing agreement ever for one of our internal R&D programs and our platform technologies OmniAb, and Captisol, continue to be well received by the industry. Off note we booked over $56 million in revenue this quarter, setting us on the course to generate significant full year financial growth and cash flows. Now first with Promacta. Novartis reported the largest quarter of revenue every at $257 million. That’s up 47% for $82 million over Q1 2017. This is significant as it was also a growth quarter compared to Q4, which was already a very big quarter. We typically see Promacta down a little in Q1, but the momentum for the product continued with another excellent quarter of sales. The drug has been on the market nearly ten years and we believe the growth is coming as a result of Novartis’ continued investment in studies to further prove out the efficacy and safety profile of the drug and physicians continuing to get more comfortable with the drug. Switching gears as for Kyprolis, Amgen reported $222 million in Q1 sales and ONO reports its first quarter sales for the drug May 9. While we earned royalties on worldwide sales for both Amgen and ONO, Amgen’s Q1 sales are up 17% or $32 million, compared to Q1 last year. The past quarter we entered the largest, most substantial R&D in the license agreement in Ligand’s history, specifically we licensed our Phase II stage diabetes program to Roivant Sciences. It's a glucagon receptor antagonist or GRA that have a novel mechanism and impressive clinical and safety data so far. It is a premier deal for Ligand in regards to both the economic terms and commercial potential for the drug if it is successful in development. Under the license Roivant paid $20 million upfront. There are over $0.5 billion of potential milestone payments and a royalty in the low double digit to mean – to mid teen range. Through its recently formed Metavant scientists, Roivant is committed to developing a portfolio of diabetes assets and drive development forward for the program with potential in both Type 1 and Type 2 diabetes. This is a major transaction for Ligand as it caps off several years of successful R&D investment into the program and creates a partner in funding path to continue development toward commercialization. The diabetes market is large and growing, and there’s major need for novel, effective new medicines. Global patents covering various forms of LGD-6972 if granted, would not be expected to expire until 2039. So Ligand has the potential to earn royalties for very long period of time if the drug is approved. On another topic we continue to be excited by the trajectory of our OmniAb platform. Matt Foehr will provide more detail in a moment, but the platform continues to be making significant penetration into the antibody discovery market and is the only transgenic animal platform that offers access to three species under one license. By 2025, we anticipate the platform will have generated over $300 million of contract revenue and will have over 40 clinical stage programs and over 150 research stage candidates, along with OmniAb’s discovered products on the market generating royalties for Ligand. With that I’ll turn it over to Matt Foehr to provide more portfolio update.

