Ligand Pharmaceuticals Inc (LGND) 2011 Q1 法說會逐字稿

Greetings, and welcome to the Ligand first-quarter conference call.

At this time, all participants are in a listen-only mode.

A brief question-and-answer session will follow the formal presentation.

(Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Erika Luib of Investor Relations.

Thank you.

You may begin.

Thanks, operator.

Welcome to Ligand's first-quarter financial results and business update conference call.

Speaking today for Ligand are John Higgins, President and CEO; John Sharp, Vice President of Finance and CFO; and Matt Foehr, Executive Vice President and COO.

Just a reminder to everyone that today's call will contain forward-looking statements within the meaning of federal securities laws.

These may include, but are not limited to, statements regarding intent, belief, or current expectations of the Company, its internal and partnered programs, and its management.

These statements involve risks and uncertainties, and actual events or results may differ materially from the projections described in the press release and this conference call.

Additional information concerning risk factors and other matters concerning Ligand can be found in Ligand's public periodic filings with the SEC, which are available at www.sec.gov.

The information in this conference call related to projections or other forward-looking statements represents the Company's best judgment as of today, May 10, 2011.

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 will turn the call over to John Higgins.

Erika, thank you, and thank you to everybody who's joining us live, and I know many of you will be reading the transcript, as well.

It is springtime 2011, and I'm pleased to report the state of the business at Ligand is strong.

For those of you who have followed us, you know our model and our recent achievements.

Ligand is focused on assembling a large portfolio of high-quality pharmaceutical assets, or shots on goal as we call them.

The objective is to assemble these assets, help manage the relationships with our partners as best as possible, and drive value for our shareholders.

In addition, we have strong internal drug discovery and early development capabilities, and are making progress advancing our own internal program.

At this stage we have over 60 shots on goal, or programs, and among these 60, over 50 are fully partnered.

That is, they are either marketed or being advanced through development by our partners.

It is a very prodigious portfolio and one that we're proud of.

Many of the assets are late stage in development, several products are already paying us royalties, and all of this comes by the hard work we've done the last couple of years in acquiring companies and advancing our own programs.

To just hit a few highlights, in the past quarter we closed the acquisition of CyDex.

This is the fifth acquisition we've done in just over 2 years.

It is, without question, a transformational deal for Ligand.

The business contributes revenue, a strong stable of existing partnerships that currently or in the future have the ability to generate royalties, milestones, and product sales for Ligand, and in addition, it gives us a very strong drug formulation platform for driving new deals with partners.

We closed the deal in January.

Several months have gone by.

I am pleased to report the integration has gone smoothly, and candidly, across the board there have been many positive developments with this company just a few months after we have closed this acquisition.

Later in the call, one of our new colleagues, Matt Foehr, is going to be making more comments about CyDex and what he is seeing.

Matt has just joined us as our Chief Operating Officer, but I'll defer to him to give a little more context for CyDex, but 2 highlights I'd like to make now are about Onyx and Prism.

These are 2 marquis collaborations that have come to Ligand via the acquisition of CyDex.

And just in terms of specifics, for all of you who are following this space, both of these partnerships have generated very, very substantial and positive news flow for Ligand in the last couple of months.

The first, Onyx is developing Carfilzomib with a full NDA submission expected within a few months for multiple myeloma.

This is not our drug, but in partnership with Onyx through our CyDex unit, we get a royalty on sales, plus we will be supplying an important raw material to the manufacturer of Carfilzomib, so we'll also be able to book material sales.

Onyx has done a -- what appears to be a superlative job developing and advancing this program.

The data we have seen that is being published is very promising, and the expectations from third parties for this program continues to grow.

Obviously the drug has not been fully filed, it's not approved or launched, but the opportunity around this asset is very, very high quality, and one that we are quite excited about.

Another marquis deal is with Prism.

Prism was a private company who recently announced that they will be acquired by Baxter.

Their primary asset is a product called Nexterone, which is amiodarone formulated with captisol, or this active ingredient that's used -- I'm sorry, it's not an active ingredient, it's a formulation excipient that's used to reformulate products.

Baxter won -- I'm sorry, Prism won approval for the product.

