Operator:

Thank you for standing by, and welcome to Ligand's Fourth Quarter 2025 Earnings Call. [Operator Instructions] I would now like to turn the conference over to Melanie Herman. You may begin. Melanie Herman: Good morning, everyone, and welcome to Ligand's Fourth Quarter and Full-year 2025 Earnings Call. With me on the call today are CEO, Todd Davis; Chief Financial Officer, Tavo Espinoza; and Vice President of Portfolio Strategy and Investments, Lauren Hay. During the call today, we will review the financial results released earlier today and provide commentary on our partner portfolio and business development activity, followed by a question-and-answer session. Before we get started, I would like to point out that we will be discussing non-GAAP results, which excludes certain items such as stock-based compensation, amortization of intangible assets, amortization or impairment of financial assets, gains or losses from derivative assets and gain on the sale of the Pelthos business, amongst others. I encourage you to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP measures, which can be found in today's release available on our website. We believe these adjusted measures provide valuable insight into our core operating performance, both historically and moving forward. Our release today and a link to today's webcast can be found in the Investor Relations section of our website at ligand.com. This call is being recorded, and the audio portion will be archived in the Investors section of our website. On today's call, we will make forward-looking statements regarding our financial results and other matters related to the company's business. Please refer to the safe harbor statement related to these forward-looking statements, which are subject to risks and uncertainties. We remind you that actual events or results may differ materially from those projected or discussed and that all forward-looking statements are based upon current available information. Ligand assumes no obligation to update these statements. To better understand the risks and uncertainties that could cause actual results to differ, we refer you to the documents that Ligand files with the Securities and Exchange Commission, or SEC, that can be found on Ligand's website at ligand.com or on the SEC's website at sec.gov. With that, I will now turn the call over to Todd. Todd Davis: Thank you, Melanie, and good morning, everyone. We appreciate you joining us today. 2025 was a defining year for Ligand. We delivered exceptional financial performance with full-year adjusted EPS exceeding our original 2025 guidance by more than 30%. That growth reflects the strategic changes we began implementing in 2023, the lean operating structure, the talented team, a focused investment strategy and the strength and depth of our royalty portfolio, which continues to outperform expectations. Full-year royalty revenue grew 48% over the prior year, and full-year adjusted EPS increased 42%, reflecting strong performance across the portfolio. Key drivers contributed to the 48% growth include the continued ramp of FILSPARI, successful launches of Merck's Ohtuvayre and CAPVAXIVE and the commercial launch of ZELSUVMI and continued growth of Recordati Qarziba. With substantial cash and investments on hand, we are well positioned to pursue disciplined investments that create new clinically differentiated product royalty streams and enhance long-term shareholder value. I'd like to take a moment to congratulate our partner, Palvella Therapeutics on their announcement this week of positive top line data for their Phase 3 SELVA trial of QTORIN rapamycin for the treatment of microcystic lymphatic malformations, also known as mLM. Based on the strong trial results, we believe QTORIN rapamycin is likely to become the first FDA-approved therapy for more than 30,000 diagnosed patients with mLM, a serious, rare and debilitating disease. We are proud to partner with Palvella and commend them on their hard work and dedication to develop transformative high clinical impact treatments for patients living with this rare disease for which there are currently no approved therapies. Separately, in 2025, our deal team executed on a special situations transaction through the strategic merger and financing of Pelthos and Channel Therapeutics. Our special situations efforts can require significant effort, but we are rewarded with our efforts with superior risk-adjusted investment returns. Our team was patient and thoughtful, creating a subsidiary, building out a top-notch management team and spinning Pelthos out into a publicly traded entity and creating significant equity and royalty value for Ligand investors. Importantly, we were also able to rescue and shepherd ZELSUVMI from bankruptcy through to FDA approval and into the hands of a capable team at Pelthos Therapeutics that will now serve millions of patients that are impacted by molluscum contagiosum. As we look ahead to 2026, we are accelerating our business development efforts. Our team