Ligand Pharmaceuticals Inc (LGND) 2012 Q1 法說會逐字稿

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

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

A question and answer session will follow the formal presentation.

(Operator Instructions).

As a remind they are conference is beg recorded.

It is my pleasure to introduce your host, Erika Luib.

Thanks, Doug.

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

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

Just a reminder to 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 partner programs, including Promacta, 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.gov.

The information in this conference call related to projections or other forward-looking statements represents the Company's best judgment based on information available and reviewed by it as of today, May 2, 2012, anddo not necessarily represent the views of GSK or any of our other partners.

Ligand untakes 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.

Erica, thank you.

Thanks for joining us, and welcome to our call.

With our shareholders we talk about our business model.

Our model is simple.

We run an efficient business with a large diverse portfolio of assets, focused on maximizing profits and cash flow.

At the core of our model is what we call Shots on Goal.

A simple concept.

It's all about building into the business a significant amount of programs with a significant amount of potential upside.

If you are on this call, you know we have done that.

We have over 50 fully funded partnerships, and we continue to build a portfolio.

What I would like to do is walk through several slides to help highlight the recent developments and some key events coming up in the near term.

On slide three I would like to focus on a sound bite we call 12 in 2012.

For those who have seen the slide show, we have been on the road, you have seen this slide.

But I want to reiterate a few points and focus our shareholders and listeners on key messages.

As I have said, we have over 50 fully funded partnerships.

All right?

Now thesecome from drugs that we discovered, technology we have licensed, drug delivery technologies, et cetera.

50 fully funded partnerships.

They [with] quality partnerships.

It's a late stage portfolio.

Very large indications are being addressed in many regards.

What is meaningful is that just in the last two quarters, since we now have moved into 2012, one dozen of these programs -- 12 programs are in Phase 3 stage development.

What we are calling Phase 3 stage.

Here is the list of the 12.

At the top of the list carfilzomib, a drugwith Onyx that is under FDA review.

I'm going to talk more about this.

There's a panel meeting coming up next month anda potential PDUFA approval -- PDUFA date in July, and a timing for potential approval.

We have NDA filings for two drugs, Promacta and Aprela.

We have a Phase 3 readout with a drug that Lundbeck has, Carbamazepine.

They have a Captisol enabled Phase 3 data later this year.

And then another eight programs -- eight programs -- that are starting Phase 3 trials this year.

It is a range of indications.

A range of high quality partners, all funded, with the exception of one, which is our internally developed Melphalan program.

What is significant about this -- and I'm going to go into a little deeper dive into a few of these programs, but this is our portfolio.

It is quality.

It is late stage.

Clearly there is a potential for very significant growth as we look out in the future.

But this built upon a business that is already generating significant revenue from current royalty bearing products from a technology we sell, Captisol, where we get quarterly revenues off the sale of Captisol, as well as a vast portfolio of deals that are already done that comprise hundreds and hundreds of millions of potential license and milestone payments.

That is the core of the revenue side.

We have this late stage high quality partner portfolio, and again many, many programs beyond that.

When we go to the next slide, this is just a list of nine or ten programs -- or events that are coming up in the next couple of quarters.

Notably Promacta; GSK will have data for Promacta for a new area of research, CIT -- Chemotherapy Induced Thrombocytopenia -- that is coming out at ASCO in June.

Also, we'll be announcing data for our glucagon program for diabetes at ADA, also in June.

Matt's going to go through Glucagon in more detail.

This is significant.

Diabetes is a huge indication, and of note, Lilly is also going to be announcing Phase 2 data, which could help define the potential of this category.

The next few items I'm going to drill deeper on.

Carfilzomib, the Merck CDK program, Promacta and Aprela, but some nice events coming up the next couple of months and quarters there.

Later on this summer we are looking at having data for our HepDirect, our liver technology we acquired from Metabasis.

We expect to start our pivotal trial for Melphalan.

And also The Medicines Company we expect will start their Phase 3 trial for are Captisol enabled Clopidogrel.

These are important events.

These are just really at the tip of the spear, some of the key events coming up the next several months.

What I want to focus on slide five are some substantive developments that have come by way of announcements and disclosures from our partners that are teeing up in our view -- in Ligand's view -- what could be have a very momentous next several quarters.

First of all, Promacta.

We are going to talk about Promacta from a revenue perspective as it relates to Q1 financials in a couple of slides, but we do expect over the next several quarters continued consistent revenue growth off of the initial indication.

The product is approved.

It is doing well.

It is enjoying good growth.

We expect that to continue with market expansion for the existing indication.

As you know, GSK is investing millions -- hundreds of millions of dollars in their development campaign to advance this drug for other indications.

There are over 20 different trials ongoing, notably hepatitis, a variety of oncology related thrombocytopenias.

What is significant is that the sNDA for hepatitis C will go in, we expect, shortly.

That is our outlook.

We believe it could go in shortly.

If it does, we could see an approval and a launch in the first half of 2013.

This is Ligand's outlook, but it is important for investors to focus on this, because hepatitis, anyway you look at it, we believe will be multiples the size of the market opportunity that ITP currently is.

And again, this could be a commercial event that could really start to impact our business starting the first half of 2013.

And I've already said there's a whole battery of other studies ongoing.

We're looking for data in other trials starting later on in 2012.

The second thing I want to focus on is carfilzomib.

If you're listening to this call, you know the relationship we have with Onyx and this important drug.

Their data are tremendously exciting.