There were plans to launch it themselves, but just about 2 weeks ago a very significant acquisition was announced whereby Baxter will acquire the company Prism and namely this product.

Baxter's a leading hospital supply company, and we expect they will be an excellent company to launch and market this product.

We'll also get royalties and material sales from this collaboration, and there's a potential -- we believe that the sales will be considerably higher through Baxter than with Prism, as Prism was a smaller company than obviously Baxter.

So these are 2 examples of significant partnerships that will generate, we expect, meaningful royalties and material sales going forward.

Moving on to a separate topic, we're now in the final weeks of concluding our Phase I SARM trial.

This is a selective androgen receptor modulator; it's a very promising field.

Muscle wasting is an important, impressive growing area of focus for drug companies.

We have what we believe to be a best-in-class molecule in the SARM space.

We are concluding our Phase I trial, a poster has been accepted for the upcoming Endocrine Society meeting in Boston, and we anticipate that we will be announcing data in about a month's time at that medical conference.

Moving on to another topic, on our web page and in our investor slide shows, we show a pie chart illustrating the stage of development of our broad portfolio of assets.

As I said, we call them shots on goal.

We have over 60 programs, most of them are fully partnered.

We try to share with investors the stage of development, and it's impressive.

The vast majority are in human development, and in fact, many of the programs are in late-stage development.

Now while many programs are advancing, one that we are most excited about in terms of near-term potential is Promacta.

This is our program that is partnered with GSK.

First-quarter sales for the drug doubled year over year.

GSK recently announced first-quarter 2011 sales, and we believe the program is commercially in its infancy.

Given the new markets that are coming online through development, given the long remaining patent life, and the fact that new markets beyond and new indications will create new expansion opportunities.

Ligand enjoys a tier royalty on sales that approaches close to 9%, on average, on sales around $1 billion, and given the drug's profile and the target markets, we believe this product could be truly a blockbuster with very substantial annual revenue potential.

Now I want to highlight the specific upcoming event, after having been on the market for a little over 2 years, for ITP, the short-term use -- or short-term treatment of idiopathic thrombocytopenic purpura.

After this period of time, just last quarter it received full approval for ITP; that is chronic use, long-term use within the United States.

In addition, in just the last couple of months it launched in Japan, and the drug now is available in most major markets worldwide, and potentially the largest indication is now soon to be completing pivotal trials.

And that is -- what is so compelling about Promacta is that we expect the Phase III pivotal trials for Promacta in hep C to be concluded over the next several months.

Now, to be clear, GSK has full control over the clinical and regulatory work, but we are looking forward with great anticipation to learning the outcome of these studies and the path forward for this very significant market, that is the treatment of thrombocytopenia in patients with hepatitis C.

Finally now before I turn it over to John I want to just remark about our recent additions to our team.

As many of you saw the headline, Matt Foehr has joined Ligand as our Chief Operating Officer.

Matt is a tremendous addition to our team.

He has energy, ideas, he has excellent operational experience, and really is a fantastic new member to Ligand.

He comes at a great time, particularly given the recent acquisition of CyDex, as he'll have the operating responsibility for running the CyDex business, in addition to running the research operations here.

I'm pleased to be able to work with Matt, and I know for investors who interface with Matt, you'll see he's a tremendous addition.

As well I want to comment that John LaMattina has joined our Board of Directors.

I have been very proud of our Board.

We have a great Board.

They're highly engaged, and give excellent leadership and guidance to myself and our management team, but John now is a tremendous addition, as well.

He joins us having spent most of his career at Pfizer.

Having spent 30 years, he retired as the Global Head of Research and Development at Pfizer, has tremendous big pharma research and development expertise, and joins us at a great time.

Not only to help us navigate many of our partner relationships, but also to manage our program.

The fact that we can attract this caliber of people, both in terms of management and our Board, is really emblematic of the fact that this is a Company on the go.

We are doing great things right now, we're executing well, and we are making some very, very positive additions to our team.

Matt will join the call in conversations here shortly but before that I'll turn it over to John Sharp to give some highlights on our financials.

Thanks, John.

I will briefly go over some of the highlights from our earnings release that just crossed the wire, and I will also try to provide a little color to the 2 significant items that show up this quarter below the operating line on our income statement.

First, our revenues for the quarter were $3.9 million, down from $6 million last year.