Thanks John. I'll start today with a review of a couple of recent developments for selected partner programs. And then I'll discuss progress with our technology platforms in general, recent and upcoming publications and presentations and progress on some of our internal R&D activities. Starting with partner programs, just a few weeks ago Sage Therapeutics announced that they submitted a new drug application to the FDA for intravenous brexanolone in the treatment of postpartum depression or PPD. IV brexanolone utilizes our Captisol Technology in its formulation. Brexanolone received breakthrough therapy designation in 2016, which underscores a significant unmet need that exists in PPD, as breakthrough therapy designation is intended to offer a potentially expedited development path for promising drug candidates intended to treat serious conditions. As background, PPD generally involves a range of symptoms from feelings of fear and hopelessness, to crippling isolation and a general sense of not being whole. It’s estimated that PPD affects more than 400,000 women in the U.S. each year. And without proper screening more than half of those cases may go undiagnosed. There are no approved therapies for PPD. And there’s clear on that medical need for treatment. SAGE's recent NDA submission is supported by data from their Hummingbird program, which is a clinical program that included three multicenter, randomized, double-blind, placebo-controlled trials, each designed to evaluate the safety and effectiveness of Brexanolone in women with moderate or severe PPD. Last week SAGE also reported on progress achieved in launch readiness preparations in anticipation of a potential first half of 2019 launch, including their strategy to deliver a family-centric support model with work towards the development of a national network intended to support home infusion of IV Brexanolone. Our relationship with SAGE started back in 2011 with a Captisol platform license agreement. And we continue to be very impressed with the work that the team at Sage is doing. I’d also like to highlight that in early April our partners at Retrophin initiated a pivotal Phase III clinical trial of sparsentan for the treatment of focal segmental glomerulosclerosis or FSGS, which is a rare kidney disorder that often leads to end stage renal disease. FSGS is also a disease with no approved pharmacologic treatments available. The trial, which is called the DUPLEX Study is a global, pivotal Phase III trial evaluating the long-term nephroprotective potential of sparsentan for the treatment of FSGS. Retrophin is highlighted that DUPLEX study builds upon the promising results from the Phase II DUET study of sparsentan and positions a program for potential Subpart H accelerated approval with the inclusion of an interim endpoint assessing modified partial remission of proteinuria. Top line data from a 36-week interim efficacy end point analysis are expected in the second half of 2020. Retrophin also announced last week that they obtained FDA and EME feedback on a pathway to NDA and MAA filings for sparsentan in IgA nephropathy, which is an added potential indication for the drug. Retrophin reported that they now expect to initiate registration enabling Phase III trial for sparsentan in IgA nephropathy in the fourth quarter of this year. I’ll also mention briefly that our partners at Sermonix are making good progress toward a Phase II trial of oral lasofoxifene in metastatic breast cancer. Data in emerging literature from thought leading groups suggest that a more potent and bio available compound to block estrogen receptor signaling may play a key role in the future management of ER positive metastatic breast cancer, particularly in the presence of ESR1 estrogen receptor gene mutations. We look forward to the continuation of the progress of the team at Sermonix is making and to the initiation of their Phase II trial. So now to our OmniAb antibody discovery technology platform, our team is coming off a very successful PEGS meeting in Boston last week. PEGS is one of the industry's preeminent, global, antibody related events focused on accelerating bio therapeutic protein drug discovery and development. Our partners presented data illustrating that our OmniAb of transgenic animals continue to produce highly diversified fully human antibody repertoires that are optimized in vivo for manufacturability, therapeutic efficacy and reduced immunogenicity. And I note also that our single license OmniAB offering continues to be the industry only platform with three species and multiple