Ligand Pharmaceuticals Inc (LGND) 2014 Q1 法說會逐字稿

Greetings, and welcome to the Ligand first-quarter 2014 earnings conference call.

(Operator Instructions)

As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Erika, Investor Relations for Ligand.

Thank you, Erika, you may begin.

Thanks, Devon.

Welcome to Ligand's first-quarter financial results for 2014 and business update conference call.

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

As a reminder, today's call will contain forward-looking statements within the meaning of Federal Securities Laws.

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

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

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

The information on this conference call related to projections or other forward-looking statements represents the Company's best judgment based on information available and reviewed by the Company as of today, May 7, 2014, and do not necessarily represent the views of GSK, Pfizer, Onyx, Amgen, or any of our other partners.

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.

John?

Thanks for joining us for our Q1 earnings call.

Matt, Nishan, and I are in Boston, today, participating in the Deutsche Bank conference, and we invite you to join us for the webcast presentation, later today, as well.

We are on at 4:10 this afternoon.

The first quarter of 2014 was very strong, financially and operationally.

Financially, we enjoyed impressive growth in revenues over the same period last year, driven by increases in royalties and Captisol sales.

We also saw a meaningful increase in cash and investments over the past year, while paying down debt and more than doubling shareholders' equity.

Beyond the financial performance, the late-stage clinical and regulatory achievements by our partners this past quarter were especially impressive and clearly defined for investors the strength of our portfolio and business.

During the past few months, we saw numerous positive events.

Notably, two new products launched from Merck and Pfizer, increasing our commercial partnered programs from five to seven revenue-generating assets.

GSK filed yet another sNDA for Promacta, Lundbeck filed an NDA for Carbella, and Spectrum announced pivotal data for its Melphalan program and anticipates an NDA filing later this year.

Beyond that, we saw many of our other partners announced data, start trials, and raise money in private and IPO financing.

Overall, the biotech and pharmaceutical industries continue to enjoy a favorable regulatory environment and strong operating performance.

Through our rich portfolio of partnered assets we are participating in this positive business environment in many ways.

In addition to our partners' achievements, Ligand's R&D activities have been very productive.

Matt will talk through some of our recent work in investments, but our team is now generating clinical data on a lead diabetes program; is advancing novel research for a couple of promising new drug targets; is strengthening the Captisol platform; has renewed clinical interest in SARM for investigator, government, and potentially partnered sponsor trials.

This productivity reflects Ligand's heritage in research and sets us up to explore deal making with prospective partners and new licensees, as will as with IPO-track companies seeking ways to participate with Ligand in its rich and highly successful R&D heritage.

With our business model, our goal is to answer key early scientific questions in the partnered programs in creative ways to advance them through the clinic to the market.

We are at a time, given the business environment, where there is more interest in Ligand's research and technology than any time over the past several years.

Before I turn the call over to Matt, let me provide comments on a few of our key programs.

First, in regard to Promacta, the program is doing very well, fundamentally.

New territories are being added for the hep C indication and another sNDA was filed for the drug, this time for aplastic anemia.

This indication was designated as a breakthrough therapy and is eligible for six-month review.

We expect the FDA action date to be sometime during the next quarter.

Also, many late-stage trials are ongoing for oncology-related indication.

Now, this past quarter we saw sales for Promacta dip several percent lower than the prior quarter to $80 million.

That is a bit lower than expected.

We believe weather may have impacted US sales and foreign currency had some impact on emerging markets.

We don't view the Q1 sales report as a reflection of the drug's long-term prospects.

We see Promacta as young product with a long patent life, with new indications and markets for the product to expand into over the next few years.

Of note, Novartis announced it will be acquiring GSK's oncology unit, including Promacta.

We believe Novartis could be a strong commercial team to support Promacta, and the company indicated in a recent presentation that they project NDA filings for Promacta in MDS and AML next year.

For some market watchers, that is as much as 6 to 12 months sooner than might have been anticipated.

We expect the Novartis Promacta acquisition to close in first half of 2015.

As for Kyprolis, the big event for Amgen's drug for multiple myeloma is due later this summer, with pivotal data expected from ASPIRE and FOCUS trials.

Sales were flat this past quarter, consistent with other oncology drugs, which may be a reflection, again, of weather in the US.

The Kyprolis pivotal data will be a major factor near term, helping Amgen to determine if and when the product will be eligible for registration in Europe, as well as the eventual expansion in the first-line use.

We are eager to learn the results from those studies.

In other news, Pfizer launched Duavee during the first quarter.

