Ligand Pharmaceuticals Incorporated (LGND) Q4 2018 Earnings Report, Transcript and Summary

Good afternoon. And welcome to the Ligand Fourth Quarter Earnings Call. My name is Vincent and I'll be facilitating the audio portion of today's interactive broadcast. All lines have been placed on mute to prevent any background noise. For those of you on the stream please take note of the options available in your event console. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I'll now turn the call over to your speaker today, Mr. Todd Pettingill. Sir, you may begin.

Welcome to Ligand's fourth 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. It may include but are not limited to statements regarding intent, belief or current expectations of the company and its management regarding its internal and partnered programs. These statements involve risks and uncertainties and actual events or results may differ materially from the projections described in today's press release and 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, February 7, 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 finished the year strong and had an outstanding 2018. The company is better today financially and in terms of portfolio quality than a year ago, and we have a bright outlook as we look forward to the next five to 10 years. As for 2018, for the year we posted over $0.25 billion of revenue, at $251 million. That is more than a fivefold increase over 2013 just several years ago, all three revenue sources; royalties, Captisol material sales and contract payments hit all-time highs in 2018. I'll add as a bit of corporate history, at an Analyst Day 5 years ago in late 2013, we published a slide forecasting revenue of over $200 million in 2018. Well, that forecast for 2018, 5 years ago, was accurate, now coming in well past that outlook. The business is highly efficient with gross margins over 97% for 2018 and high EBITDA or cash flow margins of about 80%. Cash flow in 2018 more than doubled over 2017 to nearly $200 million. The lead royalty products Promacta and Kyprolis are doing very well in the market with each posting record Q4 quarterly sales and continued robust growth. Captisol orders are balanced with a good mix of commercial and clinical orders and we have had a highly diverse mix of contract payments. Now we manage our business with a lean cost structure and low share count. Our focus on value creation features maximizing the cash flow and earnings per share. Our adjusted diluted EPS for 2018 exceeds $7, which is more than double last year. Defining events for 2018 were major licensing agreements, M&A transactions and investment in pipeline program. Now as we look forward to 2019 and beyond, we are pleased to report we have a highly diversified and strengthening business, both in terms of the number of programs and the quality of late-stage programs. We have 117 employees now, including our Vernalis subsidiary, with a heavy commitment to R&D with over 85 scientists. Ligand focuses on inventing new drugs or developing technologies to help facilitate drug discovery or making drugs possible. We strive to out license as early as possible after achieving proof-of-concept with the goal of securing back-in economics of milestones and royalties on potential products. Overall, the pharmaceutical industry is getting better at picking winners, but most drugs still fail in development, but not all of them. If we have quality inventions and good IP, we stand a good chance of finding a partner to advance the programs. Industry averages say, drugs take about 12 years from discovery to launch, all the work to approval a drug needs to go through is the same with Ligand's business model. We simply choose to focus on the first couple of years of that 12-year cycle, and then have partners focus on the other years. Now our 2019 financial outlook calls for $224 million of revenue, while that is a bit lower than 2018, a better way to compare years is to look at 2018 without the sizable nearly $50 million onetime payment from WuXi for buying out China OmniAb milestones. Backing that out, 2018 revenues would be about $200 million, and we are forecasting revenue growth of more than 10% in 2019. Looking out to the midterm timeframe over the next several years, there are several major programs investors should focus on. ZULRESSO, Sage's drug for PPD; sparsentan, Retrophin's drug for kidney disease; RVT-1502, Metavant's drug for diabetes; VK2809, Viking's drug for NASH; and our internal iohexol program. All five of these are promising programs with the potential to generate significant data and product launches over the next one to four years, and contributing to Ligand's growth early in the next decade. Looking beyond that and to the middle of the next decade, we believe OmniAb has the potential to deliver very substantial annual royalty revenue. The factors we utilize to help us plot the trajectory of the strength of that business are the number of new partners we have signed up, the number of programs under research and the number of programs in the clinic. By all metrics, OmniAb is outperforming our expectations. We see well over 300 antibodies going into discovery research by our 40-plus OmniAb partners. And to-date, 12 OmniAb programs are in human trial, which is more than we expected two years ago. This matters because there is important derisking with antibody programs as they enter the clinic. The probability of a Phase I antibody program making it to market is reported to be nearly double that of traditional chemical-based drugs. Overall, we see the possibility for generating between $500 million to $1 billion in annual royalties from our OmniAb business in 2030, given launch timing assumptions and market potential for antibody-based medicines. As we look at our partner pipeline and outlook for the business, one important element of our revenue is the substantial book of potential contract payments from all of our partners. We currently have over $3.5 billion of potential contract payments and this number is up from the $3 billion figure we reported last year. It also reflects the substantial amount already paid to Ligand, including the nearly $100 million we booked in 2018. We are very realistic in acknowledging we do not expect to book all of these payments as they are mostly tied to clinical and commercial success events, but nonetheless, it is a substantial amount and a high-value book of assets owned by Ligand. Now before I turn the call over to Matt, I want to point out Ligand's recent series of smaller investments in companies and programs to secure attractive economics. We invested in Palvella Therapeutics and in Dianomi Therapeutics $10 million and $3 million, respectively. This is a deliberate part of our growth strategy that we are pursuing along with traditional M&A. We identify and then heavily diligence programs to secure royalties. We intend to keep doing these sorts of deals, deploying additional capital and in the process locking in substantial royalty rates on many new products in development. The work is paying off as we are pleased with the quality of companies and terms we have secured and see these investments potentially yielding new royalties in the early to mid-2020. And finally, we are now past our first few months with the Vernalis acquisition, and already it's proving to be a great acquisition. The revenue contribution is higher than we expected given the earlier than projected timing of milestone payments. We have strong engagement with current collaborators and a highly motivated team of researchers in England that joined Ligand. The Vernalis Design Platform, or VDP, is now our third major technology platform along with the OmniAb and Captisol platforms to license from. Our VDP technology enables us to serve customers with difficult and highly complex chemistry challenges. If we can overcome the issues and file patents, then we can secure royalties from these programs. And with that I'll turn it over to Matt.