We were pleased to hear that they were granted a panel meeting just two weeks ago -- an ODAC panel meeting that's coming up June 20, all right?

That's six weeks away.

About a month after that there is a PDUFA date.

It the prime time for carfilzomib this quarter.

We're eager to see, as every investor is, to hear what the panel is going to come.

How the FDA is going to read out on this filing.

But ifthe drug is approved, we are look at a launch in potentially late 2012.

If it is not approved right on schedule, we think there could still be a launch in 2013.

Aprela is another program I want to highlight.

Pfizer has had public commentary.

Matt is going to elaborated on that, but we'relooking as an NDA submission in the near term.

If so, this could be approved and launched in the 2013 time frame.

And finally, dinaciclib.

This is a drug that we have partnered with Merck.

It is -- just updated on clintrials.com thatMerck is starting a Phase 3 study next month.

What's significant -- I think this has largely been below the radar for investors -- we will get $1 million milestone payment, and it is a very large robust study.

Matt is going to elaborate on that.

But I want to focus investors on these four programs, because what you're looking at here are near term regulatory events; NDA filings, NDA action dates, panel meetings.

We're looking at events that could lead to product approvals and launches in 2013.

We already have a good base of revenue, but to be able to add on quality partners, new drugs and new indications in 2013 could be very significant for Ligand.

As we go on to the next slide, slide six, just a quick commentary on our financials.

I will remark about guidance, and John will elaborate on some more highlights.

But the business is doing well.

The first quarter came right in line with our expectations.

Our guidance for 2012 is intact.

We are looking at $30 million in total revenue.

About$25 million in operating expense.

Of note, there's $6 million of non-cash.

We've got to book it for accounting reasons, but webelieve our total cash expense will be $20 million or less.

So the business on that basis is clearly profitable and cash flow positive from an operating perspective.

We have a pie chart showing the composition of revenue.

I am going to talk a bit more about that on the next slide.

But we are pleased that half the revenue we expect to come in from royalties.

That's a very high quality source of revenue, and it's a growing source of revenue.

And as we look at the business, the takeaways from our financial outlook this year is that, first of all, we are on track for another very solid year, and financial performance is getting stronger, with higher quality recurring revenue and our consistent lean cost structure.

The second takeaway, as you see on the bullet point with our NOLs in excess of $450 million, is as we he turn profitable -- as we are profitable and cash flow positive, we are going to be in a very low tax environment.

This is significant because we are now in a situation where we can start to use these tax benefits -- the NOLs carry-forwards as well as the tax credits.

And that leads to the third point, which is we have fewer than 20 million shares outstanding.

Think of it this way.

$20 million in royalty revenue.

$20 million in royalty revenue --there is no associated cost with that -- is essentially equal to $1.00 in earnings per share.

Tremendous leverage.

Will have a very lean tax effect on our pretax income, and with fewer or than 20 million shares outstanding, $20 million in incremental royalty revenue is equal to $1 a share in earnings per share.

So significant leverage on this business model.

Now turning to the next slide.

On slide seven, here is the theme we are talking about more the last several months, and I am sure you will hear more about it going forward.

It is what we call RQR; recurring quarterly revenue.

Recurring quarterly revenue.

It's a simple concept.

The Ligand revenue model is focused on RQR.

This is the revenue sharing from licensee product revenue.

It is royalties.

It is a simple concept, but this is 100% gross margin revenue.

There is no associated cost.

There's no cost of goods.

There's no operating costs.

It is 100% gross margin, and it's a percent of the dollars sold.

It's not a profit share, it's a percent of profits, it's not a percent of operating profits, et cetera.

It is a percent of revenue.

And beyond this, of course, we also get other revenue.

We get license fees and Captisol sales and so on.

The RQR is coming in every quarter.

It's projected to increase by over 50% in 2012.

We do expect Promacta to be a major growth drive this year.

And we have several potential new sources of RQR coming in -- online within the next several years based on the potential other licensees.

This goes back to my 12 in 2012 slide.

Again, as I have talked about, three products are in a regulatory phase where the could approved for new indications or new markets in 2013.

Three new sources of RQR in 2013.

On top of that, nine other products in our 12 in 2012 this year are either going read out with Phase 3 data or they will start Phase 3 trials.

This is a very impressive pipeline, and it sets us up I think very favorably for continued revenue growth and financial expansion in the years going forward.

As we go to the next slide, slide 8, investors should really focus on Promacta for two reasons.

One, the quality and the extent of the new clinical data that is coming out for hepatitis, HCV, as well as what we expect will be the oncology related thrombocytopenia data this year.

The second reason why investors should seriously focus on this product is given the financial impact and importance it has to Ligand.

This is a simple chart that plots the quarterly revenue growth since essentially it launched.

First quarter sales we booked first quarter 2009.

We booked $20,000 in royalty three years ago.

All right?

Today we are booking just over about $2.1 million.

The chart speaks for itself, but whatis key to keep in mend is the product is in its infancy.

We have patents through 2025, all right?

So here you've got about 13 bars of data.

We've gotanother over 50 quarterly bars of data that we will be reporting out on this.

Over 50.

There is only 13 bars here so far.

With higher sales, we get higher royalties.

These royalty rates are essentially at just the first year royalty, the 5% tier.

We start to move up to 7% or 8% tier.

On sales over $400 million annually we get a 10% royalty.

And also with new indications we have got a chance for further expansion beyond the existing market.

What I want to point out is that while in 2009 we did $20,000 in royalty, this quarter we did over $2 million.