genetic backgrounds to address even the most challenging biologic targets. That’s part of why we consider OmniAb to clearly be a best-in-class technology, given that it’s a transgenic animal platform with the most partners and that we are seeing a growing number of OmniAb derived drug candidates moving to the clinic. There are now five OmniAn derived antibodies in clinical development and we expect others to be entering the clinic in the coming months. I note also that we now expect partners that clinical data for two OmniAb derived antibodies before the end of 2018. We hosted the third OmniAb Partner Summit prior to the start of the PEGS meeting in Boston and we had over 60 attendees from current and prospective partners with some presenting their data and experiences with our platform. There continues to be growing interest in our Omni Chicken technology both from existing partners who have now expanded licenses to include Chicken and also from new potential partners. I note that a peer reviewed paper by Ligand scientists describing the Omni Chicken was published recently in the journal MAbs and that article has increased visibility for the use of Omni Chicken. We're also continuing to invest in the OmniAb platform as we work on next generation animals with different genetic characteristics to meet a variety of future partner needs. From a deal perspective we've announced OmniAb license agreement with venBio Partners, Ferring Pharmaceuticals and Glenmark Pharmaceuticals and we expect we will continue to add new OmiAb partners this year. The venBio agreement is unique in that it serves as an umbrella agreement for the full OmniAb platform for venBio portfolio companies. Switching now to Captisol, we also continue to enter new research agreements and expand existing relationships around our Captisol technology illustrating the partners see the value of the global validation of Captisol for enabling successful products. Our Captisol drug master files and growing safety database are significant value drivers for our technology with our Type IV and Type V DMFs in the U.S. our Canadian Drug Master File, and our Japanese file. And I note that we are also now planning to establish a Drug Master File in China later this year as well. Visibility for Ligand technologies, as well as Ligand partner programs continues at a recent upcoming scientific and medical conferences, as well. Noting first a couple of recent presentations on our liver-targeting prodrug or LTP technology, with data from Nucorion Pharmaceuticals that was presented at EASL for Nucorion’s NCO-1010 program for Hepatitis B. Their data showed that LTP enablement achieved seven to 15-fold higher drug concentrations in the liver which is the target organ, compared with an equivalent dose of a non-LTP parent compound. Also our scientists from Ligand presented last week at the National Lipid Association's 2018 Scientific Sessions meeting, showing that the LTP technology significantly improves liver targeting of the statin drug rosuvastatin and maybe an effective strategy to increase the therapeutic index of statins and potentially reduce statin intolerance. The annual ASCO meeting is approaching in a few weeks and we've noted a number of presentations related to Ligand partner programs. These include oral presentations for Kyprolis Phase III ARROW study presentation of Lilly’s Captisol-enabled prexasertib Phase Ib data in advanced cancer; Merrimack’s Seribantumab data in solid tumors; MEI’s ME-344 data in breast cancer and J-Pharma presenting on captisol-enabled JPH-203 in advanced solid tumors among others. So I'll conclude now with a brief remark about some of our continuing internal R&D. John discussed our recent partnership with Roivant for our GRA program, which is now known as RVT-1502. That program was a significant focus of our R&D efforts over the last few years and that R&D effort translated into a new and exciting partnership for us. Our internal R&D is now primarily focused on our Captisol-enabled iohexol program, which is the next-generation contrast agent for diagnostic imaging. We recently initiated key pre-clinical experiments for CE iohexol and we believe those studies may add significant value and help define our precise clinical strategy. We intend to discuss our clinical plans with the FDA in the coming months prior to filing of our IND into the initiation of clinical trials. We're excited about this program and look forward to updating you as we continue to make progress. With that I'll turn the call over to Matt Korenberg to discuss the financials.