Thanks, John. As was mentioned in our press release today, our portfolio is the largest that it's ever been, now at over 200 shots on goal. I think it's worth mentioning that a shot on goal at Ligand is a project that is being actively funded and progressed by a Ligand partner, and the current figure of over 200 shots is net of attrition. And despite attrition, our portfolio has continued to grow over the years, driven by acquisitions, our own licensing of our valuable platform technologies and by turning targeted internal R&D investments into program-specific licenses with higher back-end economics with a focus on royalties to reflect the derisking activities that we funded prior to a licensing deal. Our technology platforms continue to drive growth of new programs, and our recent acquisition of Vernalis has added to our portfolio in terms of number and diversity of programs and has brought us a new set of expertise and a platform to leverage for future shot on goal growth. This afternoon, I'll touch on a selection of recent partner program developments, and then I'll provide some updates on our technology platforms in general highlighting some recent progress and investments in the platforms as well as plans that we're excited about for the technology platforms in 2019. I'll also review some updates on our focused internal R&D activities. Starting now with partner programs. We've noted a couple of new approvals recently. CASI Pharmaceuticals announced it received approval to market Captisol-enabled EVOMELA in China. They've talked generally about their commercial plans and expectations for the drug, and I remind investors that because of Ligand's investment in clinical stage R&D for the program years back, we earned a 20% royalty on global sales of EVOMELA. A few weeks back we were also pleased to see the Daiichi Sankyo received marketing approval in Japan for esaxerenone for hypertension. This is an asset now with the tradename MINNEBROÂ , whose original discovery heritage is based on Ligand's nuclear receptor technology and we're pleased to see it now positioned to reach patients. Partners are also progressing towards new potential approvals, have recently announced clinical data or have started or are getting ready to start new clinical trials. Following a favorable FDA advisory committee review in November, our partners at Sage Therapeutics have an FDA action date of March 19 for ZULRESSO for postpartum depression, or PPD. We've also seen Phase II and Phase III results from multiple partners in recent months with Melinta announcing positive Phase III data for Baxdela for the treatment of adults with community-acquired bacterial pneumonia and positive Phase II datasets and expanded data from Viking Therapeutics for VK2809 in patients with non-alcoholic fatty liver disease, or NAFLD, and for VK5211Â in patients who are recovering from hip fracture. Viking's VK2809 data presented at the AASLD Liver Meeting is of particular note in our view. In patients with NAFLD and with elevated LDL cholesterol, the Phase II study of VK2809Â achieved its primary endpoint demonstrating statistically significant reductions in LDL-C in patients receiving VK2809; 57% to 60% median relative liver fat reduction was observed in VK2809-treated patients and a 77% to 91% of VK2809-treated patients experienced a greater than 30% reduction in liver fat content. And importantly, VK2809 was shown to be safe and well tolerated with no SAEs observed. Viking has said that VK2809's effect on liver fat at 12 weeks of treatment appears to exceed all other oral agents currently in development for NASH, supporting the view that VK2809 has a best-in-class profile. Viking also indicated that based on published data from multiple studies, they anticipate that the liver fat reductions would result in longer-term histological benefits. In addition, the improvement in lipid parameters observed in this study may suggest potential benefits in cardiovascular health, which is obviously an important consideration in this patient population. We look forward to Viking's continued progress on this and other programs. At ASH, Amgen shared Phase I data of AMG 330 in relapsed refractory acute myeloid leukemia. AMG 330 is a novel, bi-specific T cell engager, or BITE, immunotherapy that utilizes our Captisol technology in its formulation. I also note recent new trial starts with our partners at Retrophin having initiated a Phase III trial for sparsentan in a new indication for IgA nephropathy in addition to the Phase III trial that's progressing in focal segmental glomerular sclerosis, or FSGS. The PROTECT Study, which started dosing patients in late December is a global randomized multi-center, double-blind parallel arm active controlled Phase III clinical trial evaluating the safety and efficacy of sparsentan for the treatment of IgA nephropathy. According to Retrophin, approximately 280 patients with IgA nephropathy are expected to be randomized to receive either sparsentan or an active control, which is irbesartan. IgA nephropathy is a rare kidney disorder that often leads to end-stage renal disease, and if approved sparsentan could potentially be the first approved pharmacolgic agent for FSGS and IgA nephropathy. Also, Metavant is starting up a trial examining RVT-1502, which was formerly known as LGD-6972 in patients with type 1 diabetes. RVT-1502 is a novel orally bi-available small molecule glucagon receptor antagonist, or GRA that's been successfully tested at Ligand in multiple Phase I and Phase II studies in patients with type 2 diabetes. As a bit of scientific background on type 1, type 1 diabetic patients do not produce their own insulin and require daily injections of insulin to manage hyperglycemia. Management of insulin dose and frequency can be very challenging leading to periodic episodes of hyper and hypoglycemia. Furthermore, the effects of glucagon may not be appropriately balanced by exogenous insulin and contribute to elevated blood glucose. Glucagon receptor antagonist decreases the insulin requirements in animal models of type 1 diabetes and may help to improve glycemic control in type 1 diabetic patients. Our team actually presented data in type 1 diabetes at the ADA conference a few years back. And in addition to its use and work towards further trials in type 2 diabetes, we are very pleased to see Metavant's work in type 1. Our new partners at Palvella plan to initiate a Phase II/III pivotal trial of PTX-022 addressing an orphan disease called pachyonychia congenita, or PC, in the coming months. PC is a rare chronically debilitating and lifelong monogenic disease in which mutations of genes responsible for keratin production lead to dis-regulated keratinocyte proliferation, increased skin fragility and impaired skin barrier function on the planar aspects of the feet. As a result, affected individuals experience