The $2 million, I'll grant you, it is not a huge number in the absolute sense, but it is significant for two reasons.

First of all, the $2.1 million quarterly revenue, as a matter of fact, that represents over 40% of our actual operating cash expenses for the first quarter.

This one royalty line comprises over 40% of our actual cash operating expense for the first quarter.

The second reason why this is significant is the profound growth trajectory this is on.

The royalty from Promacta has tripled in the last four quarters.

So the fact that one royalty line -- and we have multiple other products paying us royalties and a vast array of other portfolio [vastes].

The fact that this one product with significant growth already comprises such a significant portion of our total quarterly operating costs, and it is on this growth trend with new indications is a very, very compelling story.

So with that I would like to turn to a slide just to tee up my last set of comments and then I will turn it over to Matt to dwell -- to delve deeper into Promacta as well as give business some other updates.

A couple of weeks ago GSK's data for their ENABLE2 trial was featured in the EASL program in Barcelona, and there were three main takeaways from that presentation.

The first is that the risk benefit and the safety events for the ENABLE trials are well understood by the experts and treating physicians.

All right, that's point one; the risk benefits and the safety events are well understood by the experts.

And this [came only] sound surprised, it is also the premise of why GSK is going to be filing their NDA.

The second takeaway is that the medical need is real, it is global and significant.

And this is important -- Matt is going to get deeper into this, but whenyou look at the sickest patients, when you look at the range of genotypes across developing -- the developed and developing world, this is a very meaningful market.

And finally, really at the crux of all this is that the data overall were very well received.

Matt Foehr was there in person, and I would like to turn over to Matt to walk through the anecdotes that he learned in person, but also to devil deeper through some of the data.

Great, thanks, John.

And as John said, for partner programs I will start off with Promacta in hep C and provide a bit of additional first-hand perspective to the presentations and data that have been publicly presented and discussed by experts over the last couple of weeks.

So on slide nine, as John mentioned, the week before last the full data for Promacta ENABLE2 Phase 3 trial were presented by Dr. Geoffrey Dusheiko at the EASL meeting.

This was a much anticipated data set and the second of two large complex and very well run Phase 3 trials designed to examine Promacta's ability to enable therapy in patients with hep C. So you'll see anecdotes and quotes on the next couple of slides that describe public perspectives in recent weeks, both during and following the EASL meeting.

And I would like to review these in detail, because they underscore the medical significance and opportunity of Promacta in hep C.

It is important to note going into this that the clinical bar that was set in both ENABLE studies was an extremely high one, statistically and from the perspective of the disease profile of the patients that were being treat.

You see Dr. Dusheiko's comment from the presentation at EASL calling this a "high bar," and perhaps even more telling are the comments made by Dr. Afdhal at a physician expert call that was hosted by [MLV] & Co.

earlier this week.

Dr. Afdhal said, and I quote, "Before ENABLE1 and ENABLE2, none of these patients ever received treatment.

Not a single one of these patients were included in a clinical trial." End quote.

So the ENABLE2 data represented one of the largest and latest stage program presented at this year's EASL meeting, and we saw no other study presented of that size showing treatment of hep C patients who were as sick as the patients from the start of the study.

From a results perspective, in ENABLE2 as in ENABLE1 before it, the percentage of patients able to go on antiviral therapy as a result of receiving Promacta was in the mid-90% range -- specifically 94%.

Keep in mind that these are patients that currently have essentially no treatment options.

So without Promacta virtually 0% of these patients would be able to receive therapy.

This rate of therapy enablement was described at EASL as "strikingly high" by Dr. Dusheiko.

These were powerful words related to [converts] from someone who struggles with ways to treat these kind of patients on a daily basis.

It is also important to note that, as reported earlier, the Promacta group in ENABLE2 showed statistically significant and clinically meaningful improvement in sustained viral response or SVR, with a P value of 0.0202.

I also note that ENABLE1, as reported at the liver conference from San Francisco, was also highly statistically significant, with a P value of 0.0064.

So now on to slide 10.

The experts that we spoke to at and following EASL uniformly see Promacta as an important breakthrough for patients with advanced hep C, and even with the significant fanfare related to earlier stage direct acting antivirals, it is clear to us that specialists around the world remain very interested in Promacta's ability to enable treatment of advanced and cirrhotic hep C patients.

On Monday's MLV call -- MLV & Co.

call that I referenced earlier, Dr. Afdhal described the risk benefit for Promacta as favorable in hep C and reiterated that this is a patient population that is simply not getting treated today.

You'll also other perspectives stated on slide 10 relating to the risk benefits calculus and clear medical need that Promacta can fill.

At EASL, when referencing the risk benefit, Dr. Dusheiko said during this is presentation attaining SVR in patients with cirrhosis would be modifying "the natural history of the disease." And similarly, Dr. Afdhal, when discussing the achievement of SBR -- SVR and the benefits of reducing the annualized risk of decompensation in these sick patients, stated that, "improvement in outcome becomes enormous," and continues on to reference a "potential ten fold relative risk reduction of decompensation." These are extremely important elements.

It's also clear to us that the safety events noted and discussed are well understood by experts and treating physicians.

Dr. Afdhal stated are the safety events in the trial are within the range of what you see in population, and specifically the thromboembolic events seen are "imminently treatable."

Experts at and following EASL see Promacta as an important potential near term breakthrough for patients with advanced hep C, with a near term opportunity in the Western markets, and potential longer opportunity in the emerging markets.