is expanding, our pipeline is deeper. Our capital base is stronger than ever in our efforts to fuel our growth initiatives. Additionally, in 2025, we launched a systematic portfolio management strategy to drive value in our development stage partnerships. We're now focused on more proactively communicating with our partners and doing what we do best, identifying new opportunities to provide additional investments or expand the partnerships in other ways. I also want to address how we view royalty financing in the current biopharmaceutical funding environment. Importantly, we are seeing growth in the demand for royalty capital as evidenced by the doubling of the royalty funding market over the last 5 years. Even with improvement in the equity markets, royalty financing has become a strategic capital structure tool companies are choosing regardless of the broader market conditions. Our partners value royalties because they are non-dilutive, complementary to equity capital and aligned with our partners' long-term development cycles. Additionally, only a small portion of the overall royalty financing market is tied to development stage assets. Ligand is uniquely positioned in this way within the rapidly expanding biopharmaceutical royalty financing sector where demand for capital is high. Since 2022, we've been on a strong upward growth trajectory. Earnings have more than tripled as our royalty portfolio has scaled and we have aggressively managed our operating margins. Core revenue has also grown meaningfully from $108 million in 2022 to $240 million this year, and we are now expecting $265 million in 2026. That's based upon the midpoint range of our guidance and more than $430 million is expected by 2030. Adjusted EPS reflects the same momentum, moving from $2.44 a share in 2022 to more than $8 per share this year with visibility to over $13.50 per share by 2030. Looking ahead to 2030, I would like to highlight our 5-year royalty receipts outlook, which we shared at our Investor Day in December of 2025. We now expect a 23% compound annual growth rate in royalty receipts from 2025 through 2030. This growth is driven by contributions across the entire portfolio. The commercial programs form the core of the growth profile and contribute to an expected 15% annual growth. These products are already marketed, supported by strong partners and in some cases, have the opportunity for additional label or geographic expansion. Additionally, the Pharm team, which represents significantly risk-adjusted development stage programs currently in Ligand's portfolio is expected to contribute an additional 5% and future investments should add at least another 3%. We believe the strength of our recent results, the continued momentum of our royalty portfolio and our investment team's disciplined capital deployment approach positions us to deliver sustained long-term growth for years to come. With that, I'd like to turn it over to Tavo for the financial update. Octavio Espinoza: Thanks, Todd, and good morning, everyone. I'll start with a brief overview of our full-year 2025 financial performance, followed by the fourth quarter highlights and then discuss our 2026 outlook. 2025 was a breakout year financially for Ligand, driven by strong execution across our royalty portfolio and disciplined capital deployment. For the full-year, total GAAP revenue was $268 million, up from $167 million in 2024. This includes a gain related to the sale of the Pelthos business. Excluding that gain, core revenue was $240 million, reflecting 43% year-over-year growth. Royalty revenue grew to $161 million, an increase of 48% year-over-year, driven primarily by FILSPARI, Ohtuvayre, CAPVAXIVE and Qarziba. From an earnings perspective, core adjusted diluted earnings per share increased to $8.13, up 42% year-over-year, reflecting strong operating leverage in the model and higher royalty contribution. Importantly, while 2025 benefited from the $25 million ZELSUVMI out-license fee, the underlying royalty portfolio delivered substantial organic growth independent of that onetime item. Turning to the fourth quarter. Total revenue in Q4 was $59.7 million, representing a 39% increase compared to the same period last year. Royalty revenue was $50.5 million, up 45% year-over-year and again, represented the primary driver of growth. Key royalty contributors during the quarter included continued strength in FILSPARI with U.S. net sales of $103 million. This represents 108% growth year-over-year and $322 million of net sales for the full fiscal year. As a reminder, we also received a royalty on net sales of Travere's partner in Europe, CSL Vifor. In total, we recorded royalties of $32 million on approximately $355 million in global FILSPARI sales in 2025, including those reported by CSL Vifor. Merck's Ohtuvayre, which reported net sales of $178 million in the partial fourth quarter on a full quarter basis, accounting for the fact that Verona owned the asset for the first 7 days of the quarter, sales were just under $200 