difficulty with ambulation, which frequently then necessitates the use of either ambulatory aids or alternative forms of mobility such as crawling on the hands and knees. PTX-022 leverages a proprietary formulation and delivery technology to enable distribution into the basal keratinocytes, which harbor the mutant keratin genes and are the primary defects in PC. Switching now to our technology platforms and starting with OmniAb. Our OmniAb antibody discovery platform continues to grow and rapidly drive the expansion of our portfolio of partnerships. There are now 12 distinct Phase I and Phase II studies underway or recently completed with OmniAb-derived antibodies. And we expect that number to grow with more partners preparing to start new clinical trials. The majority of these antibodies are for oncology indications, and one is in the autoimmune area. Since the time we purchased the Omni technology just over three years ago, the number of partners accessing OmniAb antibodies has nearly tripled. Earlier today, we announced the new OmniAb deal with Sweden-based Genagon Therapeutics, and we expect to continue to add new OmniAb partners. Our scientific team up in Emeryville now has more active projects related to OmniChicken than ever before. We're also seeing interest from current partners as well as prospective new ones for additional and new campaigns for novel antibody targets in OmniChicken. Innovation has and will continue to be a hallmark of the OmniAb platform. Last year, we launched the next-generation OmniChicken or what we call the SD Bird, which features a full complement of natural Human D or diversity gene segment. We also entered into a funded collaboration with Johnson & Johnson for the development of a novel heavy-chain-only OmniChicken. That program is progressing very well, and we expect to meet certain success-related milestones this year. Additionally, our team is also well underway with the development of a common light-chain OmniChicken, which we plan to brand as OmniClic and expect to launch to partners late this year. The OmniClic common light-chain chicken is somewhat akin to our OmniFlic or fixed light-chain rodent technology, which assists our partners as they look to develop bi-specific antibodies or antibody fragments specifically for CAR T applications. OmniFlic has been growing in popularity as the industry's interest in bi-specific antibodies increases. Turning now to Vernalis. The addition of Vernalis to Ligand has gone very well and is now nearly complete. The team at the Cambridge U.K. site, which will be the sole Vernalis site going forward fits in very well with our model of early-stage partnering. Vernalis' strengths are in fragment and structure-based drug discovery, where protein structuring, fragment screening and molecular modeling are closely integrated with medicinal chemistry and create an additional Ligand platform upon which to enable rapid and efficient discovery of novel drugs. The acquisition has added exciting new shots on goal, existing collaborations with major pharma companies that we look to expand upon and additional assets that present potential out licensing and corporate formation opportunities for Ligand. The Vernalis assets also have increased the diversity of our partner base and the underlying technologies of our portfolio. I'll also direct investor attention to a presentation at the upcoming AACR meeting in Atlanta where Servier will be presenting data on the Servier-Vernalis collaboration, and specifically the Phase I stage Mcl-1 inhibitor for cancer that Servier has now partnered with Novartis. The molecule was previously known as S64315 at Vernalis and Servier, and now at Novartis is known as MIK665. Importantly, we now also see the opportunity to marry our OmniAb antibody expertise with the small molecule Provis [ph] at Vernalis in the area of antibody drug conjugate, which is another growing area of interest within the pharmaceutical industry. And now very briefly on Captisol. The Captisol technology continues to provide value to our partners, and we continue to expand our active Captisol Drug Master File in the U.S., Canada, Japan and China. Notably, last year, additional special population safety reports were added to the DMF safety databases for Captisol, including patient data on oral administration, additional renal-related data and datasets specific to pediatric populations. Our Captisol partners continue to value our growing in global safety databases, our large and reproducible manufacturing scale of GMP material and a well-established history of highest reliability as a supply partner. In addition to shipping commercial and clinical material out of our contract manufacturing sites in both Portugal and Ireland last year, we also established a new distribution capability in Ireland in 2018. This expanded distribution capacity helps us meet the current and future needs of multiple commercial and pre-commercial partners as they diversify or expand their manufacturing supply chain for their finished products that have been enabled by Captisol. I also note that we recently entered into new Captisol licenses with Merck KGaA and a startup company called reVision Therapeutics. And I'll wrap up my comments with some brief updates on activities with our internal R&D pipeline, starting with Captisol-enabled iohexol. Our internal team has continued to make good progress on the Captisol-enabled iohexol or CE-iohexol program. We built up our preclinical dataset significantly, which is designed to further illustrate the differentiating features of our product. And we're now in final preparations for making our CTA submission to the health authorities in Canada where our first in-human trial will be run this year. We've manufactured our clinical batches of CE-iohexol and are expecting to initiate the clinical trial this quarter and we aim to have Phase I bioavailability data on CE-iohexol in Q3 of this year. The trial will target enrollment of 24 healthy volunteers and will be a single center randomized double blind, 2-period crossover study to determine the relative bioavailability of CE-iohexol and a reference product, which will be GE Healthcare's Omnipaque. The trial will also assess safety and tolerability. We expect to present data from the program at relevant medical and scientific meetings throughout the year. We also now have five new internal antibody-related programs leveraging the capability of our deeply experienced OmniAb team. We initiated these programs in 2018 and have generated data and plans that we expect to be talking more about at meetings and with investors and potential partners through the year. The five programs are on targets where the biology is known and they generally center around the oncology and inflammation therapy areas. And I'll now turn the call over to Matt Korenberg to discuss the financials.