This is a drug stemming from a license with Wyeth and Pfizer in the mid-1990s that, after a long development path, finally won approval in the US late last year.

The European filing is pending approval, and we expect to know that outcome next quarter.

Of note, on Pfizer's earnings call, Monday morning, Pfizer's CEO called out Duavee as one of five products they expect incremental revenue from in 2014.

Also, on the same call, the group president of global innovation at Pfizer said one of their objectives is, and I quote -- leveraging our strong presence in the women's health category to launch Duavee in the United States as a potential new standard of care, unquote.

It is great to see the public mentions by Pfizer's executives for this promising new therapy.

Finally, in other news, Merck received approval ahead of schedule for Noxafil IV, a Captisol-enabled anti-fungal, and the product is now on the market.

We received a $1 million milestone payment in March, and that is ahead of schedule, as we had originally expected the FDA approval and milestone to occur in the second quarter.

Now, I will turn it over to Matt.

Thanks, John.

I am going to make some additional comments about our partnered and internal unpartnered pipeline assets, as well as the platform technologies that we are investing to fuel future Shots-On-Goal.

John touched on the commercial, clinical, and regulatory progress by some of our Captisol partners, who are in late-stage development, or who are now commercial.

These programs illustrate that the role of Captisol can play in creating novel differentiated products with existing active ingredients and creating what one could consider higher probability Shots-On-Goal, as you compare to published industry average success rates for products in development.

I want to point out that beyond the validation from these established Captisol programs, the inbound interest in Captisol has increased significantly in our time with the technology.

We continue to see more potential partners requesting samples of Captisol, and the commercial and regulatory success of Captisol-enabled programs continues to create positive visibility for the technology.

Recently, a few of our early-stage Captisol partners, in private or recently public companies, have really been on the move, moving ahead our partnered programs and successfully building out their teams and structures.

Our partners at SAGE Therapeutics have been reporting significant progress on SAGE-547.

It is now in the clinic for super-refractory status epilepticus, and they also reported the receipt of orphan designation last week.

SAGE has also succeeded in a couple of large financings with some blue-chip investors and are quickly moving the program ahead.

Also CURx, which is a private company based near Ligand in San Diego, is moving ahead with plans for a Phase 2 for Captisol-enabled Topiramate, which we licensed to them last year.

Another company has also had recent progress in developments, and that's Aldeyra Therapeutics.

Friday of last week, they completed their IPO to raise funds to support the development on an asset on which we are partnered.

Aldeyra's lead program is Captisol-enabled NS-2.

MEI Pharma continues to advance its pipeline of exciting oncology drugs with unique mechanisms.

On Monday, they announced the first patient had been dosed in a Phase 1b study of its mitochondrial-inhibitor drug candidate, ME-344, which is also Captisol-enabled.

They are testing it in combination with Hycamtin in patients with solid tumors, including small-cell lung and ovarian cancer.

Preliminary data from this study is anticipated to be available in the first quarter of next year.

And last year, MEI presented results from a Phase 1 study of a ME-344 and showed evidence of single-agent activity in patients with refractory solid tumors, showing 38% of patients who achieved stable disease or better.

As a business, our goal is to provide excellent customer service to our Captisol licensees.

It's the right way to do business, and it makes the technology licenses even more valuable to our partners, and it's a way to confer more value with the licenses.

I am quite proud of the service that our team provides to our partners, and we routinely receive positive feedback praising our teams responsiveness, ability to manage and answer technical questions, and thanking us for the valuable help we provide as they move their programs through development.

In addition to that, they also realize that when paired with their active ingredient, whether that is an existing active that is coming off patent, or a novel active that has never been tested in humans before, that Captisol has the ability to truly make a product.

Recently, a scientist at one of our pharma partners, when completing one of our routine customer surveys, noted to us that, quote -- I have found Captisol to be nothing short of a miracle when trying to formulate compounds that are difficult to dissolve, unquote.

Outside of Captisol licensees, another partner that I want to comment briefly on, is Viking Therapeutics and the progress that they are making with their FBPase diabetes program, VK0612.

We signed a deal with Viking in 2012 for FBPase, which is a potential novel mechanism for the treatment of diabetes, which is obviously a huge global market.

Viking, now, has a highly experienced team in place, striving towards a clinical Phase 2b initiation later this year, and Ligand has the potential for meaningful downstream economics, including over $38 million in clinical and regulatory milestones and tiered royalties on potential commercial sales.

Switching gears, now, to our internal programs, we plan to present our Phase 1 data for our glucagon receptor antagonist, next month, at the ADA meeting in San Francesco.