And Dr. Afdhal said he thinks this will enable a lot of patients who are not being treated today to get treated.

From an ongoing development perspective, as John generally mentioned, GSK confirmed yet again during their Q1 earnings announcement last week they have sufficient data to file the sNDA for Promacta in hep C, and that they are currently preparing the filing..

GSK also continues significant efforts and investment to pursue indications for Promacta in critical oncology related thrombocytopenia or [ORT] indications.

And as John mentioned in the upcoming events, the calendars and presentations for June's ASCO meeting were published publicly last wee, and the clinical data for Promacta in chemotherapy induced thrombocytopenia in solid tumors will be presented at that meeting.

So I'm going to switch goals now for a few moments to some of our other key partnered assets.

As John mentioned in detail our partners at Onyx Pharmaceuticals continue to report their progress for NDA for carfilzomib, which is a product that utilizes our Captisol enabling technology and could yield Ligand royalties,milestone payments, and already yields Captisol material sales to us.

Last week Onyx announced the FDA's on Oncologic Drug Advisory Committee, or ODAC, will review the company's NDA for carfilzomib for multiple myeloma on June 20, and as many of you know, the PDUFA date for completion of review by the FDA is July 27.

Separately and switching to another program, Pfizer has announced that they are on track for an NDA filing for Aprela.

We expect it to be filed in both the US and Europe at about the same time, and Aprela is drug that combines bazedoxifene, which is a synthetic estrogen, with Premarin.

Pfizer has said that the drug has the potential to reduce menopausal symptoms such as hot flashes and to prevent bone thinning osteoporosis, but with a better safety and tolerability profile than the older hormone replacement therapies.

A Pfizer executive has remarked publicly that "we think this is a market which is unsatisfied, and if you can bring a hormone therapy which doesn't have the traditional side effects, we actually think we can lead this marketplace."We view this as a potentially huge opportunity to be able to lead the marketplace for this area of women's health and are really pleased that Pfizer continues the advancement and investment in this trial.

Merck's plans fro dinaciclib have also been updated publicly and indicate that they intend to initiate 466 patient Phase 3 study in refractory chronic lymphocytic leukemia next month.

This is a program and a partnership that we have not talked a lot about previously, but one that will start to gain a higher profile in the business and you'll start to hear more about.

Just as a bit of history, Ligand gained rights to this program through the acquisition of Pharmacopeia in 2008.

Merck has studied dinaciclib in multiple Phase 2 studies, and they are making a significant commitment to increase the oncology presence.

For those unfamiliar with the program or target, CDK are a family of kinases that are critical regulators of cell cycle progression.

Cell cycle disregulation is obviously a hallmark of cancer, and inhibiting CDK is thought to block cell cycle progression and promote apoptosis or program cell death.

Dinaciclib inhibits CDK one, two, five and nine, and Merck completed Phase 2s in ALL, AML, COL, COL/lymphoma that, advanced breast and lung cancer, mantle cell lymphoma, and B-cell CLL.

We see novel kinases inhibitors as a potential next wave of therapies in the oncology space, and we are very pleased to see a great partner like Merck showing significant dedication and commitment to this area with a novel chemical entity that has a strong patent position.

So I'm going switch gears for a bit on the partner program side and talk about our newer partnerships.

We've now owned the Captisol technology for a full year, and it continues to add Shots on Goal to our business, just as we anticipated that it would when we he purchased CyDex last year.

Just yesterday we signed a clinical stage Captisol agreement with Vertex Pharmaceuticals for a Captisol enabled product that is gearing up to enter Phase 1. We are very pleased to add a Vertex to the stable of partners.

They have a strong technical team, proven development and commercialization prowess, and Vertex has a great understanding of the value that Captisol brings to an asset.

And we think Vertex has been proving as a very successful -- as very successful in the number of important and growing therapeutic area.

Also in Q1 we had two big pharma partners each add new clinical stage Captisol enabled programs to the development pipelines.

These two programs and deal terms are currently undisclosed, but we hope to share more details with you on them in the future.

We remain keenly focused on supporting current Captisol partners and also are pleased that we are adding new customers every month.

Our partners buying our are R&D grade of Captisol are balanced between big pharma, big biotech, specialty pharma, and startups, and using Captisol in a diverse range of therapeutic areas, which creates a nice balanced platform for future growth.

So in relation to our unpartnered pipeline assets, we are looking forward to presenting a broad set of preclinical data on our glucagon receptor antagonist program at the American Diabetes Association meeting in June and expect to be talking more are about that program in the future.

We have been investing in glucagon in a very focused manner since the time we acquired it from Metabasis in 2009, and this is a target with a larger -- within the large and growing diabetes space.

And while we know from public disclosures that Lilly is running clinical trials in this general area and target, we feel like the space in the science is really ripening in this area.

Our glucagon program, which we call LGD-6972, is a novel, highly potent, orally bioavailable small molecule glucagon receptor antagonist.

We are pleased with the data we are seeing for our program thus far, and we are very pleased with the progress that our R&D team has made.

We look forward to sharing our data set in June.

Obviously diabetes is a huge unmet need, and we see glucagon as a promising and novel target.

As we progress our programs, we continue to maintain a lean and disciplined R&D budget, but we are investing in a number of programs this year with the primary goal of partnering in most cases.

We are doing all of this with the goal of continuing to feed our Shots on Goal model and the vision that we set out for yourselves.

So with that I'm going to turn it over to John Sharp, who is going to review the Q1 numbers in the more detail.

Thanks, Matt.