Thanks, Matt. 2018 was an exceptional year for Ligand. Significant growth in total revenues and in earnings contributed to a year in which we significantly exceeded our expectations for the business and for our financial guidance. We continued our track record of generating significant cash flow from operations. As I begin discussing the financials, I'll remind investors that the fourth quarter of 2018 is the last quarter in which our prior year royalty revenue comparable period is shifted by one quarter as a result of ASC 606. When discussing royalties, I'll mention the appropriate comparable prior year period as well as the actual reported number. The tables in our earnings news release issued today contain only the 2017 period numbers as reported at that time, while our 10-K will have more details on the comparability of the royalty numbers when we file in a couple of weeks. Total revenues for the quarter ended December 31, 2018, were $59.6 million, and this is up from $50.5 million a year ago. Royalty revenue in Q4 2018 was $40.2 million, which is a 25% increase compared with the royalty revenue of $32.2 million in the appropriate comparable period. The growth in royalty revenue largely reflected higher Promacta and Kyprolis royalties. Q4 2017 royalty revenue as reported was $28.3 million, but as I just mentioned, this is not the appropriate comparable number for the Q4 2018 period. Milestone and license revenues were $9.3 million in Q4 2018 versus $14.4 million for the year ago period, reflective of the fluctuations in timing of milestone and licensee achievement by our partners. Captisol material sales were $10.1 million compared to $7.7 million in Q4 2017. The substantial Q4 2018 number for Captisol contributed to a record year for the technology, and while this business generally has lumpy sales from quarter-to-quarter and should not be considered a trend, it should give investors confidence in the strength of the Captisol business. Regarding gross margin. Our Q4 gross margin for Captisol sales was slightly lower as compared to the first 9 months of the year as well as the prior year period. A mix of commercial and clinical material sales can shift from quarter-to-quarter and year-to-year resulting in changes in gross margin. Our material sales cost translated to an overall corporate gross margin of 95% for Q4 2018. On the expense side, our R&D in Q4 was $8.8 million. Excluding stock comp and other noncash charges, R&D was $6.3 million. For G&A, our Q4 total was $11.2 million. Excluding stock comp and other noncash charges there, G&A was $7.3 million. Taken together, total cash expenses for the quarter were $13.6 million, which is in line with our guidance of $13 million to $15 million. As we've gotten further into the Vernalis integration, we have a more detailed view on how this will roll into 2019, and I'll provide some more specifics in a few minutes when discussing guidance. Turning to GAAP net income. For Q4 2018, GAAP net income was a loss of $42.5 million or a loss of $2.02 per share. Similar to Q2 and Q3 of 2018, in Q4, there was a significant noncash item related to the performance of Viking's share prices. In this quarter, the loss associated with Viking shares was $74 million, while in Q2 and Q3 combined we had a gain of approximately $102 million. Viking's stock has been volatile as most biotech stocks often are, but Viking had a strong 2018 with good execution and good data events. Our view continues to be that Viking is a great company with a promising future. As we mentioned in previous quarters due to the change in accounting for financial instruments prescribed by ASU 2016-01, beginning January 1, 2018, we account for the value of our ownership in common stock such as Viking and Retrophin by making the value of our -- by marking the value of our shares at current market prices with the resulting unrealized gain or loss running through the P&L each quarter rather than at the time of selling the stock. Prior to the new accounting standards the changes in value would impact the balance sheet, but not the P&L. These fluctuations in value whether positive or negative are not reflective of our core operating business. As such, these gains or losses will be excluded from our adjusted earnings calculation. For the quarter, we reported adjusted net income of $39 million or $1.70 per diluted share, and this compares with adjusted net income of $29 million -- $29.6 million or $1.31 per diluted share for the same period last year. In Q4, we generated $33.3 million in operating cash flow, which is an increase from $31 million of operating cash flow generated in the year ago period. For the full year 2018, total revenues were $251.5 million versus $141.1 million in 2017. Revenue growth translated to significant increases in cash flow as well. We generated $194.7 million in cash from operations in 2018, which is more than double at $93.6 million in 2017. Related to our GAAP net income for the full year 2018, as outlined in our earnings news release, GAAP net income for the year was $143.3 million. However, as mentioned, this figure was impacted by a large noncash gain of $50.2 million for the year resulting principally from changes in the trading prices of Viking shares. For 2018, we reported adjusted net income of $166.9 million or $7.15 per diluted share compared with adjusted net income of $72.5 million or $3.26 per diluted share for 2017. The outperformance on revenue and EPS relative to our most recent guidance was primarily attributable to the exceptional Promacta fourth quarter as well as a few additional Captisol orders in the quarter and some benefits on cash, R&D and G&A expenses. As a reminder, our adjusted EPS is reported on a fully tax basis despite the fact that we pay less than 1% cash taxes as a result of the utilization of our NOLs and other taxed assets. Based on our current projections, our cash tax rate will remain less than 1% through the end of 2020. On the balance sheet, we finished the year with over $718 million of cash, cash equivalents and short-term investments. We continue to maintain our cash and highly liquid short-term investments, but in 2018 we realized over 200 basis points of interest income on our cash. Our cash balance reflects the significant share repurchases and convertible note repayments that occurred in Q4 2018. As investors likely saw, we recently increased our share repurchase authorization to $350 million, which is up from $200 million previously. As of today, we have acquired over 870,000 total shares and used over $120 million of our authorization. In the past three months, we repurchased over 4% of our stock. Knowing what we know about the business and given our outlook, we are pleased to make these repurchases as they directly increase the per share cash flow and earnings for all investors going forward. We plan to continue to opportunistically evaluate share repurchase opportunities. On the strategic front, we closed two transactions in the quarter that I wanted to touch on briefly. Our acquisition of Vernalis closed in October and the integration process is going well. The team in U.K. on board is servicing our clients. We'll continue to integrate the financial aspects of the business, and as always we'll look to control cost as we generate new shots on goal. Separately, we closed our $10 million investment in Palvella's Phase II/III trial for PTX-022 as Matt Foehr discussed earlier. We hope this along with our recently disclosed $3 million Dianomi investment are the first of many such investments as we continue to use all of the tools at our disposal to create new shots on goal. Turning now to financial guidance. As detailed in today's press release, we're raising our 2019 guidance and introducing more detailed full year financial information. First on revenue, we expect continued solid royalty revenue growth for 2019. For the year, we expect about $154 million of royalty revenue. For material sales, we expect another solid year with approximately $27 million of Captisol sales. A couple of the late December orders in 2018 contributed to the outperformance we saw last year, but we still continue to see strong order demand in 2019. And lastly, for milestones and license fees, we expect at least $43 million of milestones and license fees for the year. As I've detailed in previous years, this milestone and license revenue will come from a variety of sources and spans more than 80 possible events. On the expense side, for R&D, we expect $36 million to $38 million of total R&D expenses for the year. Excluding stock comp and other noncash charges, we expect that R&D expense will be $25 million to $27 million. For G&A, we expect the total expenses to be $37 million to $39 million. And excluding noncash charges and stock comp, we expect G&A to be approximately $23 million to $25 million. Together, we expect these cash operating expenses for 2019 to total $48 million to $52 million. These revenue and cost components all translates to full year 2019 revenues in approximately $224 million and adjusted earnings per diluted share of approximately $6.05. With respect to quarterly pacing or breakdown, we expect royalty revenue to increase each quarter with Q1 being the lowest royalty quarter for the year. As of now, our Q1 royalty revenue estimate is approximately $25 million. Beyond that, the pacing of milestones and material sales is always uncertain. That said, we generally expect a relatively even split across the year for Captisol material sales, and we expect milestones to be more heavily weighted to the first half of the year with several large approval and related other milestones -- approval-related and other milestones lining up in the first quarter as we see it now. Finally, just a reminder that our adjusted EPS guidance excludes stock-based compensation expense, noncash debt-related cost, changes in contingent liabilities, transaction-related amortization and onetime costs, unrealized changes in value to our holdings in Viking and other common stock, mark-to-market adjustments to licensers, changes in contingent liabilities related to our CVRs and excess convert shares covered by the bond hedge and certain onetime nonrecurring items. With that, I'll turn the call back over to the operator and open up for questions.