The decrease was due to termination of our remaining collaboration agreements in 2010, but these were offset by material sales from the newly-acquired CyDex.

In addition, royalty revenues were up slightly, as an increase in Promacta royalties were offset by a decrease in Avinza royalties.

Operating expenses were $6.5 million for the quarter, including $0.5 million for cost of goods sold.

R&D expenses were down $5.4 million compared to last year, as we shut down our New Jersey facility, which was used primarily to service our collaboration agreements.

And G&A expenses were up by $1.1 million due almost entirely to transaction expenses for the CyDex acquisition.

Below the operating line, we recorded $2.1 million of other expense for the quarter compared to $1.3 million of other income last year.

Both of these amounts are primarily related to non-cash adjustments from our publicly-traded contingent value rights, or CVRs, for Metabasis.

And as a reminder, these CVRs are mark-to-market each period where we can see significant fluctuations either way, and which may be materially different than the amount we actually pay out on these CVRs.

In addition to that, we also recorded an income tax benefit of $13.8 million.

This amount relates to the CyDex acquisition, as well.

This benefit was generated by differences in the way the intangible assets that we recorded related to CyDex are treated for book and tax.

In short, we can't deduct the amortization of the CyDex intangibles for tax purposes, which creates a deferred tax liability in purchase accounting.

However, as we have sufficient tax assets at our disposal to offset this future taxable income, we also recorded a tax benefit that ran through our income statement as we released our valuation allowance against tax assets.

You put all of this together and our bottom line was $9.5 million of net income, or $0.48 per share.

Overall, the financial results for the business were right in line with our expectations.

Going forward, we expect our royalty revenues to continue to increase on a quarterly basis.

However, the timing of our material shipments, and our license and milestone payments can fluctuate significantly from quarter to quarter.

We also have a good handle on our operating expenses, for which we expect to see our quarterly expenses decrease starting in the second quarter and through the end of the year, as the first quarter, as a reminder, included the $1 million of transaction-related expenses, as well as certain other non-recurring expenses.

With that said, we continue to expect total revenues for 2011 to be between $22 million and $24 million, of which about 0.5 of that is material sales, about one-third is royalties, and the remaining balance is license and milestone payments.

On the expense side, we estimate 2011 operating expenses to be between $18 million and $20 million, including about $2 million of new non-cash amortization related to the CyDex intangible assets.

We also continue to expect average gross margins of 65%, and continue to expect to be profitable and cash flow positive by the end of 2011.

And with that, I will turn it back to John.

John, thanks.

Actually, Matt Foehr is going to make some remarks.

Matt?

Thank you, John.

First, I'll say that I'm very excited to be joining Ligand right now.

I am a big believer in the business model that's been carefully put into place at Ligand over the last couple years, and have certainly seen the need for a model such as this in very recent experience in large pharma.

I've also been a part of building significant momentum and growth through a model like ours in mid-sized organizations, and candidly, it feels very good to be part of that again, and I look forward to helping lead an expansion of that.

Platform technologies that have uses in a variety of areas can really create an extremely efficient and scalable business model in business in general, and our portfolio is certainly terrific for an organization our size.

I've only been here a few weeks, but I can say I'm very impressed with the Ligand and CyDex teams, given the conscious efforts that have been put into place in creating our model.

We have a very carefully selected group of employees, and I see that as allowing us to really run a successful and lean and efficient business model.

This CyDex deal, John obviously talked about it in the intro, but I see this as really a great deal for us.

Closing the deal was clearly a cornerstone achievement for us in Q1, fueling financial growth, adding new assets to our portfolio, but really see that the technology at CyDex as a great platform.

It's not only a technical formulation enabling technology on the lab bench, but is also one that has the potential to impact dosage and administration, and in some instances cost of care.

And is really well designed to meet the current and future needs of our partners, whether with existing APIs or NCEs.

CyDex also has a very solid, existing customer base that's well matched to Ligand's.

The existing deals are really very high-quality deals, some high potential and very positive relationships.

We see the Baxter and Prism news, as John Higgins outlined, is really a positive.

Onyx continues to be a fantastic partner to us, and we're looking forward to building on those relationships and finding new ones.

Right now we're working on new deals.