I'm going to keep my remarks focused more on the -- some of the more are important highlights and trends from the first quarter.

Before I get to those, I want to echo what John said earlier, which is the business is performing well, andthe first quarter financial results were right in line with our expectations.

Now for some of the highlights.

First I want to focus on the continuing strength of our royalty revenue, which we consider high quality revenue, as there are no costs associated with it, and it is reliable, consistent quarterly revenue.

We reported $3.1 million of royalty revenue for the quarter.

That is an 53% increase over the first quarter of last year, and a 16% increase from the fourth quarter of 2011.

Now I want to discuss license and milestone revenues.

The precise timing of these revenues is difficult to predict on a quarterly basis.

On a comparative basis, although we are down from our big fourth quarter of 2011, we are up just over a $1 million from the first quarter of 2011 and what we find encouraging is that we continue to enter into new agreements each quarter, which not only bring in immediate revenue, but in most cases also adds to our pipeline of partnered assets.

My last comment on revenues relates to Captisol material sales.

While we are down slightly from the first quarter of last year, I will remind everyone that, much like the license and milestone revenue, Captisol shipments can be lumpy, with large orders coming in timed with clinical development or product launches.

And I will say it one more time thi,s quarter was in line with our expectations, as we did not expect any significant shipments to go out during the quarter.

Next I have a few comments about our operating expenses.

We have said many times that we can run this business with $25 million of gross combined R&D and G&A expenses, or $20 million of annual cash expenses after backing out non-cash depreciation, amortization and stock compensation.

Today we report a combined R&D and G&A expenses of $6.3 million for the quarter, of which $1.3 million were non-cash expenses, which annualized out to just under $20 million of cash expenses projected for the year.

We have worked successfully over the past several years to reduce our operating expenses, and this quarter's results are further confirmation of our ability to run a successful business on a lean cost structure.

Finally, I wanted to point out what we -- that we continue to strengthen our balance sheet.

Our debt balance is $1 million lower than year end.

Our accounts payable and accrued liabilities have decreased by over $9 million, asignificant amount as we resolve and pay down legacy contingencies from our prior deals.

And our stockholders equity has nearly doubled, as in the first quarter a tranche of temporary equity was reclassified to permanent equity.

To wrap things up, as you heard from John and saw the accompanying slides, we are reiterating our previous financial guidance for the full year.

We continue to expect total revenues of approximately $30 million, broken down as coming half from royalties, one quarter from material sales, and one quarter from license and milestone payments.

As far as expenses, we expect cost of goods sold to be between 30% and 35% of material sales, and we continue to expect combined R&D and G&A expenses of $25 million per year, including approximately $6 million of non-cash expenses.

And as we have consistently said, we do expect a continuing business to be profitable and cash flow positive for the full year.

And with that I will turn the call back to John.

Thank you.

Operator, let's open the queue up for questions.

Thank you.

(Operator Instructions).

Our first question from the line of Keith Markey from Griffin Securities.

Please proceed with your question.

Thank you for taking my question.

Just a couple of house keeping things if could at the beginning.

Could you break out income expense and income -- interest income or other income, and also accounts payable versus accrued expenses?

Yes, so interest expense runs at about $600,000 per quarter.

And then the rest of the other income is made up of the change in the contingent value rights liability.

And then for AP, our current balance is about $7.9 million.

And then the rest will be accrued liabilities.

Great.

And then I was wondering, John, you mentioned -- or showed in the slide presentation about $15 million from RQR, and you kind of touched upon a little bit contributing to the remainder.

The remainder is including Captisol sales plus the milestones and other collaborative revenues?

I'm sorry, I missed last part of that, Keith.

Does the remainder, it would look like about -- based upon your estimates for this year, up $30 million in overall revenue, that about $15 million is going be coming from milestones, and -- I would think milestones and Captisol, and that was the remainder that was discussed or mentioned in addition to the RQR?

Yes, that is, correct.

So about half, roughly $15 million of the $30 million is RQR, and then one quarter would be license milestone payments, and the balance material sales -- the Captisol sales.

Okay.

Great.

And then I was wondering in looking at the -- I know that you were expecting a decline in Captisol sales for the first quarter, because you had such a strong fourth quarter.

Or at least partly because of that.

As we look forward, I was wondering if averaging out the two quarters would make sense to consider that as a reasonable run rate, or -- and should we be looking at perhaps an increase in Captisol sales in anticipation of a launch of carfilzomib, or do you think that Onyx already have sufficient inventory of Captisol on hand?

The general outlook, second quarter revenues we expect to be higher than first quarter, but maybe 10%, 15% higher.

Not significantly higher.

When we look at the full year, it -- carfilzomib or Onyx is one important customer, but as Matt has mentioned, we have a couple of other big far pharma customers with undisclosed programs for competitive reasons, all very understandable logical commercial factors.

Our partners don't want their programs disclosed.

When we look at total Captisol orders, we actually see fairly meaningful purchases in Q3 and Q4 for Captisol.

It is the nature of the business.

Every year may be different.

To be clear this is, not really fully dependent -- or dependent on carfilzomib.

There are other factors, and I expect the second half revenue will be higher than first half revenues.

Okay, great.

And then I was just wondering, last question, if you could highlight some of the work that you are doing in your own R&D program?

Yes, you bet.

I will turn it over to Matt to hit the highlights there.

We obviously have a few programs that we are investing in, some of which you see data in.

And we continue to invest in HepDirect, which was a technology that we brought in from Metabasis.