[Operator Instructions] We have your first question comes from the line of Joe Pantginis from H.C. Wainwright. Your line is now open.

Good afternoon and congratulations on a great year. A couple of questions on some of your transactions and also your internal development that Matt mentioned. First on Dianomi, I was just wondering if you could add a little more color. It seems like you've added another technology platform that has the opportunity to provide multiple shots on goal. I was just wondering if you could provide any color there?

Joe, this is Matt Foehr. Just give you a little bit more background on the technology itself. It's called the MCM technology or the Mineral Coated Microparticle technology and essentially what it does is it mimics the ability of -- it's mimicking the ability of what human bones and teeth can store and protect biologics and it's leveraging that to improve delivery, either sustained delivery or stability. So it's a new technology. As you say, it gives us an opportunity for more shots on goal. The technology came out of Bill Murphy's lab, who is a well-known biomedical engineer at University of Wisconsin and our team obviously spends a lot of time evaluating the technology. We really like it, and think it does give an opportunity for more shots on goal.

Joe, I'll just add the, perhaps, the difference here versus Captisol, we did not acquire the company, it was an investment into the company. So they will operate and perform their work. What we have done with this structured transaction is secure royalty economics on their first five products. So they may market them themselves, they may license those, but it's not our business so to speak, to control and license those out, but it's certainly a very exciting platform that can heavily diligence and in some ways comparable to some of the other technologies that we own in house here at Ligand.

No, that's helpful. Thank you. With regard to internal programs, I appreciate the added color as well. So it looks like you are certainly leveraging the OmniAb platform for yourselves. And with regard to these five antibodies that you're talking about in the oncology and inflammatory spaces. How far do you think you would take them and what I mean by that is, do you think they'll fit into the very long-term successful model that you've had with regards to even your earlier comment on today's call, John, where you said out-license as early as possible? Or maybe see some sort of balance that you saw with RVT-1502 or 6972 where you held on to it just a little bit longer to garner better economics?

Joe, this is Matt Foehr, again. That -- as we look at these five programs -- I'll say, our teams, since we initiated to kick these off last year, the team has made great progress on them. They are all targets with known biology, right, so the biology is known, but they are in areas where we see potential licensing need. And so for us the key is targeted investment answering a couple of key questions that then increase the economics. So in the case of antibodies like these, it's obviously defining the antibody sequence. It's getting some -- of the biology in animal models and preclinical models and even doing some of the pre-IND type of work that can really drive better downstream economics for an antibody program.

Got it. Thanks a lot, guys.

Joe, thank you.

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

Good afternoon and congratulations on all the progress.

Thank you.

First one up, on MINNEBRO, I'm wondering if you could provide some details whether it's -- what the royalty rate there is, maybe market size, any details along those lines? And then if I remember correctly, Urovant was part of that licensing agreement. Maybe an update on where they're at in their regulatory processes?

Yes, Matt, I'll obviously speak to the MINNEBROÂ history a little bit, right? So this is a drug that was discovered leveraging Ligand's original nuclear receptor technology, for a time it was in a spinout company, this is now going back to 1999, 2000 time frame, within a spinout company called X-Ceptor that was then acquired by Exelixis, who then partnered it with Daiichi Sankyo and we've seen that with a number of assets over the years, right? They change hands as a larger player comes in, which is the case here with Daiichi Sankyo. This was in a mineral cortico -- corticoid receptor field and now, it's obviously approved in Japan, Daiichi ran the Phase III trials, we had passed along that data 1.5 year or so ago when they completed those successful trials in hypertension. Hypertension is obviously a large market, and we're cheering Daiichi on. They haven't given specific guidance around commercial outlook or things like that. So we direct you to them for more details there.

Okay. Great. And then regarding Urovant, is there any update on how they're progressing with U.S. and, I guess, rest of the world?

No. We'd have to direct you to other parties on that.

All right. All right. Fair enough. And then I guess, a follow-up question on the Dianomi. Given that that's essentially a fourth platform, is there an opportunity downstream if that's having some success where you would bring that in-house, you would essentially acquire the rest of the business? Or do you anticipate kind of letting it run its course with the five and moving on to other opportunities?

Well, it's a fair question. I think clearly the idea of bolting on technologies is right in the strike zone of what we want to do and frankly what we're good at. But out of full respect for Dianomi, they are an independent company, obviously they're financed with some Ligand money, but they are fundraising outside of Ligand, they've got a very good science and leadership, one of their founders was a senior portfolio manager at Invesco, a very credible and highly respected investor. So this is a stand-alone company. There is no plan to acquire them and that really was not the objective here, but certainly, over time, if there's interest or we see other technologies to bolt-on, we'll pursue those opportunities.

Okay. Understood. All right. And then maybe one last one for me, is there any reason why kind of looking through the year, whether it's timing or whatnot, where your margins, your gross margins in particular would change or is that -- should we kind of use the 2019 run rate as kind of a good starting point?

So the 2019 margins will be reflective of the mix of commercial, clinical, which partners, et cetera, on the material side, but no reason why margins would be overall different than 2019 versus '18. I think we have seen a slight shift towards the commercial side, which is, as we said all along, lower margin in the clinical side. And so that might be a reason for the material sales margins to tick down a bit, but I think, they'll still end up right in the same neighborhood.

Okay, great. Thank you very much.

Thank you, Matt.

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

Great, thank you. Good afternoon. Just on Promacta obviously driving a significant amount of your current royalties, a lot of varying opinions out there from analysts and the like on just the exact or potential patent expiration. I know you mentioned the orange book patents or at least one that goes into 2028. Can you just give us a couple of more minutes on that, just sort of more color? Are there earlier significant patent expirations that maybe provide a window for generic competition to come on to the market earlier?

Yes. Larry, a good question and obviously we monitor it closely. We've got a very talented, sophisticated patent team in-house here at Ligand. And obviously talked to Novartis monitor their public disclosures as well as work that they're doing internally. The big picture is fantastic asset, it's growing very nicely, and we think we're going to have years, seven years or more of patent protection. When you study Novartis' 10-K or Q disclosures, they give a very long list of IP, it's layers upon layers. And frankly, there is some presumption that if composition of matter come off in the early 2020, '23 type time frame that, that is the end of patent life. We absolutely do not see it that way. I don't believe Novartis sees it that way. There are very strong salt [ph] patents that go through 2025 and 2026 and then again a series of other patents through '27 and '28. So our view is that sitting here in Q1 of 2019, we have 7 years or more of patent life. And some of that, that we're excited about in terms of seeing the continued growth and the robust market protection. I'll see if Matt Foehr wants add any other color there.

Yes. No. I think you covered it well and as you said that Novartis is pretty from fulsome in their disclosures in their 20-Fs and their 10-Ks on the list of patents in the different market.