million. U.S. net sales of Ohtuvayre for the full-year 2025 were $506 million. Merck's CAPVAXIVE, which reported net sales of $279 million in the fourth quarter and $755 million for the full-year is rapidly approaching blockbuster status. Recordati's Qarziba reported net sales of EUR 159 million for the full-year 2025, representing 12% growth. Adjusted net income for the quarter was $42.7 million or $2.02 per diluted share compared with $1.27 in the prior year period. The increase was driven almost entirely by higher royalty revenue, reflecting the scalability of our model. On the expense side, R&D expense declined to $3.5 million in the quarter compared to $4.4 million last year, and G&A expense was $25 million, relatively flat year-over-year as we maintained disciplined cost management while supporting portfolio growth. Overall, the fourth quarter capped a year of accelerating earnings and expanding margins. For the full-year, R&D expense was $81.2 million compared to $21.4 million in the prior year. 2025 full-year R&D costs include $62 million related to the accounting treatment of Castle Creek and Orchestra investments. Full-year G&A costs for 2025 were $92.4 million compared to $78.7 million, driven by stock-based compensation costs, Pelthos transaction costs and other head count-related costs primarily to scale the BD function. We also ended the year with a very strong balance sheet, including $734 million in cash, cash equivalents and short-term investments. When combined with our equity holdings in Pelthos Therapeutics and available capacity under our credit facility, we ended 2025 with over $1 billion in deployable capital. Turning now to 2026. We are reaffirming the financial guidance we introduced at our Investor Day in December. For the full-year, we expect adjusted EPS of approximately $8 to $9 per share, royalty revenue of $200 million to $225 million, representing 32% growth at the midpoint, Captisol revenue of $35 million to $40 million and contract revenue of $10 million to $20 million. In total, we expect revenue of $245 million to $285 million for 2026. As a reminder, the year-over-year adjusted EPS growth appears modest at the midpoint due to the onetime ZELSUVMI out-license income recognized in 2025. Excluding that item, the underlying earnings power of the business continues to grow meaningfully. Royalty growth in 2026 is expected to be driven primarily by FILSPARI, Ohtuvayre, CAPVAXIVE and ZELSUVMI, all of which remain in relatively early stages of their commercial life cycle. With that, I'd now like to turn the call over to Lauren for a portfolio update. Lauren Hay: Thanks, Tavo, and good morning, everyone. I'd like to provide more detail on our new portfolio management strategy that Todd touched on earlier. We recently launched a more sophisticated and systematic portfolio management process designed to actively drive value across our partnerships. This approach allows us to track progress and catalysts in a more disciplined manner to increase the frequency and depth of our partner dialogue and to proactively identify new investment opportunities. This positions us to take initiatives to ensure our partners have what they need to be successful, whether that means adding investment behind programs in which we have high conviction, broadening the scope of existing collaborations or identifying novel ways to expand the partnership. In short, it's all about being more proactive, more data-driven and more investment focused across the portfolio. Moving to the next slide, I'd like to provide an update on one positive development from our recent portfolio management efforts. Lasofoxifene is a program that has been in our portfolio for quite some time. The product was originally discovered in 1991 through a research collaboration between Ligand and Pfizer and is currently midway through its Phase 3 trial for the treatment of ER-positive/HER2-negative metastatic breast cancer in patients with ESR1 mutation. Lasofoxifene has a compelling value proposition. In Phase 2 studies, lasofoxifene demonstrated a 13-month median PFS in combination with abemaciclib, significantly stronger than the 3- to 6-month median of currently approved monotherapies. Lasofoxifene also has a unique mechanism of action as a selective estrogen receptor modulator, or SERM, presenting potential advantages in tolerability as well as bone and urogenital health. Additionally, the product has a large safety database of approximately 10,000 patients from prior Pfizer studies. Lasofoxifene was being developed by Sermonix Pharmaceuticals who ran into financial challenges midway through the pivotal study. Late last year, we worked collaboratively with Sermonix equity investors to successfully assign the license to LeonaBio, previously Athira Pharma. In conjunction with the license, Leona completed a $90 million PIPE with very strong investor demand led by Perceptive, Commodore and TCGX with additional potential financing of $146 million to support the program. Ligand participated in the PIPE