We feel like that's a technology in many ways that was ahead of its time.

So wecontinue to invest that.

We talked a bit about glucagon, and we are excited to be providing more data on glucagon at the ADA meeting this summer.

That, again, another asset that we brought in from Metabasis.

We also do -- are doing some work and continuing work on our SARM program, and we completed a Phase I study obviously last year, as some of that data has come out this year.

There have been publications as well.

We continue to do some follow-on work on that.

We also see that area as an area of science that continues to ripen and will be one that we continue to want to invest in.

GTX obviously is in this space as well.

They have a compound that should be reading out early next year, and I think that will continue to help that space ripen even further.

So we continue to be excited about that.

We have got some earlier stage work on an Alzheimer's program we haven't talked much about, but you will be hearing more about that in the future.

And then of course Melphalan, which we didn't cover in the prepared remarks, but we -- is very much part of our plan, and we are pursuing and gearing up for the about pivotal trial.

So we got a lot of work going on internally right now and are gearing up for that pivotal this year.

Okay.

So with the Melphalan -- based upon the status of not having a partner yet for Melphalan, are you working -- or planning on working on that entirely on your own at this point?

At this stage we plan to initiate the study and conduct it.

We believe that we could have an NDA filed by the end of 2013, and potential approval in 2014.

There are interested parties in the program, and as we have talked about, we find this to be a very compelling Captisol enabled program for multiple myeloma.

We've talked a lot about this on the road.

It has a great medical story.

A very, very interesting orphan designation story, and a potentially very exciting commercial play as well.

We believe that we can very capably manage the clinical work, and that is the path we are on.

We have not committed fully as to whether or not we will launch it ourselves or partner it out, but we remain very excited about the program, and it is only reinforced by some of the overtures we've had by prospective partners as well.

So stay tuned on the path forward there.

Okay.

Thank you very much.

Okay.

We will take the next question.

The next question from the line of Carol Werther with Summer Street Research.

Please proceed with your question.

Thank you.

Thanks for taking my questions.

I first wanted to ask you about cash usage for the year and if you have in your minds what you think you might end the year with?

What amount of cash?

So we haven't given specific guidance, but you can see we ended the first quarter about $11.3 million.

I would expect that to be flat in the middle of the year, and then start to build up in the second half of the year as the Captisol shipments come online and the royalties continue to grow.

It is fairly hard to predict the year end balance.

Much like last year, we expect some of these Captisol shipments to be at the very end of the year.

So we could see another growth in our AR balance.

But I would say a few million dollars -- flat middle of the year a few million dollars growth into the middle of the year.

Okay.

Thank you.

And I believe Glaxo stopped the indication with Promacta for chronic liver disease?

Is that true?

Yes.

They recently announced that they are discontinued development for that indication, and at the same time, of course, the ENABLE2 data was coming out and they are announcing their CIT -- their oncology related thrombocytopenia data was coming jut out.

So there's still a very, very significant investment across other indications.

Candidly, we were surprised to hear that publicly from GSK.

We continue to hear from thought leaders, independent of GSK, a very strong belief that these drugs that boost platelets, like Promacta or Nplate, could be very important therapies in chronic liver disease.

So that is the official word from GSK today.

I will tell all of our shareholders that I think it is very important for GSK to revisit this at some point.

Maybe after sNDA submission or potential hep C approval.

They have got a great drug, and at least what we have seen in the data and what we have heard from thought leaders, this could be a very, very important indication.

The key is that there is 13 years remaining patent life.

GSK, again, we have a lot of respect for what they are doing, and we are going to trust that they are making the right decisions in the short-term.

But long-term I think there is a lot of opportunities there, and we aren't ruling out that CLD could be could be an indication that is somehow pursued in the future.

Okay, thanks.

And then with the chemotherapy induced thrombocytopenia, that is Phase 1/2 data that we will be seeing?

I believe so.

The data -- the summaries came out from ASCO last week, and I believe it is summarized as a Phase 1/2, yes.

Okay.

When we saw the data at AASLT, we got to see the slides for the first trial.

The second trial that was at EASL, do you think we will is see that slide deck at any time soon, or do I have to wait for the publications?

Carol, good question, and Matt I think was going to mentioned in his prepared remarks, but the conference call that MLV hosted on Monday by Dr. Afdhal included a slide deck.

And that again was facilitated by this independent research firm.

But they hosted the call and there were slides made available at this that time, and I believe that they are sharing those slides or the Dr. Afdhal is sharing those slides.

SoEASL did not publish them directly, but there are slides that have been used in these public forums.

Okay.

Thanks very much.

Thank you, Carol.

Appreciate your questions.

Our next question comes from the line of Ed Arce from MLV and Company.

Please proceed with your question.

Hi, John, Matt and John.

Ed, good afternoon.

Good afternoon.

So congrats on a solid quarter.

I just had a few follow-on questions.

Some of the questions I had have already been answered, but on the CTK inhibitor dinaciclib, I was just wondering that $1 million milestone payment, is that for the initiation of that drug?

Correct.

The initiation of that Phase 3 study.

Okay.

I haven't quite had a chance yet to look at the clinicaltrials.gov site yet, but you said that was going to be in lymphocytic leukemia?

Is that correct?

Correct.

Yes, correct.

So it's a 466 patient trial.

They have it listed as a start date of May.

Okay, all right.

And give than we have just recently received news of the ODAC panel set for carfilzomib, I was just wondering -- I know you talked about it already, but just your general thoughts on having this panel about a month before the actual PDUFA date?