Okay right, no great, I appreciate that color. And we're with a -- it sounds like a good runway of at least patent protection. How about just the runway for you in terms of growth? Obviously, the product has done amazingly well. There are a couple of new competitors in the market. Can you maybe just share with us from global level without even getting into quantifying numbers or the potential of it, sort of how much you guys have -- or it's penetrated on its second line indication and where there's potentially room for growth there?

Yes. So in 2018, in some ways a roadmap, we raised guidance a few times. We obviously had overperformance on licensing and deal revenue, but Novartis, frankly, two or three quarters blew it out of the water. Their numbers were being Street expectations, frankly they exceeded our internal forecasting, fantastic performance. What's important 2018 was the year that we saw these other entrants. Now 12 years -- 12 months of market experience, these other entrants, frankly, are small. They are marketed by small companies, they aren't getting a lot of traction. They may be good medicines, not commenting on that, but in the face of new market entrants, Novartis is posting some fantastic numbers. It is the best-in-class medicine. There is no doubt about that. And in this fourth quarter is a real nice reinforcement of how well that product is doing. The analysts' expectation, we monitor Street outlook. And for the last three years, analyst outlook has grown considerably with big sales within the kind of $1 billion to $1.2 billion range just a few years ago. And now when you look at the 13 analysts that cover Promacta, these are Novartis analysts, not Ligand's, the company's -- the analysts who cover Novartis, the peak outlook is a size $2 billion to $2.2 billion. So I think that as it's an evolving market, there's a belief that the platelet category overall is expanding the entire pool of potential eligible patients to be treated. It's larger than people expected, it's a larger dollar category and Novartis is dominating the market shares. So it's a good product, we're proud of it and that is our kind of report on what we observe in terms of what is available publicly.

Okay. I appreciate that. Just a couple more, a global question. Your press release reaffirms sort of your business model, which is obviously back-end loaded, royalty based. Along with that, with your partners, you do have milestone payments that come in. Can you just maybe, I don't know you -- the number's over $3.5 billion, but just remind investors what you guys think is a comfortable number for not just this year, but on average over the next, I think, you said 10 years? And just also, I think, a part of that or even a material part of that is sort of not necessarily milestones, but more license fees and subscription-based fees on -- for OMT, so which is also growing. So I think there have been some misguided analysis out there that you're -- how to value the company based on milestones, which I think, gets a little bit lost in the real -- what the company really is worth?

Thanks, Larry. It's Matt Korenberg. As I said frequently on these calls when we talk about our milestones, we talk about the number as being over a certain amount and we bake into some -- some level of conservatism into that number, but we, as John says all the time and as we say in our slides, most things fail. When we talk about the total, that's the total possible if everything worked and when we model it internally, what we do is take the industry averages for success rates of trials moving from start to finish and approval and depending on where our drugs are, we line up those milestones with stage of drug and then apply all that math. And what I've said in the past is that, we feel over the next 15 years or so, realizing on average about $40 million to $60 million a year, $40 million to $60 million a year. So in total over 15 years, that's something like $600 million to $900 million over that period. And obviously that's a much less - much lower number than the $3.5 billion total that we've got recognized or contracted for. You mentioned the breakdown of those. There is certainly a subset of that $40 million to $60 million that we expect every year that is regular recurring license fees, annual license fees that our partners pay us, service fees and other license fees that our partners pay us for use of our technology or otherwise. So there is a certain recurring nature to a portion of that as well.

And one other thing just to add and we invite investors to go back and look at the last five or six years, but the amount of partnerships under license has grown and we have, of course, a later-stage portfolio, which often our -- the later stage events are often tied to large potential milestones. But as a point of fact, if you look at the revenue trend, 5, 6 years ago, the annual contract revenue annually was about $5 million to $10 million. And we saw that level for a few years. Well, I'll tell you, we had a prolific increase of licenses, and again, programs were advancing. For a couple of years, we then saw revenue gap up to about $20 million to $30 million and we saw that level for a couple of years. And now, once again, here we are. More deals, more licensing, later stage, we were looking at $30 million to $40 million. Well, we are at that level and with WuXi this year almost $94 million, you back that out we're at $45 million. So once again, we do believe that we are at a new higher quantum of annual revenue. And while it's hard to forecast, these are events out of our control, they're tied to clinical timing, et cetera. The reality is the model is working. We have the highest volume of license contract payments in the history of the company, the most assets under development and programs are advancing. And this is a substantial, and what we've witnessed in the last five years, meaningfully growing element of our revenue stream.

Right. And on the license and milestones number that -- guidance provided for '19, I think when you had initially provided guidance, you had said there was an additional amount that -- where timing was really challenging to gauge, but you could get a portion of that. Can you remind us, I think, there was a certain amount, dollar amount, potentially?

Thanks, Larry. When we initially gave guidance, we quantified that as about $40 million of potential upside. Nothing has changed from that. You correctly noticed that we didn't mentioned that specific number in our guidance today or my speech today, but the reason really is it's -- rather than sort of track that number specifically for investors quarter-to-quarter and have to update it on every time we're talking publicly, we wanted to give the rough level of potential upside at the beginning of the year and let folks just digest that. And then over the course of the year, we'll just continue to update actual milestone guidance as we go.

Right. And the updated guidance relative to, I think, it was just about 6 weeks ago, the reason for the increase was that mostly driven by higher expected royalties, obviously Promacta maybe at end of the year higher levels maybe that's -- is that the biggest factor or anything else there?

Good question. It's almost entirely Promacta outperforming what we expected in Q4 and then rolling that forward through the rest of the year. And offset just a little bit by some of the Captisol orders that ended up happening right at the end of 2018 instead of in early 2019. So offset a little bit of the upside of Promacta with that, but otherwise it's mostly Promacta.

Okay. And Matt, just a couple, I didn't catch the effective tax in the quarter and what you expect in '19 and what's sort of incorporated into your guidance?

Our guidance always assumes 22% to 24% tax rate, which is 21% federal and then 1% to 3% state depending on where our sales come from each year, et cetera. So that's what baked in.

And then effective in this quarter, past quarter was that the same number? Or was it -- looked like it was a little lower than that?

Yes. I think it was a little, but it's always shift around by onetime items that either -- have differing tax impacts than the actual rate, which at which we forecast. So it's one-off things that move in and out of our adjusted EPS, et cetera.

Okay. Thanks. I appreciate it.

Your next question come from the line of Drew Jones from Stephens, Incorporated. Your line is now open.