We're taking inbound calls and are approaching new players.

We're very excited about what we're seeing, and hope to enter into some new relationships soon.

So there are really no shortage of opportunities, and with an efficient connection of the businesses, we really do see ourselves creating a broader platform for growth for the CyDex business.

So with that, I'll turn it back over to John.

Yes, Matt, thank you.

So we've commented a lot about CyDex.

For those who were on our call at the time we announced the deal, we outlined 3 principles, 3 factors for why we did the deal.

The first was to accelerate our financial growth, the second was to significantly expand our portfolio, and thirdly, to give us an entree to participate in the drug reformulation segment, which we believe to be a very important and promising area of the pharmaceutical business.

Those are the 3 principles.

All 3 are coming to roost, and again, are being reinforced post integration.

So that is the substance of our call.

Just a couple of other quick remarks I'd like to make about upcoming events.

In late June, on June 23, we're going to be hosting an analyst and investor day in New York City.

We did this last year about the same time.

It'll be a similar format.

More details will follow shortly via press release, but it will be in New York City, an after-market event on June 23.

There's a lot to talk about these days, so this will be a good time, and we believe a great event to get in front of investors in a more formal setting.

Also I'd like to announce that Ligand will be activating a new corporate Twitter news feed starting tomorrow.

The purpose of this addresses the fact that we have so many partnered programs and relatively frequent news developments that often don't warrant a press release by Ligand, and otherwise may not be picked up by our investors.

We have a lot of great little pieces of information that come up regularly, so we believe that Twitter, this avenue for social media and outlet, will be a very, very effective tool, particularly given Ligand's unique business model, this very broad diverse portfolio of partnered assets.

So we'll be sending out Tweets on news events coming your way.

If you'd like to sign up, check out our news release tomorrow and we will give you the details.

Thank you.

With that, we'll turn it over to the operator for questions.

Operator, we're ready for questions.

Thank you.

(Operator Instructions) Our first question comes from the line of Jeffrey Cohen with C.K.

Cooper.

Please proceed with your question.

Hi, folks, thanks for taking my call.

Just a few quick things.

Could you talk about timing from GSK -- or your anticipated timing on the Promacta trials as far as reading the mail, and can you recap the -- what was the quarterly sales for Promacta Q1, pounds or dollars, please?

And also any color on Aprela or [Feblin] as far as any word from Pfizer?

And also, there was a comment earlier about something -- some news event in the next -- some data event in the next couple months.

I missed that, I'm sorry.

Data event for what, Jeff?

I don't recall.

There was a comment in the next couple months, or a month or 2 months there was something that would read out.

It was toward the beginning of the call but I missed it.

Okay.

So, Jeff, thanks for your question.

To go back, a Promacta question about Promacta hepatitis C timing and, Jeff, I believe that's the news event that I alluded to.

This is our estimate.

The studies were finished at the end of 2009, early 2010, and they're about 13 months of treatment period with a six-month follow-up.

So if you look at the calendar and add months and also look at what is being reported on clintrials.gov, these studies should be fully completed, we estimate, by early summer.

July-August timeframe, that's our estimate.

Exactly how soon GSK will publish the data or announce it following the timing is uncertain, as well as the venue is uncertain.

Having said that, we have been -- this study started in 2008.

It's a very large campaign, 200 centers worldwide, 1,500 patients and with many pivotal trials these are very important, very long-running studies.

So we are in the final weeks, maybe months.

And given the market launch, the fact the drug's now available at in most major world markets, and the expanded label came last quarter for ITP in the US, the import of new data for what we expect to be a much, much larger indication, given our royalty rate and the long patent life on this.

This is a very, very significant event for Ligand and we believe that we're just several months away although, obviously, we don't know exactly when.

As far as sales, sales in dollars for Q1 reported by GSK were $19 million and that compares to $9 million 1 quarter ago.

So it's more than a doubling and I'll just add that that comes with Japan having just launched in the first quarter.

So that really is a partial quarter of Japanese sales, and some countries in Europe are still coming online, and that full approval, the chronic use approval, came late in the first quarter, as well.

So, again, a lot of nice developments with this product commercially but it's still a very young product.