to signal our support and partnership with Leona, and we are encouraged to see this important late-stage program backed by a strong investor base under the leadership of the talented team at Leona. Top line data for lasofoxifene is expected to read out in mid-2027 in the ongoing pivotal ELAINE 3 trial, which is currently more than 50% enrolled. Additionally, Henlius has exclusive rights to lasofoxifene in Asia and certain countries in the Middle East and is currently in Phase 3 development in China. Ligand earns a tiered 6% to 10% royalty on worldwide net sales of lasofoxifene. With management peak sales estimates of approximately $1 billion, this could potentially result in annual royalties to Ligand of $80 million. Moving to the next slide, I'd like to provide some important updates on other key assets in Ligand's portfolio. I will go into more details on Palvella's QTORIN rapamycin, Travere FILSPARI and Merck's Ohtuvayre on the following slides. First, I'd like to briefly touch on two of our pipeline assets. This includes Sanofi's Tzield and Agenus' BOT/BAL. In October 2025, Tzield was accepted for expedited review for Stage 3 type 1 diabetes, or T1D, through the Commissioner's National Priority Review Voucher pilot program based on its potential to address a large unmet medical need. Tzield is currently approved in the U.S. for patients with presymptomatic Stage 2 disease to delay the onset of Stage 3 in patients who are 8 years of age and older. If approved, this new indication would expand treatment to patients diagnosed with symptomatic Stage 2 disease. This represents a much larger and more accessible patient population. Sanofi expects a regulatory decision in the first half of 2026. Sanofi is also pursuing a lowering of age eligibility from 8 years of age to 1 year of age in the approved Stage 2 indication with a PDUFA date of April 29. In addition, Tzield is expanding geographically after recent approvals in Europe and China. Turning to Agenus' BOT/BAL. Agenus announced the closing of a strategic collaboration with Zydus designed to accelerate global development and commercialization of BOT/BAL. Agenus has initiated a global Phase 3 trial evaluating BOT/BAL in patients with refractory unresectable microsatellite stable colorectal cancer. The trial will enroll approximately 800 patients across more than 100 sites in Canada, France, Australia and New Zealand. The Phase 2 data are highly encouraging, demonstrating deep and durable responses in this difficult-to-treat population, underscoring the meaningful benefit observed in patients who have failed standard therapies. Moving to the next slide. Let's look at Palvella's QTORIN rapamycin. The successful Phase 3 trial results in microcystic lymphatic malformations represent a major positive catalyst for Ligand this year. Palvella announced this week that QTORIN rapamycin demonstrated a highly statistically significant outcome on the primary endpoint, the key prespecified secondary endpoint and all 4 additional secondary endpoints. For the primary endpoint, QTORIN rapamycin demonstrated a plus 2.13 point improvement on the mLM Investigator Global Assessment scale. This is clinically transformative and even more compelling when viewed in the context of a disease where patients currently have no FDA-approved treatments. 95% of trial participants were rated as improved and 86% of patients were rated as much improved or very much improved. Additionally, QTORIN rapamycin was well tolerated with no drug-related serious adverse events. A remarkable 98% of all participants who completed the trial elected to continue to receive treatment through the ongoing extension period. I'd like to encourage our listeners to review Palvella's presentation on its Phase 3 results located on the Palvella website. The work Palvella has done has the potential to be transformative, providing a high clinical impact treatment for patients living with this rare disease. Palvella plans to submit an NDA in the second half of 2026 and is accelerating U.S. launch readiness for this potentially first FDA-approved treatment for mLM in a first-line standard of care treatment for this serious lifelong disease affecting an estimated more than 30,000 diagnosed patients in the U.S. As a reminder, QTORIN rapamycin has been granted breakthrough therapy designation, orphan drug designation and Fast Track designation from the FDA for the treatment of mLM. Now turning to Palvella's development of QTORIN rapamycin for the treatment of Cutaneous venous malformations or cVM. In December, Palvella announced positive top line results from its Phase 2 TOIVA study for the treatment of cVM. Palvella recently completed a very successful cVM breakthrough therapy designation meeting with FDA and plans to submit a breakthrough application shortly. The FDA has also granted Fast Track designation to QTORIN rapamycin for the treatment of clinically significant angiokeratomas. There are currently no FDA-approved therapies for the estimated more than 50,000 U.S. patients