Hey, guys. This is actually Mason filling in for Drew. Thanks for taking the question.

Thanks for call in.

So looking at OmniAb, what's the OmniAb representation and the milestone opportunity, that $3.5 billion opportunity that you guys talk about? And how much of the $43 million guide for 2019 is from OmniAb projects?

Good question. Last year, at Analyst Day, we gave a breakdown of 2017 and 2018 milestones by category. We didn't specifically break out OmniAb, but we gave a sense of the annual license fees, which is mostly OmniAb and some of the trial starts, which we said were a lot tied to OmniAb. As you probably saw in our press release, we announced the date of our Analyst Day in today's press release. We intend to give a lot more detail on the breakdown of milestones at Analyst Day. But generally speaking, the OmniAb numbers have been about $10 million to $20 million a year. So they're a subset of the $43 million.

Got it. Thanks. And stepping back for a minute, what percentage of your partners would you say are virtual biotechs? And how do you think that compares to the percentage of the total market that's made up of virtual biotechs?

Yes. So out of the 200 shots on goal, there is a very small subset of folks that are what I call startup companies, and that are actually counted as shots on goal. That's an important nuance. Just because we announce a new deal with someone that maybe a startup company, it doesn't necessarily mean it ends up in our shots on goal count right away. And so across our partner list, we have a handful of startup biotechs type companies, but across the shots on goal it's a lesser percentage.

Yes, and what's fascinating, I mean, just when we go back and look at the last 10 years in dealmaking, often there are investors stute-[ph] investors or scientists that have an instinct to go after something, to go after some opportunity. They come to Ligand because what they want to do, Ligand has. Either we got actually molecule or a drug or we've got technology that can enable their dream. Okay. So startups happen. Frankly, if you look at technology, the tech sector, biotech, et cetera, three examples, Retrophin, Sage, and Viking. Each one of these had an investor or a scientist who had an idea for a product. And they came to Ligand and they took a license. These were all virtual startups and we were there literally at the beginning with the principles when they ostensibly had nothing else except a license from Ligand. Now you look at Viking today, over $600 million market cap, all right. How about Retrophin, over $1 billion market cap, and Sage, about $3.5 billion market cap, $4 billion, $5 billion. It's incredible. The evolution of this industry and it's not brick-and-mortar, it is not size. 20 years ago, the industry was, your market cap was based on how many Ph.D's you had and I'll tell you I was a former banker, in the early '90s, the joke was, well, for every Ph.D. it's about $1 million in market cap. Wouldn't you know, these companies raced to sign up Ph.Ds. 200 Ph.Ds, oh well so that's about a $200 million market cap. Well, I'm just saying because today the industry has evolved and there is much more virtual opportunity, a chance to create a biotech out of ideas and then contract for services, contract for discovery, contract for clinical trial management. And it is really a profound way how this industry has evolved and a very efficient way for Ligand to participate with these inventors, with these startup companies, to lock in meaningful economics and do it in a very efficient low-cost way for Ligand. So we're clearly witnessing capital and company formation, but on the back-end, there's a lot of good case press for how these virtual companies, these startups, are successfully moving to very substantial companies, just several years later.

Got it, guys. That makes sense. All right, that’s it from me, guys. Thanks. Appreciate it.

Mason, really appreciate you call in and asking the questions.

Your next question comes from the line of Scott Henry from Roth Capital. Your line is now open. Scott Henry, your line is now open.

All right. So let’s move on operator, please.

Next question comes from the line of Dana Flanders from Goldman Sachs. Your line is now open.

Hi. Thank you for taking my questions. My first one just on milestones. Can you just remind us kind of the methodology to get down to that risk-adjusted number? Are you taking just the average probability of success based on phase? Or are there specific assets and milestones where you're using either a higher probability or lower probability of success?

Thanks, Dana. Largely across the portfolio, we just take the average industry standard probability of success based on stage of development. We do occasionally vary from that, but it only -- to be more conversative, not to be more aggressive. We would never assume that we had a higher probability of success than the industry average says, but in certain circumstances in the past, some of the higher risk, later-stage trials we've taken lower probabilities, but generally speaking, it's about the average.

Okay. And maybe a similar question on just how you kind of set your shots on goal target? Is there a minimum threshold for a company to be considered a viable partner, whether it's level of funding or moving an asset through clinical trials? It sounds like you may be leaving assets out that should be considered a shot on goal, but just trying to figure out kind of the level of subjectivity there? And how you kind of walk that line?

Dana, this is Matt Foehr. I mean, obviously, we -- as I said, we -- when we count something as a shot on goal, if it's being actively funded and progressed by a partner, right, and I'll use a kind of recent example that I think is probably useful. We did a licensing deal with a company called a Seelos a couple of years ago, a multipart licensing deal. And while we announced the deal and they were progressing, working out plans and looking to raise funds, they actually just completed a reverse merger very recently raised $18 million, we -- I'll use it because it's kind of a present time example, we actually didn't count Seelos in our shot on goal count until very recently once they've got funding and they're progressing the programs forward. So that, I think, gives you a little insight kind of how we think about it. We've seen a lot of growth in our Shots-on-Goal lately, a lot of that's been driven by OmniAb and some of that is because of the way our licenses are structured, obviously we enter into a discovery license, partners generally pay an annual fee to utilize the technology on an annual basis. That, if they're using it in discovery, we would generally count that as a discovery shot. Now they may be testing 20, 30, 40 targets, we don't count all those as shots on goal, but we will count in OmniAb shot downstream once they've defined the antibody and are progressing actively preclinically towards an IND and that's been leading to lot of growth in shot on goal count.

I think the number, obviously, it's increased every year, we report out when there is some event to talk about what the count is, but you're good to ask what do we count? We don't count everything. Frankly, we think we're conservative. We've got to make sure it's funded that it is progressed, but we also are very disciplined, very detailed in studying what's dead, what's killed, what doesn't deserve to be on the list any longer. And we have substantial attrition and we're always backing those out, okay. Not to be -- to say the numbers are literally, right. We try to be conservative in terms of reporting the number, but it's not only what is qualified, the qualification to count what's in, but also the discipline to exclude or delete what no longer should be counted.

Okay. And maybe just a housekeeping question. Can you just talk to the increase in accounts receivables recently? What's been driving that? Has that been Captisol related?