As far as Aprela and Conbriza, just to break it down, there are two SERMs, or osteoporosis drugs that Pfizer owns.

Pfizer has launched Conbriza, or Vivant, in Europe and Japan.

Sales started fourth quarter last year.

We earned our first royalty check just this quarter, the first quarter of 2011, and other countries are rolling out.

Every month or so we see another 1 or 2 countries roll out in Europe, so that product is launched.

You asked about Aprela.

Aprela is the combination drug, which has the SERM plus a premarin.

We do not know when, but Pfizer has indicated that they expect they will file an NDA for that and that might happen, we believe, by the end of this year, but we're still waiting with anticipation to see that news.

Perfect.

Thank you very much.

Thank you.

Our next question comes from the line of Van Brady with Presidio Management.

Please proceed with your question.

Yes, I have a couple of short questions, if I may.

It's been suggested that Carfilzomib -- if I got that right -- since there is no anything on the market for multiple myeloma could get orphan drug status and maybe even be approved by the end of the year.

Could you give us your thoughts on that?

And then I'd like to ask another question.

Well, I will share some general comments, but as an override I'll say that product-specific questions are perhaps best directed to Onyx directly, as they clearly have a not only control of the program but also have the regulatory dialog with the FDA.

Generally what I will say is that this drug, the data so far looks very, very promising.

It's been -- the studies are well run, the data is encouraging and, again, we are really reacting to what we're reading from third parties.

But the medical and investor communities seem very excited about this product.

And, again, these are analysts -- medical and financial analysts that don't cover Ligand and we're just reading what is being reported out and in response.

There is excitement that, while there's Velcade and some other products on the market already for multiple myeloma, there is a sense that this product could be superior in certain manners and so I think that's what's driving the excitement for the product.

This is cancer, it's a deadly cancer, and it could be a very important drug.

So those are my general comments.

Again, I do want to defer people to talk to Onyx directly for more specific questions, but I'll simply say we are very proud to be a part of this asset.

We aren't advancing the development, but Catosal, this reformulation chemistry that we have provided to Onyx, is -- frankly it's an important part of their product.

And, again, we're playing our role in -- not with this partnership but also in a myriad of other collaborations in helping make good drugs even better.

Okay, thank you.

I had a question regarding Nexteron.

You said that the -- you're quite positive on the possibility that the sales would be larger and ramp much faster under Baxter than they would in Prism, is there any way to quantify that?

It is a great question and the quick answer's no.

It's hard to quantify and, frankly, we aren't going to quantify right now, but let me give some perspective.

Prism is a very capable and successful company, but frankly, they were private.

They had a small team, limited capital resources, and to our understanding was really focusing just on the US markets.

We're excited about Prism, and we're very pleased by everything that they had reported out in terms of their plans for the product the last 6 to 9 months.

Having said that, Baxter is -- could not be more different.

They are world renowned.

They've got a fantastic reputation.

They are the leading hospital base supply company.

They've got a huge marketing team.

They've got enormous capital resources.

They just paid $170 million cash -- actually the deal hasn't closed yet, we're expecting it to close within the next few weeks.

But a very significant cash outlay plus some earn outs, which means that they should be investing significantly to launch the product.

On their earnings call -- and, again, I'm just conveying a quote that we read in the transcript -- but their CEO made a remark about this acquisition on their earnings call 2 or 3 weeks ago, and he conveyed excitement for the acquisition and said that he believed the product could do as much as $150 million to $200 million a year in sales.

Again, we are not going to quantify what that could mean to Ligand right now, but we will get royalties on dollar sales and we will be supplying Baxter the product material.

So if they're selling a lot more product, sales could be higher, which means higher royalties, plus it means we're going to be selling a lot more Catosal.

So it appears to be a great deal for Prism and accordingly is a great deal for Ligand.

Okay, thank you very much.

Thank you.

Thank you.

Our next question comes from the line of [Chandra Singh] with International Biotech (inaudible).

Please proceed with your question.

Could you please update the status of Glucagon for diabetes and also TR hormone for T3 (inaudible), please?

I 'm sorry, could you repeat the question?

I understand it's about TR beta and Glucagon, but what was that --?

Yes, I wanted to know what is the status on those two projects which you have been working for more than a year?

Right, yes.

That's a fair question.