Thanks Matt. Before I get started I'd like to remind investors that this is the first quarter we are reporting under the new ASC 606 guidelines. The principal place that impacts Ligand is on the royalty revenue line. As a result we’re making a couple of comments about the comparable period for royalty that provide investors the correct comparable royalty numbers to evaluate growth of that line item. The tables in our earnings release contain only the 2017 period numbers as reported at the time. Our 10-Q when filed will have footnotes to describe the differences in various places. Now let's begin with some financial highlights from our earnings release issued earlier this afternoon. Total revenues for the quarter were $56.2 million, up $29.3 million a year ago. Again Q1 2017 revenue last year as reported under the old revenue recognition standards. Royalty revenue in Q1 2018 was $20.8 million, which was a 47% increase compared with royalty revenue of $14.2 million in Q2 2017, the appropriate – which is the appropriate comparable period. The royalty growth largely reflected higher Promacta and Kyprolis royalties. Q1 2017 revenue, royalty revenue as reported was $24.2 million. Milestone and license revenues were $30.9 million in Q1 2018 versus $3.9 million for the year ago period with the increase due primarily to the recognition of the $20 million upfront payment for out-licensing our GRA program, as well as several sub-licensing events related to the OmniAb platform. Material sales for Q1 2018 were $4.4 million compared with $1.1 million in Q1 2017, with a swing reflective of the timing of purchases for use in clinical trials and commercial products. The sales mix for material sales effective gross margin which were slightly higher as compared to the prior year period. Our material sales cost translated to an overall corporate gross margin of over 98%. We expect that this gross margin for the balance of the year will be slightly below the 98% number given the expected mix of sales. On the expense side R&D and G&A cash operating expenses were in line with our expectations and we remain on track for the year for about $33 million to $35 million of cash operating expenses. Specifically as it relates to the R&D line you'll see that we reported $7.4 million of R&D expense this quarter including both cash in non-cash expenses. Included in this line is a onetime expense for the acquisition of Vero. Investors will recall that we acquired Vero in January for $2 million and announced the initiation of our new internal development plan focused on Captisol-enabled iohexol. Rather than capitalize and amortize the $2 million over the life of the program, we expensed this onetime acquisition cost of an R&D program and as a result the R&D line is higher than it would be otherwise. For the quarter we reported adjusted net income of $35.7 million or a $1.55 per diluted share and this compares with $12.6 million or $0.57 per diluted share for the same period last year. A reminder to investors that our adjusted net income is reported on an after tax basis although we continue to utilize our NOLs and tax assets which results in a cash tax rate of less than 1%. With respect to cash flow in Q1, we generated $60.8 million in operating cash, an increase from $24.2 million generated in the year ago period. On the balance sheet we finished the quarter with just over $264 million of cash, cash equivalents and short term investments in addition to our $27.5 million of Viking stock. Related to our GAAP net income in Q1 2018, as outlined in our earnings release, GAAP net income for the quarter was $45.2 million. This figure included a significant gain of approximately $21 million related to the marking – related to marketing the shares we hold in Viking to their current market price. Given the large financing that Viking completed in the quarter, our ownership is now proximately 13%. As a result we've moved off equity method accounting for Viking and investors will see a line in our current assets on the balance sheet that will reflect the value of Viking shares moving forward. This large, one time, unrealized gain was excluded from our adjusted EPS calculation. Turning now to guidance, we are reiterating our full year 2018 financial guidance. We expect 2018 to be a year of excellent revenue in earnings growth. For the year we expect about $116 million of royalty revenue, about $23 million of Captisol sales and about $45 million of milestones and license fees. In addition, we see potential upside about to an additional $20 million for milestones and license fees. These components translate to expected full year 2018 revenues of $184 million with upside from milestones and license fees and expected adjusted earnings per diluted share of $4.85. In terms of quarterly pacing, we now see the year as having approximately 50% of the revenue in earnings in the first half of the year, which is an increase from our previous guidance for the first half and is largely a result of realizing the revenue associated with the upfront payment tied to successful out licensing of our GRA program in Q1. As a final reminder to our investors, as a result of ASC 606 our tiered royalty structures – and our tiered royalty structures our royalty revenue recognition pattern will be changed such that we now expect royalty revenue to increase in each quarter throughout the year, with Q1 being the lowest quarter for royalty revenue and Q4 being the highest quarter in each year. Lastly, please recall that our adjusted diluted EPS guidance excludes stock-based compensation expense, non-cash debt related costs, transactions related expenses and amortization, changes in contingent liabilities and CVRs, non-cash unrealized gains and losses associated with our investment in Viking Therapeutics, mark-to-market adjustments for amounts owing to licensors and the excess shares from the convert covered by bond hedges and certain other onetime nonrecurring items. With I will turn the call back over the operator and open up the line for questions.