Yes. No not related -- well, partially related to Captisol orders in the last weeks of the quarter, but it's actually mostly driven by the royalties. Because now we book real-time the royalties, we always have a -- whatever the royalty numbers are for the quarter, we have a receivable related to nearly entirely all of the royalties each quarter. So as we have increasing royalties, our receivables are going to increase every year. Back when we booked real -- on a one quarter lag, we had almost no receivables because our royalties were booked and paid in the same quarters.

Okay. Thank you for taking my questions.

Thank you.

Next question comes from the line of Scott Henry from Roth Capital. Your line is now open.

Thank you, gentlemen. And congratulations on a great year. Sorry, I had some technical difficulties just a couple of moments ago. Just a couple of questions. First, EVOMELA in China. Could you give us any idea of how we should think about the magnitude of revenues you could generate in that area?

Yes, thank you, Scott. So as I mentioned in the remarks, EVOMELA got approved in China at the end of last year. CASI Pharmaceuticals is going to market it. We expect they'll launch fairly soon based on their communications. Best to direct you to them for kind of their specific market commentary for the drug, but we do get a 20% royalty on EVOMELA globally. And just speaking more generally about the stem cell transplantation portion of multiple myeloma as a patient - as more drugs have out in multiple myeloma and multiple myeloma patients are living longer, the number of stem cell transplants in multiple myeloma is actually going up. And you hear this when you talk to physicians that it used to be that they would harvest enough cells for one, maybe two transplants and now knowing that patients are living longer are stronger and can have more stem cell transplant procedures, there is a view that there's an increase and they're seeing that really globally with the launch of a lot of the new multiple myeloma drugs.

Okay. Great. Thanks for that color. And then when I look at the model for 2019 and 2020, how do you think of, I guess, I'm trying to get an idea of what you view as material new revenue drivers within the royalty line, just trying to get an idea of how we should think about what's on the horizon that could impact the royalty line in the next kind of 12 to 24 months?

Yes. Thanks, Scott. Obviously, as we think about the next couple of years in growth and royalties, it's going to be driven a lot by Promacta and continued success there as well as Kyprolis and growth there. Matt just talked about and you were asking about the launch of EVOMELA in China, with a 20% royalty rate that's going to be certainly a growth driver on the royalty line. And then obviously Sage has their PDUFA date coming up shortly, successful approval and launch there will add significantly to the royalty line over the next 24 months. And then following that will be a number of smaller launches, but then the next major launch will be most likely the Retrophin launching in kind of the '20, '21, 2022 time period.

Okay. Thank you for the color on that. Final question and it's really just clarification from the prepared remarks. I think John was talking about the 12 OmniAb programs and targets for 2030. I thought I heard $500 million to $1 billion. Could you just clarify that comment again? I thought it was interesting, but I didn't take it down?

Yes. Yes. That's right. So OmniAb, we acquired the business three years ago and we acquired Crystal and we had invested heavily through the build out of the technology and I think there are two parts of the general commentary. The first is the metrics we have to measure the strength -- the health of the business today are far exceeding expectations. When we bought the business, we had 16 partners, today we have over 40. When we acquired the business, we had - we estimate about 100 or so programs in discovery research, now there is well over 300. And of course, at the time there was zero in the clinic. Today there are 12. These metrics are important because it is without question the best-in-class antibody drug discovery platform. Fantastic IP, three distinct species and the partners are having very, very good success with this platform. Not only are we advancing, developing, mining those relationships, but we have had a very good strength of new deal making, okay. So now the second part of this, and we're going to talk more about this at our Analyst -- at the Analyst Day, but the second part is to help investors understand what does that mean? Clearly, we're booking a lot of deals. There is contract payments and the like, but we do think there is very, very high probability antibodies will be approved and launched in mid-2020s. It is a lot of numbers. There are so many programs, so many partners, so much money being invested. There is a very high probability antibodies from OmniAb will launch in mid-2020. And these antibodies hit peak sales within just a few years of launch. So the reason why we're picking 2030, admittedly that is a little further out, but call it 10 years, it's about a 10-year outlook, it's actually 12. But call it 2030, when we look at the number of programs, when we look at the type of targets, when we look at the quality of the partners, the size of the medical market, when we look at what we know to be the exact royalty rate for those programs, then we do the math on all of that, in fairness it is a large range, but we feel comfortable saying that we believe this antibody business has a possibility to generate between $500 million and $1 billion of annual royalty revenue in that time frame. It's a range, it's an estimate, a lot has to happen, but that is our outlook. And what's important is that as much as we have very good IP on our animals, on the OmniAb animals, the IP that's conferred to the programs actually is defined by the discovery event. So where our IP is through the early 2030s, the fact is there is new IP that's coming online for each new antibody. Okay. So when an antibody is discovered, let's say, in 2019, there could be an IP through 2039. We expect there will be antibodies discovered even in 2021 or 2022, all right, add 20 years, right, you now have IP through 2042. All right. So what's significant is that we do see a growing number of potential products that could be approved in mid-'20, we expect these products will begin to hit peak within a few years of launch. The antibody is based on top-selling drugs on the planet are antibodies. Humira, $15 billion to $20 billion, right, just as an example. Now there are a lot of small drugs, right, but the reality is the largest amount of investment and the biggest drugs are antibodies and we have a very big seat at the table there. So that's the general background to help frame that. And again, at our Analyst Day, we'll give a little more clarity on that. And in fact, we might even have some OmniAb partners participate and present their stories around their platform as well.

Okay, great. Thank you for the color and thank you for taking the questions.

Thanks, Scott.

There are no further questions at this time, please continue.

Yes. Thank you. Well, I really appreciate everybody's turn out and questions. Obviously, we're pleased with 2018, but the focus is on 2019 and beyond. As we outlined, we feel very good about the business in the short, the mid- and the long-term. And we hope that we've provided some color. Now going forward the next few months, we are participating in few conferences, we'll be at the Barclays conference in the middle of March, we'll be at the Roth conference just a few days later also in March, we will be at the H.C. Wainwright conference in early April, that's in London so an European event. We've got growing exposure to Europe and increasing interest in those market and then finally as we look further out into May, it will be at the Craig-Hallum conference. We've already noted that we have an Analyst Day, we announced it in our press release but -- on March 12 in New York City, we'll have Analyst Day, a couple of hour program. We'll expect more updates along the themes of what we discussed today and we also expect to have a few of our partners attend and present their programs as well. So with that, again, thank you for your turn out and we look forward to seeing you over the next few months.

This concludes today's conference call. You may now disconnect.