These are two programs that we inherited from our Metabasis acquisition, and they are important programs, for certain.

Not only are we excited about the promise of them but also we are investing money.

Having said that, they are on a perhaps longer development track than we would have expected at the time we acquired Metabasis.

The Glucagon field is focusing in diabetes, it's a very promising field.

There were some attractive molecules and chemistry but we need to do more animal work in order to get ready to file an IND and we -- the earliest we would file an IND for Glucogon is the second half of 2012.

For TR Beta, that program -- it's a big market.

There was good proof-of-concept data that Metabasis had generated with a lead class of molecules.

However, there are other molecules in that area of research that we believe will be better clinical candidates for various safety and efficacy factors that we've been evaluating.

So we are looking at those molecules and are deciding to pass forward with earlier molecules.

That's the update.

There is no major announcement expected in the near term, but they are being advanced but they're on a longer development path than we originally forecasted.

Okay, thank you.

Thank you.

Our next question is from Christopher James with McNicoll, Lewis & Vlak.

Please proceed with your question.

Hi, good afternoon, John.

Congrats on a great quarter, progress made and look forward to your analyst day.

Just taking a step back, the landscape for hep C appears to be going to drastically change with the approval of two new oral drugs, Telaprevir and Boceprivir.

How do you envision the thrombocytopenia market playing out and how should we look at it just in terms of patient size and dollar amount for Promacta, given that the orals, although they do cause cytopenia anemia, neutropenia the main drawbacks of those, just how big do you see that market playing out?

And then just a couple more follow ups on Promacta.

Yes, you bet.

Chris, thanks for the question, and I'd actually like to invite my colleague, Rob McKay, to comment.

He's following this space very closely.

But as a general remark, I'll say at analyst day this will be a great venue for us to talk about this and review these questions.

We are hoping to get a thought leader, medical expert, there to talk about Promacta in hep C, but also the general landscape.

But on balance -- I'll let Rob fill in the details -- we are not only bullish about Promacta and what we are witnessing in terms of the commercial launch and the development activities, but also the other updates that we're hearing out of Merck and others.

We think the market is substantial and, frankly, it may be larger than we even expected.

Rob?

Yes.

Well, Chris, as we've talked before, remember that for Promacta we've always been looking at targeting what is the 10% of the sickest hep C patients in the US, and those patients generally have liver disease and thrombocytopenia.

And that market was never really going to change, even when the new therapies came online.

These patients have underlying thrombocytopenia and need to be treated before they can really take any, whether it's the current standard of care or the new Vertex or Merck drugs or anything beyond that.

Frankly, the news that we got last week from -- or a week or 2 ago from the advisory board on those 2 programs, I think we regard it as good news for Promacta, as did some of our scientific key opinion leaders that are part of the Ligand program.

Basically you saw the data that neither of those drugs reduced thrombocytopenia over the standard of care.

The Merck drug was a bit more increasing over -- compared to the Vertex drug, but both of them increased thrombocytopenia, so they're not making the thrombocytopenia go away.

And I think the other thing that we started hearing was -- as we all knew the efficacy with those drugs was great and indeed the data bore that out.

I think what we're hearing is that, in fact, our target patient population may grow as clinicians are more ready to try to push some of these sicker patients towards a therapy that actually may be a cure for them.

And so, again, the target population for Promacta probably did not get any worse and maybe got better last week with this news.

As far as the si -- the dollar amount and the size, you can do your own math on what that may look like.

If we're really targeting 10% of the US hep C population, that's obviously hundreds of thousands of potential patients, so that would be a major step up from where we are today with ITP.

So does that cover it for you, Chris?

No, Rob, I think that's a great point.

I think the second point you made is really key.

I think you're going to see this -- (inaudible) spoken, just talked about this warehouse effect where you're going to see more and more patients being put on therapy.

In fact, patients are waiting for therapies that are less toxic, so I agree with you.

Just moving on, staying on the Promacta, Nplate did $65 million last quarter so run rate well over 250, and compared to -- $65 million compared to $19 million for Promacta, how do you see those two playing out and when do you see Promacta catching up?

Chris, so that dynamic, Nplate outselling Promacta, really has been there from day 1.