At this time we will like to take any questions that you might have for us today. [Operator Instructions] Your first question comes from the line of Joe Pantginis with H.C. Wainwright. Your line is open.

Hey guys good afternoon. Congratulations on another great quarter. First a question I usually ask, but it's another quarter someone asked the same logistical question with regard to have any of your plans changed with regard to the convertible debt due in 2019.

Hey Joe, thanks for the question. No plans have changed. We have, as I mentioned over $264 million of cash, cash equivalents. We will owe our convert investors of about $245 million of principle and then in the excess we'll use shares. And so we've got plenty of cash today it will generate significant cash between now and alternate maturities as well.

Great thanks, that's helpful. And then just shifting gears with regard to formally LGD-6972, could you just remind us what the level of your support role will be for the product now RVT-1502. And then with that in mind you did say obviously your key internal pipeline asset is Captisol-enabled iohexol. But do you have another internal 6972 that you might be looking at to bring forward in the relative near term?

Hey Joe thanks for the questions. It’s Matt Foehr. Obviously we announced the deal with Roivant as John described as you said, it's now called RVT-1502. We're very happy with Roivant as a partner. We actually spent a lot of time with Roivant and other interested parties during the deal process, but they clearly understand the value proposition and the applicability of the drug in both Type 1 and Type 2 diabetes. We expect they'll be talking more about their plans publicly coming up. But we're very happy with the work they're doing. They obviously control the development moving forward. So I'll say cheer them on as a rapidly progress. Obviously there’s substantial economics associated with the deal going forward with over $500 million and milestones in a low-double digit to mid teens royalty. So it's I'll say satisfying to see our R&D focus on investment play out like that in a partnerships. Those who have been following us for a long time obviously recall the investment we made in at that time Captisol-enabled melphalan which is now even though – that's a drug for which we have a 20% royalty on. But that was also – those economics were also linked to the fact that we have spent some substantial time and focus on progressing the regulatory path and the clinical programs. For iohexol we’re very focused on moving that program forward as I described. We think there's a real need for innovation in that area, there's really been a lack of innovation and the need for a kidney safe product is very clear. In fact there were some recent publications in the New England Journal of Medicine both a paper, as well as some commentary about the real need that just came out over the last couple of months and we see that as really a validation of the need and importance of the program. Beyond that we obviously have other programs we're investing in. There are opportunities with the LTP Platform. We've published some work recently with LTP paired with some statins. I would expect we’ll continue to do some early stage work there. We also have a small molecule GCF compound that we have been working in publishing on as well. So that's just kind of a general outline.

Great thanks a lot guys.

Sure.

Your next question comes from the line of Matt Hewitt with Craig Hallum Capital. Your line is open.

Good afternoon gentlemen congratulations for the strong start.

Hi Matt, thank you.

A couple questions. Obviously thank you for providing all the detail on especially the top 12 or your first 12 priorities. But maybe if you can help with some of the opportunities that you see beyond those first 12, it's a little bit harder for us on the outside to track at times. But maybe pick a couple that you see as ripening and potentially knocking on the door to be in the top 12 over the next year or so?

Yes well Matt thanks. And I'll make a remark and then Matt Foehr can add a color. I think on this call there may be a limit to what we're going to simply just to be organized or efficient for investors. What we try to do is create a – if you will a roadmap of leading value assets. And obviously the top of our list are the late stage commercially proved assets generating revenues and profits for the company. And then we break it out into the big six and the next 12. We select those we get questions how do we pick those categories. And the Big Six are focused on late stage assets, often they are Phase III or NDA stage or there are programs with significantly high value economics. One example is the GRA deal we recently did. This could be proverbial blockbuster, multi-billion dollar drug in the diabetes space and its associated with a high royalty. So for those reasons, those are some factors how we categorized that here. The next 12, we do want to give a roadmap for other assets with a potential breakout data in the current calendar year or other programs with high value economics. Having said that, for graphical illustration with over 165 programs obviously there's a limit to what we can break out in a regular investor presentation. As we go on this year, we've got some conferences I expect to have an Analyst Day yearend and we’ll showcase other featured programs. Matt I don't know if you want to add any other color. I think on this call we probably aren't going to get into other line item detail, but are there any other comments you want to add there?

Yes, no I think you summarized it well John. The only other piece I'll add is just that with the momentum we see building around OmniAb and those programs as I said there are five in the clinic currently, we expect others to be entering soon, many with some very promising biology and excitement around them. Just as one example of that we talked on the last call a little bit about the HanAll program HL161, which is an anti-FcRn monoclonal antibody, has been the subject of a few deals and is one that we see as exciting. There are others, as well. But as John said, just interest of time, probably going to [indiscernible].

And just another perspective. And I think the evolution of the pipeline that we hope to see and perhaps will be talking about, but with OmniAb, it's a highly valuable technology platform we described clear success we leveraging that with new partnerships and creating financial value. We are now just in the last six, twelve months seeing just a very first-class of clinical stage candidates, antibody drugs that are now in human trials. As investors know, but as a point of reference the top selling drug Humira is an antibody to OmniAb that relates to [ph] OmniAb but fact there is some very, very large, highly commercially successful drugs that are antibodies. And right now, while we are early stage, we believe that once we’ve seen more Phase I, or Phase II stage assets, our partners will be more inclined to start taking about those assets. Under confidentially, we cannot right now. But that's an example, of an emerging space for the OmniAb, which does not occupy much of our pipeline chart right now in terms of public presentation. But over the next six to twelve months, I expect there will be emerging data and disclosure by of our partners that will permit us to talk about those programs.

That’s all really helpful. Thank you. And may be just one follow-up on the OmniAb platform. Maybe compare, contrast where that is today relative to where maybe Captisol was on to your wings had a similar timeframe. And maybe the phase of development that you’re seeing regarding OmniAb versus Captisol at that similar period? Thank you.