diagnosed with angiokeratomas. Palvella plans to initiate a Phase 2 trial evaluating QTORIN rapamycin for clinically significant angiokeratomas in the second half of 2026. Across the two lead indications, there are an estimated more than 100,000 patients diagnosed with either mLM or cVM. Based on payer research and orphan analog launches, Palvella projects an annual per patient price of $100,000 to $200,000 per patient. At peak, this positions the U.S. commercial opportunity for QTORIN rapamycin to reach an estimated $1 billion to $3 billion in annual sales. This could translate into a potential $100 million to $300 million in peak annual royalty revenue to Ligand. We congratulate our partner, Palvella, on their tremendous recent success and their momentum heading into their first potential FDA approval as well as important development milestones. The upcoming year will be a very catalyst-rich year for our Palvella partnership. Next, FILSPARI continues to perform well commercially in IgAN, and it now represents the largest royalty in our portfolio on an annualized go-forward basis. Q4 sales in IgAN reflected initial tailwinds from two important Q3 catalysts, REMS modification as well as updated KDIGO guidelines. Additionally, Renalys, who was recently acquired by Chugai, announced positive Phase 3 results and plans to submit an NDA in Japan for IgAN in 2026. We believe there could be significant commercial upside if approved in Japan based on population estimates. While we were disappointed to see that the FDA extended the review time line for the sNDA for FILSPARI in FSGS, we continue to believe in the potential of FILSPARI to make a meaningful difference in the lives of patients living with FSGS, and we are encouraged by Travere's engagement with FDA, their commitment to continue to work with the agency through the extension period as well as their continued efforts on commercial preparations. Moving to the next slide. Ohtuvayre is tracking well ahead of initial expectations, and it continues to be the strongest launch in COPD history. Q4 sales grew more than 40% sequentially over the prior quarter and the product generated approximately $500 million in sales in its first full calendar year of launch. Additionally, the National Medical Products Administration of China accepted the NDA for Ohtuvayre for the maintenance treatment of COPD for review. Ohtuvayre is currently only approved in the U.S. and has potential for significant upside from geographic expansion. Beyond the portfolio highlights we reviewed today, we have a wide range of diversified assets with meaningful upcoming catalysts. Collectively, our commercial portfolio is the strongest it has ever been, and it represents a deep pipeline of potential value drivers over the coming years. With that, I will turn the call back over to Todd for his closing remarks. Todd Davis: Thank you, Lauren. We are pleased with the progress of our late-stage development pipeline, specifically the strong trial results of Palvella's Phase 3 mLM trial and the recent new partnering of lasofoxifene with LeonaBio. We've always had strong conviction around these important late-stage programs and are encouraged to see both the clinical development progress of QTORIN rapamycin in mLM and to see lasofoxifene now backed by a strong investor base under the leadership of a talented team. When we combine the strong launch momentum, we've seen across multiple products in our commercial stage portfolio and build on that with our late-stage development pipeline, it's easy to see how quickly momentum can build and begin to predictably compound. Our strong origination capabilities, our investment team and our robust investment process are driving meaningful portfolio growth. Our deal team's ability to identify, access and create high-quality investments sets Ligand apart. Thank you, everyone, for joining us for today's earnings call. I will now pass it back to the operator and open it up for questions. Operator: [Operator Instructions]. Your first question comes from the line of Thomas Allred with Oppenheimer. Trevor Allred: It's Trevor. Congrats on the quarter and the recent Palvella data. I had a question regarding clinical update expectations for your late-stage royalty portfolio. We all know about the big update for FILSPARI in FSGS, but what other clinical updates might we expect for other assets during 2026 that investors might be overlooking? Todd Davis: Thanks, Trevor. I think in terms of our late-stage pipeline, it's quite active. I think if you look at it holistically, just a short list here, but you have Qarziba in the study for U.S. approval, Qarziba in Ewing sarcoma, that's with Recordati, BOT/BAL with the Agenus is in Phase 3. With Orchestra, you've got both the AVIM therapy and Virtue-SAB trials in Phase 3. With our Castle Creek partnership, they're working on another treatment for DEB, similar to Krystal's drug called D-Fi that is in Phase 3. We mentioned, obviously, and significantly discussed the mLM, but quickly coming in