Both products launched about the same time, right at the end of '08, and right out of the gate Amgen has been out selling Promacta.

I'd say that the growth quarter -- the recent quarter or 2 the growth for Promacta is, by our analysis, better than Nplate, although the sales are lower.

Our view is that Amgen -- clearly they've 2 decade long relationship with these customers.

They've got a big commercial engine.

They also have a significantly favored reimbursement environment in that they -- Nplate is an injectable medicine.

We hear from many sources that that is really the biggest difference in terms of utilization, the fact that these, frankly, expensive medicines have very different reimbursement and coverage, since one is oral, Promacta is oral.

Aside from that we're hearing the doctors like both drugs and feel that Promacta has a great medical profile.

So our view is that there is no weakness in the drug or the commercial activities.

It is just a circumstance that GSK started with a smaller team and they face reimbursement hurdles for this indication, for ITP.

Now, when you go outside of the US, the reimbursement environment is different.

And again, Japan just came online, as well as some other European countries.

We're seeing that Europe is -- rest -- ex-US is growing nicely.

And the other factor, which is I think most, most significant is Amgen is not developing Nplate for hepatitis C.

Thrombocytopenia in hepatitis C is real, it's significant, and there could be many, many explanations why, but one thing is for certain is that Amgen perhaps thought about it or got started way too late and so they just never really initiated a hepatitis C campaign.

GSK is going after what we believe to be the biggest market in thrombocytopenia and if they get good data and can file and get the drug approved it should create a significant expansion of the commercial opportunity.

That's great.

Just a couple more.

Could we potentially see data by ASH for Hep C?

In Ligand's estimate, yes.

That's entirely our estimate.

I invite you or any investor to call GSK and try to get them to answer directly.

We are as eager to know as anybody when is this data coming out.

We do not know.

But by every calendar math we've done this data ought to be out by year end and certainly at the deliver conference in November or ASH in December, or sooner, we just -- we don't know.

But I've been here over 4 years, and ever since day 1 Promacta hep C was the big ticket.

We've done a lot of other great stuff.

We have built a fantastic business, but to be clear, Promacta hep C is still the big ticket.

And it's exciting around here.

We've got a lot of stuff day to day that's keeping us very busy and I think we're doing some great work, but we are closer than ever to that pivotal data coming out and we're excited about it.

I agree, it's a game-changer for you guys, potentially.

And we haven't heard much on the backup to Promacta, can you give us an update on that?

Sure.

There's not much to update.

This, for the listeners, is the next generation, a TPO agonist that we partnered with Ligand at the end of 2008.

There's a number of pharmacological and other factors that we believe make this superior to Promacta.

Promacta, we believe, is a great drug but there's -- again, next generation we think that there's a number of factors that make it better and, frankly, it's got a longer patent life.

GSK, we think could be a great partner to advance this.

They did some early work.

We don't expect they're going to go after ITP or these other smaller markets, but we believe -- and it's classic big pharma portfolio build out -- if Promacta's successful and they start to ramp up new indications and it gets established worldwide, this is a very, very logical follow-on drug.

They can leverage our Phase II data and start to take into other areas including, we expect, more the oncology, the cancer-related thrombocytopenias.

So it's a valuable asset and there's not a lot of other specific updates in terms of the development life, but we do believe that GSK could be a great partner and as Promacta's successful they'll advance this, as well.

Great, we'll keep following.

And then finally, I think the first caller might have been referring to the SARM data at the upcoming endo conference.

What could we expect?

Is that just to look at safety, or could we see some hints of efficacy on that?

Yes, Chris, that's a good reminder.

That might've been what I referenced.

So the event is the Endocrine Society conference in early June in Boston.

We have submitted a poster, which has been accepted.

It had preliminary data.

The study design is a single-ascending dose, which is completed, and a multi-ascending dose -- multiple-day ascending dose, so it's a Phase I but a robust study.

I'm not going to comment on what we will announce.

The study's finishing now and we're compiling the data and so on.

But we're excited about this molecule, it's got great IP, it has great animal pharmacology, and we think it's a promising field.

So we're excited about the program and, again, I'd like to wait until that medical conference before we talk about the data coming out.

Great, John.

Thanks and congrats again on a great quarter.

Hey, Chris, thank you.