That’s a good question. And again Matt and I can tag team on an answer because we both obviously kind of see the business operationally and strategically from a different perspective. But generally, any technology acquisition is going to have arc life, if you will. Captisol in some ways was already much later stage. There were a couple of proof products, we're generating royalties, but it was a much smaller business, smaller revenue outlook. And frankly, there was at the time even a lower expectation for the number of deals. So it's a very attractive platform. That platform, as investors know, literally has exploded into opportunity. We have far exceeded the number of deals, the revenue, the cash flow off of the Captisol. So as a measured success, principally because of seven years later, we got a lot more information. The difference though with OmniAb is – and this is what's important, while its earlier days of preclinical, just first Phase I stage clinical candidates. And we don't see commercial revenues yet as of this stage. The reality is, the amount of money that is being invested by partners far, far exceeds the amount of money that has been invested in Captisol-based assets. And it's really what's going in the antibody space. It’s the number one area of R&D investment for big pharma and big biotech. And again, while it's early-stage of the discovery tool we see all that if our successful partners are making wise decisions on what antibody targets to go after and our investing large sums of money. Not all are going to be successful. We see that most programs fail, but some will. And that’s significant investment for high-value targets should accrue to Ligand’s benefit. Matt any other color you want to offer to contrast the two.

Yes just one other element of it just comparing the two. In general, the majority of our Captisol agreements are – agreement for single program or single compound where Captisol is paired with that compound, now you have a couple of exceptions of platform, or some exceptions of platform agreement Lilly, Merck, others where they can add Captisol to a swap of their compounds if they have their proprietary MCEs. You compare that to OmniAb where essentially all of our deals are platform deals. So partners are using OmniAb to discover targets for a whole variety of diseases, variety of targets. As I mentioned previously, we have some partners who are testing as many as 15 to 20 targets in one annual cycle using OmniAb. So the use of it is just comparatively very wide. We saw a lot more of that in even finer detail at our Partners Summit last week at Boston at PEGS. So that's another kind of slight difference between the two programs or the two technologies, I should say.

Understand great thank you very much for the detail.

Your next question comes from the line of Scott Henry with Roth Capital. Your line is open.

Thank you and good afternoon. I'm just going to stick to a couple of modeling questions. The first being your base royalty business, it looked pretty strong in Q1 particularly Promacta. I recognize you’re maintaining your guidance. Is it safe to say you feel pretty good about the way the royalties are playing out so far to date?

Thanks Scott. Yes, so obviously we reiterated our guidance and we're sticking with that. But we still need to see the balance of the Q1 numbers example, from Ono in Japan on Kyprolis and couple of other things. But yes, certainly so far the performance of everything we have seen in Q1 was quite strong and gives us high confidence that we will be able to meet their numbers for the year for sure.

Okay Great. And when we think about material sales and milestones, obviously, they're a little chunkier. Any comments on how we should think about the cadence of those numbers throughout the year? Is it similar pattern to prior years or anything unique this year that we might factor in?

Nothing unique this year. So as a reminder, typically, fourth quarter both milestones and Captisol sales tend to be a little higher in terms of our planning case, part of that is on the milestone side tied to some of the annual renewal cycle for some of the partners. But it just happens a lot of the trial progress we expect to see happens in the second half of the year as well. On Captisol, we've gone over this a number of times, but ordering patterns are such that Q4 tends to be a higher quarter than the others. Obviously, this year specifically the milestone number in Q1, I would expect to be the highest number for the whole year by a wide margin given the $20 million recognition of the GRA license fee. But beyond that, I would say that you’d see sort of typical quarterly patterns on both of those.

Okay, great. And then final question, I know you talked about the Viking Therapeutics’ entry. Am I correct to understand, is basically, there would be no entry in that line borrowing movement of the stock price you want to set. Is that how we should think about that Viking Therapeutics entry line going forward?

Yes, correct. There are two spots that will hit: one, obviously, it's on the balance sheet and so the value of the shares as of the end of the quarter will be on the balance sheet each quarter. So that will move up and down with the share price. You will also see that in the P&L we’ll have a gain or loss depending on the movement of shares each quarter associated with Viking and also other smaller positions that we hold in another companies. But we'll continue to adjust out those gains and losses from our adjusted EPS calculations until we actually realize gains and losses of course from monetizing.