behind mLM for QTORIN rapamycin at Palvella is the cutaneous venous malformations where they read out some new data in December. Then you heard about lasofoxifene today, and we have Tzield with ongoing studies in type 1 diabetes that could expand the use of the drug there. We should have a number of robust updates on all of those over the coming several quarters. I would just point out that a significant majority of these have been added into the portfolio in the last 2, 2.5 years. Those efforts are accelerating. You can expect additional late-stage assets to continue to be added into our pipeline. That is core to our business model and will be a key driver for our growth going forward. Operator: Your next question comes from the line of Matt Hewitt with Craig-Hallum. Matthew Hewitt: Congratulations on the strong finish to the year. Maybe first up, and this is a question for Lauren. I know that you've been championed with monetizing some of the older assets in the portfolio. I'm just wondering if you could give us an update on that and whether or not you see some potential for low-hanging fruit, some reinvigoration of that older pipeline. Lauren Hay: Yes, Matt, thanks for joining, and thanks for the question. The answer is yes, definitely. We have 5 to 10 opportunities across the portfolio where we're very actively engaged at the moment. Some of those would be new investment opportunities for Ligand. Others are opportunities where we do have operating capabilities on our senior team in terms of really a lot of depth and breadth of experience scientifically across the regulatory domain and then commercially where we could offer advice and support to our partners. Then looking at the balance of the year, there's another 10 opportunities on our list where we plan to engage over the next couple of quarters. I imagine that we'll see publicly another announcement or two by the end of the year. I think as an example with lasofoxifene a strategy that's already yielding quite a bit of value to our portfolio and some of those legacy investments that you referenced. Operator: Your next question comes from the line of Annabel Samimy with Stifel. Annabel Samimy: Congratulations on a strong year. I guess in the last few months, we've been hearing a lot more about Tzield. It's a low royalty, but it seems like it could be a decent market. Can you talk a little bit more about the larger opportunity that you see? Do you have any sense of a peak sales size and what that can contribute to Ligand given the low royalty? Lauren Hay: Yes. Thanks, Annabel, for the question, and thanks for joining. You're right. Our royalty on Tzield is on the lower side relative to some of our other partnerships. This is a potentially blockbuster opportunity that Sanofi has. The current indication where they're approved is in Stage 2 type 1 diabetes, which is a little bit complex to digest and there's a lot of words associated with that indication. Basically, what that means is that they're going out and looking for patients who are presymptomatic. If a patient is diagnosed with type 1 diabetes, what they do is they go out and they screen the family members and see if there are any patients who may be presymptomatic who would be progressing to symptomatic disease and then they treat them with Tzield. Sanofi is doing a fantastic job building out that market. However, it's very difficult, as you can imagine, going out and screening large numbers of these presymptomatic patients. We're continuing to see gradual growth in that indication. The one where they have the commissioner's voucher, that indication is in Stage 2 disease. Those are newly diagnosed symptomatic patients. Those are much more accessible commercially just because they're already in the health care system and being treated. Commercially, that opportunity is probably much larger. Sanofi acquired this asset from Provention Bio, and they have a lot of conviction around it. We're eager to see the decision on that Stage 3 indication sometime in the first half of this year. Operator: Your next question comes from the line of Yigal Nochomovitz with Citigroup. Joohwan Kim: This is Joohwan Kim on for Yigal. Congrats on the quarter. We were wondering if you could help contextualize the reiterated guidance range given the slight delay for FSGS approval? How much, if anything, did the low end of the range assume for FSGS royalties in addition to continued IgAN royalties? Octavio Espinoza: Yes, thanks for the question. We assumed relatively -- we have a relatively modest assumption. It is a risk-adjusted number on FSGS going into the 2026 royalty guide. We did disclose that number. It's in our Investor Day slides. It's $4 million in 2026. Obviously, at the time, we had the January 13 PDUFA date, moving it out a quarter in tax that number minimally, I believe, it is a risk-adjusted number. Obviously, if it's a good outcome on the approval, then that is a derisked input, and it's somewhere north of that $4 million. It's overall, FSGS is going to be, we think, a