Thank you.

Our next question is from the line of Nick Farwell with Arbor Group.

Please proceed with your question.

Hello, can you hear me?

Did you mention Nick Farwell?

I'm sorry, I couldn't hear you.

Yes, sir, your line is live.

I apologize.

I just have a quick clarification if I may, John, and that is with respect to your outlook for '11, on the revenues you break it out by percents, but you don't break it out by entity; that is CyDex and Ligand.

And just for edification purposes, can you break those numbers out between Ligand and CyDex?

We can sort of interpolate the numbers by taking out the material side from CyDex and we get roughly $2 million or $3 million for royalty and license.

Right.

Yes, Nick, simply it's about 60% CyDex this year and 40% Ligand.

Okay.

So that's a rough breakdown across those ranges.

And that formula we don't expect is going to continue going forward necessarily, but given the contribution of material sales that's all coming out of CyDex.

True, I understand.

I'm just trying to understand better if there are issues between the revenue stream associated with royalties versus license?

It would appear there would be and I'm trying to bring clearer focus on that because that would give us some idea as to your perhaps outlook for SARM for the sake of discussions.

So the revenue guidance excludes any new deal revenue.

We may not have called that out specifically in this press release, but it -- but that outlook is unchanged.

We've had it in slide shows and other press releases.

So any substantive new deal making -- SARM or there may be some other new deals -- that revenue guidance excludes that, which would be, quote, Ligand, the original parent company revenue contribution.

What I will say about the quality of revenue is that this revenue base -- it's a good quality revenue base.

There's meaningful chance for growth.

We've got multiple royalties, so there's diversity.

Several of these products recently launched, still with long remaining patent lives, so when you have long patent life and new markets and indications and it's across a diverse base, again, the quality of that I would rate much higher as compared to, let's say, just one off milestones, which are great.

It's revenue and we'll take the cash, but -- so that's just a little more commentary.

I get that out now.

We offer that up when we meet with investors one on one, but given the contribution of material sales across multiple customers and the range of royalty revenues this is a good revenue base, given our cost structure.

Right.

And the other includes perhaps 1 or 2 opportunities at CyDex, not just exclusively Ligand?

Correct.

Okay, that's what I wanted to highlight.

The second, in looking at the OpEx guidance, can you or John give us some sense of what G&A might look like going out over time given you had the transactional costs for CyDex in the Q1?

Yes.

So, Nick, this is John Sharp.

So we had $4.2 million in Q1 that included -- that included the full $1 million in G&A so -- and it included what I'll call some other transition-related costs.

So you take that down to roughly $3 million and dropping, I'll say, slightly each quarter after that.

Okay, fine.

And then can you talk a little bit about R&D and how you see -- does that, for any particular reason, change during the balance of this year in any material way?

It is a little similar to G&A without the one-time Q1.

I will just say that there are some studies that we're performing in the first half of the year that will taper off towards the second half.

Okay.

Thanks, John, appreciate it.

Thank you.

Thanks, Nick.

Thank you.

Our next question comes from Steve Flax with Flax Investments.

Please proceed with your question.

Yes, hi.

I'm just a little confused.

What were the revenues on CyDex for the quarter and what are you guys estimating for the full-year revenues on CyDex?

Steve, again, the breakdown, given our revenue range, approximately 60% of that range we would expect to be CyDex, which is mostly material sales, as we supply Catosal to our partners, but also some royalties derived from the CyDex partnerships, so roughly 60%.

As far as the first quarter, about $1.5 million was from CyDex and the balance was from Ligand.

So going forward you're estimating around $12 million from CyDex, is that correct, for material revenues for the year?

Yes, plus or minus.

Right.

60% of the high end of our range would be a bit more, but I think that that's a reasonable place holder.

Okay, thank you.

Steve, thank you.

Thank you.

Ladies and gentlemen, there are no further questions.

I would like to turn the floor back to management for any closing comments.

No, that concludes our call.

Again, we're pleased to be with you early in 2011.

We have an analyst day we're preparing for and we're excited about the calendar of news events coming up the rest of this year.

Thank you for joining us.

Thank you.

Ladies and gentlemen, this concludes today's teleconference.

You may disconnect your lines at this time.

Thank you for your participation.