I think it is great.

I mean, that is if you want our perspective.

I think it is not uncommon to have a panel meeting four weeks, five weeks before, soI think the timing is fairly standard.

We do not know what to expect, or rather we do not know for what Onyx expectations were for whether or not they would have a panel meeting.

But I think it's going to be great for the public markets.

There's going to be an open vetting.

We will hear from thought leaders.

Our sense is that there is a strong consensus that this is a good drug.

It is just a question of timing at to when the FDA might approve it.

So the good news is that it is scheduled.

We all know about it, and we are essentially five, six weeks away from that event, which is going to pull forward I think some perspective on whether or not the FDA might act on approval in late July.

Okay.

Great.

And then just one last house keeping question.

The income that you reported for discontinued operations, what exactly was that?

That was just resolution of certain old liabilities.

It goes back to the old commercial business, where we have some contingent liabilities on our books, and as those get resolved it runs through discontinued ops.

I see.

Okay.

Thanks again, guys.

Thank you, Ed.

Our next question comes from the line of Chris Richard from Merlin Nexus.

Please proceed with your questions.

Thank you, gentlemen.

Just a couple of quick questions.

One a house keeping.

I know we discussed this in the past, but I just wanted to get a sense.

How much of that $450 million in NOL is useable going forward?

Technically it is all useable.

The issue would be that there is an annual limitation to it, and so that number is reported based on that annual limitation though.

Okay.

But it is all useable going forward?

Correct.

Now, they could -- if unused, they do expire at certain periods.

Okay.

And to follow-up on one of Carol's questions about the GSK discontinuation of the Elevate indication, there was a presentation of EASL of Nplate versus eltrombopag versus -- I guess, nothing, really.

Yes, it was actually a placebo.

For percutaneous liver biopsy.

And we didn't see in that study, although it was only 24 patients per arm, we don't see any of the thromboembolic events that were worrisome in the Elevate study.

Has Glaxo's tone changed since that presentation?

Were they aware of that data previously?

Chris, I don't know that tone has changed, et cetera.

They continue to be very committed to the program, and the CLD -- the chronic liver disease -- announcement I don't think was linked to that in anyway.

Okay.

Okay.

And I guess lastly, we are seeing -- if you look at the numbers for Nplate as well as Promacta -- I mean, Promacta continues to grow, but it seems like Nplate is -- their growth is kind of reenergized in the last quarter or so.

Is that because of some off label use?

Do you have any indication of that for HCV since the ENABLE studies have been presented?

And the [cupic] studies recently?

Chris, I mean, great question.

We are certainly interested in Nplate, and I'm sure GSK is following that as well.

We do not have any insight as to off label use really for either product,particularly Nplate.

Generally what I will say, though, is I think if we have a big picture perspective, both drugs are doing well.

Nplate is outselling Promacta, but if you look at the trends over the last four to six quarters, Promacta is gaining a much bigger share of market.

I believe a year and a half ago Promacta only accounted for 17% to 20% of total market sales.

Today, current periods, the last one or two quarters they account for 32%, 33% -- fully a third of total market sales.

Both products are growing nicely.

On a percent basis they are growing about the same level quarter over quarter, but in fact GSK is gaining in terms of total market share.

Right now, when you look at -- Promacta just reported $43 million for quarter sales, Nplate about $90 million.

You have got two products combined that are on track to do close to $600 million this year.

Label for ITP.

There may be off label sales, but I'll tell you this is really validating our belief all along that ITP alone could be a $0.5 billion to $1 billion market, and we have already seen that.

Now, it is a question of how big can ITP -- can it approach that $1 billion level?

And the other markets, oncology related thrombocytopenia and thrombocytopenia in hepatitis are much, much bigger markets for sure.

All right, gentlemen, thank you.

Thank you, Chris.

Appreciate the questions.

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

Please proceed with your questions.

The first one relates to the undisclosed products that Merck, Lilly and Hospira appear on your 12 in 2012.

You mentioned earlier that Merck is now working on CDK.

Is that one of the disclosed ones, or is that what was previously the Merck undisclosed?

No, those are two different programs.

The Merck undisclosed is a Captisol enabled program, and the dinaciclib was the one we were talking about in further depth today, that's one that we acquired through the Pharmacopeia acquisition.

So they're two different assets.

Okay.

Now, did -- you said -- I think you said there are two new undisclosed programs added this quarter.

Yes, and those are yet again two other ones different from both of the ones we were talking about or all of the ones we were talking about.

Those are two new Captisol enabled programs entering into Phase 1s, both with big pharma partners, both of which are undisclosed currently.

So you have a total of five undisclosed products that the point?

Is that correct?

Merck has one --

Well, there's actually -- there's more than that.

I think just to break it down, the 12 in 2012, we are talking about the latest stage assets, and that is addresses at that point.

Matt in his commentary, we are excited the fact that existing contracts -- we have platform agreements with some big pharma partners.

They are doing some great work advancing products to market.

They are calling us, saying we have another product that would be perfect for Captisol, and they're either looking at new and improved version or life cycle management, but they want to get Captisol.

And so the beauty of this is that it is already validated.

The partner knows us, they know the technology, and a chance to further expand a supply relationship.

And possibly accrue future royalties.

That is good news.

Yes, those are just --

Is there a possibility any of these three undisclosed products on the 12 in 2012 slide will be disclosed this year?

Yes, this is a chance.

At least one of the three, possibly two.

And in fairness to you, van, or others listening, we aren't in any way trying to be cryptic here.