minor contributor in 2026. Obviously, that becomes more significant and more meaningful as we get out to the -- into the later years. Yes, so that's the input on FSGS. Operator: Your next question comes from the line of Joe Pantginis with H.C. Wainwright. Joseph Pantginis: First, maybe for Todd or anyone else that wants to chime in, off of your recent Analyst Day and combined with your very strong deployable capital, do you have any thoughts or does it stay the same with regard to any changes or updates toward your selection criteria for potential partnerships, for example, the sizes or anything else? Todd Davis: Joe, thanks for the question. This is Todd. Well, I think that in general, as the value of our portfolio grows and it is growing rapidly, the average value per deal that we want to capture will go up proportionately. Just as a matter of functional strategy, you can increase proportionately your deal size or you can do more deals. We really like the range that we're in because we're very focused on these high clinical value assets. A lot of times, you can create really significant value with Phase 3 studies that are in the $30 million to $80 million cost range in total. That's a very good investment target for us, where there's a high demand for capital and there's relatively few solutions in terms of structured finance or royalty financing. We'd like to stay in that space. On average, we are going to be looking for greater value generation and having that accelerate over time through a combination of maybe slightly larger deals and more deals. Joseph Pantginis: Then maybe a question for Lauren, if you don't mind. Maybe you can remind us or provide some detail, and I know, obviously, get more information for the company. With regard to the Castle Creek technology, we had a lot of familiarity with that. I think maybe it's important to remind us or talk about any potential differentiations with regard to VYJUVEK because obviously, for example, any differences in potential surface area addressed or any other differentiation you might want to discuss? Lauren Hay: Yes. Great. Thanks, Joe, for the question. We have a lot of conviction in D-Fi, which is the Castle Creek treatment that, as you mentioned, is the same indication as Krystal's VYJUVEK. The investment thesis here is that we think it's a validated target. We're looking at a Phase 3 gene-modified autologous cell therapy with Castle Creek. The differentiation here is that it's injectable. It could expand the body surface area, whereas VYJUVEK has a live HSV vector and is applied topically. They're pretty limited in terms of the accessible body surface area for any individual patient. We also think that VYJUVEK has really validated the market here. They did just under $400 million in 2025 sales. We think D-Fi could come in and be a nice complementary treatment for patients with DEB. They have -- the vast majority of their body surface areas affected by these really debilitating wounds. If you offer patients a range of treatments where VYJUVEK as an example, needs to be dosed on open wounds, whereas these patients have -- they develop over time, a lot of these chronic wounds that get crested over and so they're not accessible with a topical treatment like VYJUVEK. When you introduce an injectable into the marketplace, then it really expands the treatment options for patients. Longer-term, there could be a potential to also use this treatment in the hands and feet, whereas patients with DEB, they get almost a webbing in between their fingers and toes that really limits their ability to perform activities of daily living. Longer-term, that could be on the horizon as well. They have a really strong team in place at Castle Creek. We think that with the differentiation and a validated target, we're pretty optimistic about the trajectory for this one. Operator: Your next question comes from the line of Larry Solow with CJS Securities. Peter Lukas: It's Pete Lukas for Larry. Just a couple of questions on FILSPARI. Does delay in approval in FSGS have any impact on your 2026 outlook? Or can we assume negligible or no expectations in guidance? Octavio Espinoza: Yes, it's going to be negligible. It's a relatively small assumption from FSGS in 2026. We did disclose at our Investor Day that we're assuming $4 million contribution from FSGS in 2026, relatively minor. Peter Lukas: Can you remind us of the potential market size opportunity in the U.S. for FILSPARI, FSGS versus IgAN? Outside of the U.S., it's been approved in Europe and trials underway in Japan. Can you give us an idea there also of the market opportunities outside of the U.S.? Lauren Hay: Thanks for the question. Consensus estimates for FILSPARI in IgAN and in FSGS are around $1 billion per indication. Just as a reminder, our royalty is 9% here. That would be a potential of around a $90 million royalty revenue to Ligand for each indication stand-alone. FSGS, they are expecting will launch more quickly than IgAN because there are no treatment options. It's a