Okay, great. Thank you for taking the questions.

Thanks Scott.

Your next question comes from the line of Larry Solow with CJS Securities. Your line is open.

Great, thank guys. Good afternoon. On the Captisol OmniAb, I think, another sort of key distinction is that both are very backend loaded. The OmniAb has a significant contract revenue licensing component, it’s more events and you can pay for events. So it’s sort of the cash flow fond before you can get to the commercial end it seems pretty substantial. That's just my [indiscernible]. Just on Promacta, obviously, tremendous acceleration sales there. And as you said pretty remarkable up to 10 years, anything unusual in the quarter? Do we know about price increases as the competitor maybe not growing as fast, but are they also growing? Any thoughts on that?

Yes Larry this is Matt. The overall ITP market appears to be growing. Also one of the things we see in talking to experts as well publications around Promacta over the last six to 12 months with long-term safety data and data in other fields like aplastic anemia, as well as just, I'll say, Novartis' commercial execution, which continues to be superb. I think all of those things are starting to play out. But when you talk to physicians, it's really the data, the long-term safety data and the well-established efficacy data that’s really, I think, starting to play a key role.

Okay. No reason to believe that it may not follow the exact normal patterns of the year. Usually, Q1 is lower than Q4, this time, it was actually upfront [ph]. But any reason to believe we won't have the usual sequential sales increase as the year progresses? I mean, space [ph] have been going almost every quarter for the last three years but…

Yes. Not that we see, Larry, no not that we see it. We noted the same thing in Q1 generally over the last four, five years has been down sequentially, Q1 has been down sequentially over from Q4. That was not the case this Q1 we were obviously please to see that.

Great. Larry I’ll just add. Obviously, the RX trends we monitor U.S. publicly available trends, that look very strong. With any product, you’re going to see some quarterly impact based on foreign currency exchange rates and the like. But it’s just double up on what Matt was saying. It’s continued investment. I mean for product that’s been out 10 years there’s still very significant investment in clinical research. And this is important because we are hearing anecdotal feedback from patients, customers and parents the pediatric space is vitally, important. And it seems that patients and physicians are increasingly comfortable using this drug in pediatric space. That’s a big category if you can safely monitor platelet levels. Children are so active, they are at a high risk for bruising, and cuts, and so on. And platelet transfusions is another alternative therapy is a very difficult alternative. That’s just one example why the market is solid and continues to show some very impressive gains.

Alright. Novartis only had it for a couple of years. So I guess for them there’s’ still hopefully a lot more spend put into it. Do we know – has price had any impact? I think probably we thought it was still price at a discount to the second distinct competitor. Is that still the case?

In general, yes, Larry. We really haven’t much kind of latest commentary on price. But in general, we believe it is price lower than the other T-cell antagonist.

Okay. Any update on the [indiscernible] in the quarter?.

Yes, so Spectrum reported late last week and they reported $8.1 million quarter, which obviously translates to $1.6 million of royalty revenue for us for the quarter.

Okay, that’s down little bit I guess.

Yes it’s down a little bit. But in the Q1 cycle there probably has something to do with that as well, but we are obviously not preview to [ph] that level of lympho from them.

Got it, great. Thanks.

Thanks, Larry.

Your next question comes from the line of Esther Rajavelu with Deutsche Bank. Your line is open.

Hi, thank you for taking my question. I just have one quick one on guidance. Assuming the $20 million upside comes through, how do you expect that could phased through to the quarter?

Hey Esther good question thanks. What we said generally is that, when we talk about our $20 million upside it’s usually events that are blinded to us a little bit more, meaning we don’t know exactly when a trial is going to start or not or it requires two steps. Meaning a Phase I needs to finish and then a Phase II needs to start and the Phase I is currently ongoing and so you don’t know quite when that’s going to happen. Or a program might be preclinical. I’m getting ready to go IND and you don’t quite know what the timing of that is. Those are generally the types of things that make up those upside numbers. And as you can imagine, if it’s not public either from the other company or to us privately most of that stuff is going to be in the second half of the year. So I think we’ll continue to monitor it. It will certainly let investors know if we happen to realize particular milestone early that was part of the upside bucket, but most of it is probably second half of the year.