Again, this is big pharma, they are highly competitive commercial markets, and for them to tip their cards and tell the world that they have a new and improved or best in class drug for these purposes doesn't make sense.

So just as soon as there is clinical data or some other event that is public, we will make sure that we update our disclosures.

You don't have alibi for that.

I think it is very normal for them not to disclose something.

I understand that totally.

Just one other question.

Thatregards the comment of about ITP being a $500 million to $1 billion market.

Was that just for Promacta alone, or is that including the Nplate, which is already up to -- if you add Promacta, it was up to about $600 million.

So our view on the market for ITP that was it was in that range for the category.

Now, there is really only two therapies in the space, but that was our analysis, and this really goes back three or four years when Promacta and Nplate were just launching.

Yes, ITP, it's a small indications.

It got approved off of small and relatively short studies, but our view is that this category alone could approach about $1 billion.

Amgen, they got first to market.

They've got a bit higher priced drug.

They've got a better commercial platform, building upon their Epogen franchise.

But having said all that, if you aggregate the run rates for both drugs, it is rolling to about $600 million total this year.

$400 million to Nplate, $200 million to Promacta.

So it is a great story, and GSK especially is investing in other indications.

So I think theybelieve, and we certainly do, that there is growth well beyond this existing market.

When you go on Promacta for ITP, do you stay on it forever?

How long is a treatment generally?

ITP is a chronic disease, unexplained low platelet count, but the platelet levels can wax and wane, so they are monitored regularly.

And it's hard to know what an average course is.

But by our estimates we would say an ITP patient is probably on therapy about six months a year.

That is our estimate, knowing that they go off and on.

It is a disease that is chronic which may require treatment for years.

Well, okay.

Thanks very much, John, appreciate it.

You bet.

Appreciate your questions.

We have time for one last question.

Our last question comes from the line of Nick Farwell from Arbor Group.

Please proceed with your question.

Good afternoon.

Just a few follow-ups if I may.

John, the slide you have, number eight, if I recall correctly do you not reflect both a quarter lag what the aggregate or gross Promacta sales are?

That is correct.

So the chart here is shows quarterly royalty revenues that we have reported, and it is and a on a lag.

So the first quarter royalty we have booked actually is based upon fourth quarter revenue in 2011.

So if we looked at first quarter gross Promacta sales versus fourth quarter gross Promacta sales -- i.e.

that is what will be reported in the second quarter -- is the slope still upward?

Yes, butI mean you are asking a good question.

A bit of a technicality by way of our accounting.

The sales, for instance, last quarter were $39 million, and this quarter they are up to $43 million.

About 11% increase quarter over quarter.

Consistent nice growth for the core brand.

That a $21 million stub was that the higher royalty rate.

So it's-- mathematically the sales are higher.

The royalty applied against higher sales will be a bit lower.

We aren't doing the math on this call, so I -- but I think what we will see is quarterly contribution that is flat to up slightly.

But what is significant is that we are on a much higher total revenue base for 2012.

By our outlook we think 2012 revenues for Promacta could approach $200 million, which means that first $100 million is at the 5% rate and the second would be at the 7% rate, so there is nice momentum.

Getting granular on the quarter over quarter, but that hopefully gets a little more color there.

It resets annually then.

It does.

I missed that nuance, sorry.

I was also curious, in other income you have $600,000 roughly of interest expense.

You have roughly $200,000 for CVRs.

So there is another $150,000.

Is that the income from discontinued operations that nets out to the $243,000?

So there is -- it is around $600,000 of interest expense.

There's about $800 million -- or $800,000 of the change in contingent value rights.

And then just some various other little things.

Okay.

And then what is your total debt at the end of the first quarter relative to the fourth?

So we were at $30 million at year end, and we are at $29 million now.

Okay.

And then if I may, there was a -- at the end of April there was a license for anti-inflammatory research program with Merck.

Are there any residuals associated with this transaction?

Yes, Nick, there are.

It admittedly was fairly circumspect disclosure that was more or less a requirement of Merck Serono.

This is an important area of research.

We are very proud of the deal.

But the disclosure, again out of respect for a pretty competitive research space, we were fairly circumspect.

This was not a "put it in the box and out" license.

There are milestones and other terms associated with the deal.

We have not gone into those details.

I expect that with further developments that may come in the next nine to 12 months we will be able to give more details around, not only the target, but also the other economic features of the program.

Okay.

Obviously that is a second quarter event then?

Financial event?

Correct.

Thank you for the clarification.

You bet.

Nick, appreciate your questions.

Thank you.

All right, well, that wraps up the call.

Appreciate the interest and great turnout by investors today.

Just in summary, we have a couple of investor events coming up.

We will be at the Bank of America conference, Las Vegas, third week of May.

And then the Jefferies conference first week of June.

So we have got an exciting story.

We are very pleased with our internal execution.

I think we good plans.

The team is performing very well in the quarter.

We are delighted to be able to welcome Nishan de Silva to our team.

He came from Warburg Pincus.

But just anothersuperstar that we've added to the team, and he is going to help us drive our business development and strategy efforts.

And beyond that we are delighted with the developments from our partners.

We have got a robust portfolio.

We are very pleased.

There is quality data and news flow coming out of our are partners, and we are very pleased with the business.

Thanks for your time and interest.

Look forward to talking with you in the future.

Ladies and gentlemen, this does conclude today's teleconference.

Thank you for your participation.

You may disconnect your lines at this time, and have a wonderful day.