more rapidly progressing disease. The patients are younger. Travere has really built out all the commercial -- or the vast majority of the commercial infrastructure that they need they've shared that they'll be adding some sales reps to help cover the pediatric nephrologists, but they already have a lot of the infrastructure in place. They've guided to the fact that the launch, if approved, would probably ramp more quickly than in IgAN. I think that on the Japan side of things, IgAN is quite prevalent in Japan. There could be a pretty sizable commercial opportunity there. Travere and then Chugai have not shared anything externally in terms of their expectations there. We'll have to see if the drug is approved, how the pricing comes in. We're optimistic that there could be some real value to unlock there. Operator: Your next question comes from the line of John Vandermosten with Zacks SCR. John Vandermosten: Jazz's Rylaze beat estimates in fourth quarter. I'm wondering if that was enough to push it into your category of key royalty drivers? Then also, what are your thoughts on this asset as we look ahead towards the rest of the year? Lauren Hay: Yes. Great. Thanks for the question. Rylaze is one of the more mature products in our portfolio. We don't talk about it as much as we do some of the products that we have that are newer to the portfolio in terms of launching and ramping and a lot of growth. What we continue to see is real strength in the performance of Rylaze. As you've evidenced by the recent strong quarter that they shared, we don't have a lot of catalysts in terms of inflection points that could drive the sales of that drug up or down. It is one of our key royalty revenue drivers, and we expect that it will continue to be over the coming quarters and years. Probably, nothing on the near-term horizon that we see that would materially drive the sales to grow substantially from here. John Vandermosten: Looking at Pelthos and your equity holding in that asset, do you see that as a source of cash? Or is that just a good place to stay as they roll out their portfolio and add new assets? Todd Davis: Yes. I think obviously, with a strategic transaction like that where you end up with a real significant percentage in the company, we're going to have a very long-term view on that as holders. We're not looking for liquidity right away, and we think there's a lot of upside there as well. Overall, in terms of our equity strategy, I mean, between warrants and legacy investments and things like that, we still have 1 million shares in Viking, for example. We have had a general philosophy that once these things are mature and that's the appropriate time, of course, we do look for liquidity, and we do see them as a source of cash in some cases. John Vandermosten: Then last question is just a broader one on the markets at all. M&A was kind of up in the second half of '25 and then it's maybe slowed a bit this year, and the IPO market has been fairly weak for our space. How is that affecting the opportunities that you see? Todd Davis: I mean, it's generally, I would say, an okay market right now. Better than it was 2 years ago, for example. For us, John, in good markets and in bad, I think royalty financing is growing rapidly regardless. It's doubled in the last 5 years. People are seeing it as much more a mainstream part of their capital structure for lack of a better term. There's debt, there's equity, and there's royalty financing available for companies. It used to be 10 years ago when you would approach a company and offer a royalty financing. There was typically, not always, but typically an education process required. Now most of the CFOs and CEOs out there immediately know what you're talking about conceptually and understand how it fits into their capital structure. They also realize that there's many advantages. I mean it's not better, but it's different than other forms of financing. For example, our investments are extremely long term, and they're tied much better to the life cycle of assets within our biopharmaceutical development time lines because we're attached to the assets over time, even when they trade hands. There's a lot of advantages to doing this. Obviously, at some point, if people think their equity is significantly undervalued on a relative basis, it can look attractive for that reason. In good markets and in bad, we have just found our pipelines to be quite robust. Paul Hadden and the investment team simply have more deals to do than they can possibly do. We're really culling our pipeline of opportunities pretty aggressively to make sure that we're spending our time on things with a high probability of closing. That offer good assets, meet all of our asset criteria that we look at and will offer appropriate returns as well. Operator: Thank you. That concludes our question-and-answer session. I would like to thank our speakers for today's presentation, and thank you all for joining us. This now concludes today's conference call. You may now disconnect.