Got it. Thank you.

Thanks Esther.

Your next question comes from the line of Joe Pantginis with H.C. Wainwright. Your line is open.

Hey guy thank you for taking the follow-up question. I would be remessified if I did not ask this question, especially, since we’re talking about Promacta and the ITP landscape. So with that said, you have a couple of infringe drugs, Promacta NPlate as an example. Promacta has been doing very well. You just went into more details. So I guess the question I want to ask is Ligand’s views with regard to is the market – does the market have room for a new market entrant with regard to the recent approval of Kyprolis. They appeared to get a broader label, surprise some people not others with regard to how broad the label was, whether it was TFL refractory or not, but it’s going after second line. So just curious about your views towards a new market entrant to the space?

Yes Joe thanks. This is Matt Foehr. Yes thanks for the question. Novartis, obviously, probably is the best to comment on some of the [indiscernible] of the market. But we saw the news as well, it’s not a surprise to us at all if the drug was approved. We’ve obviously followed, what I will call, kind of the various clinical paths that drug has taken over the years. The express we spoken to of have generally guided they’re really based on the results of the two Phase III trials for the drug and the population that was actually studied in those trials and the adverse event profile that we are seeing. We anticipate a likely be used in patients who have failed TFL therapy in real-world practice, and therefore, really ought to have minimal impact on Promacta. In the express we talk to also site, what I call, well-established safety and efficacy profile for Promacta the pediatric data we were just talking about, long-term safety data and the like. So we also saw that that drug’s data was published in the American Journal of Hematology during the last couple of weeks and even that publication noted drug may have a role in the treatment of a small subset of adults with persistent chronic ITP. And I believe that’s generally how it was characterized in that publication. So we don’t see it playing a big role in practice. But we would also of course direct you to Novartis as well.

Absolutely thanks for your thoughts Matt.

Your next question of Esther Rajavelu with Deutsche Bank. Your line is open.

Hey guys sorry. I just have one other question on – I’m sure this will be out in the queue. Can you provide us with the add bake share with for the stock based compensation?

So, the share number that we use to calculate our adjusted EPS is outlined on the last table earnings release. And so if you look towards the bottom there, you will see that for a GAAP purposes this quarter, the number was 24.8 million. We added that back about 1.7 million of shares for to reflect the convert fund hedge and then – sorry deducted and then you get the $23.8 million – $23.08 million for the diluted share count. Was that the number that you were looking for?

I was looking for the number that if you were to keep the stock-based compensation in your adjusted numbers. What…

The dollar, so what was our stock-based comp dollar amount for this quarter? Is that what you’re looking for?

No. What if the dollar amount converts when your – if that were to be all diluted? The $4.6 million in your stock-based comps, is that…

That’s the dollar value of the shares or the dollar value of the shares that were recognized as an expense in this quarter. Those shares we’re investing over time, obviously. And they are all included already in the share counts which is why, we added back the dollar amount to the net income number. The fully diluted number is the 23 million shares.

Right. We can take the soft line. My question was if you were not going to take that stock-based compensation expense out, that you’re going to include the stock-based compensation in your adjusted numbers, then what would that 22.01 be?

Yes. Why don’t we follow-up off-line.

Yes.

I will make sure I will give exactly the right number.

Thank you.

Yes.

There are no further questions at this time.

Okay. Well, thank you. We appreciate everybody’s attendance. Good questions. Wanted to just give a preview, we have several upcoming events – Investor conferences. We’ve been invited to the Berenberg Conference May 24, that’s out in Tarrytown, New York. We will be with Craig-Hallum at their investor conference in Minneapolis, May 30. And then, at the Jeffries Conference, June 6. That’s the calendar coming up. We also have data as Roivant program under license now but our GRA program has data coming out in June. Thanks for your attendance. And we look forward to seeing you and updating you along the way.

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