We feel we have a more potent molecule with improved properties from what's in development by other companies, and there are a limited number of molecules with novel mechanisms in development for diabetes.

This program has the chance to be a major novel player in the diabetes space.

Also, with increased high-profile interest in the metabolic space, specifically related to NASH and obesity, we are seeing an increase in the partner interest related to some of our metabolic assets, specifically our TRbeta program and our [DGAP] program.

We are also progressing on our IRAK4 program.

IRAK4 is an interesting discovery program, where we feel we have a leading scientific position.

IRAK4 plays an important role in the innate immune system, and may also be important for cross-talks between the innate and adaptive immune systems.

IRAK4 is a signaling component downstream of both Toll-like receptors and Interleukin-1 receptor, suggesting that it may have therapeutic value for a range of autoimmune and inflammatory conditions.

Inhibition of IRAK4 activity has been implicated in multiple diseases, including rheumatoid arthritis, lupus, gout, inflammatory bowel disease, asthma, and allergic rhinitis.

Inhibitors from IRAK4 may also be useful for the treatment of certain leukemias and lymphomas.

We have identified orally available small-molecule inhibitors of IRAK4 and are working in models of cancer and autoimmune disease to position them for partnering.

We are currently targeting presenting new data for this program at a scientific meeting later this year.

Our R&D engine is functioning very well at Ligand.

We focus our efforts on answering questions to drive partnering of assets, and also on creating and supporting novel platforms that meet needs in the industry, and that can be the subject of future partnering.

Our goal is to make focused R&D investments to be responsive to the scientific and deal landscape, and translate our investments into fully funded partnerships, downstream.

With that, I'll turn the call over to Nishan to review the Q1 financials.

Thanks, Matt.

I'll recap just a few of the highlights from our earnings release, issued earlier today.

Total revenues for quarter were $16 million, up $4.4 million compared to the same quarter last year, driven primarily by an increase in Captisol material sales by $4.2 million, and an increase in royalty revenues by $2.1 million, which largely reflected higher Promacta royalties.

These increases were partially offset by $1.9 million lower license and milestone revenue.

Last year's quarter had a $3 million up-front payment for the Captisol-enabled Melphalan licensing that we executed with Spectrum Pharmaceuticals, leading to higher license and milestone revenue in the year-ago period.

Our cost of goods sold for the quarter was $2.5 million, resulting in gross margin on material sales of 56%, similar to the year-ago period.

In addition, our cash G&A and R&D expenses were virtually flat compared to same quarter last year.

For the quarter, we reported a non-GAAP income from continuing operations of $7.3 million, or $0.35 per diluted share, compared to $4.4 million, or $0.22 per diluted share, for same period last year.

On the cash side, we ended the quarter with $26.6 million of cash, short-term investments, and restricted cash, which is ahead of our plan and higher than last year, while continuing to pay down debt.

We have a small debt balance of $5.8 million remaining, that is scheduled to be paid off over the next three months.

As we look forward, one change to our revenue outlook that we just became aware of relates to Avinza.

Pfizer recently notified us that a generic product entered the market for Avinza in February.

While we are entitled to continue to earn royalties until 2017, with a generic on the market, we expect our royalties will decrease.

As background, Avinza is late in its commercial life and is a relatively small product for Ligand.

Sales have been declining for years, and we earn a 5% royalty.

During 2013, the quarterly Avinza royalty was, on average, about $825,000.

For the second quarter of 2014, we expect the Avinza royalty to be about $350,000.

And after that, we anticipate our quarterly royalty for Avinza to be in the $50,000 to $100,000 range.

For 2014 outlook, we reaffirm our previous guidance of total revenues between $62 million and $64 million, and non-GAAP earnings per diluted share between $1.40 and $1.45.

While Avinza royalties will be lower going forward, at this time, we believe other factors within Ligand's business will help offset that variance and keep our revenues and earnings in our original range.

For the second quarter, we expect total revenues to be between $9 million and $9.5 million, and non-GAAP earnings to be between $0.11 and $0.13 per diluted share.

As expected, the revenue outlook for Q2 is lower than our reported Q1 revenue.

As we have said on past calls, our quarterly revenue is lumpy due to royalty rates that reset annually to lower tiers that we see at the start of our calendar year, and due to the timing of milestone payments and large Captisol orders, as we saw in Q1.

Our non-GAAP earnings per share guidance, for both the full year and the second quarter, exclude changes in contingent liabilities, mark-to-market adjustments for amounts owed to licensors, and stock-based compensation expense.

With that, I'll turn the call over to the Operator and open it up for questions.

(Operator Instructions)

Our first question comes from the line of Graig Suvannavejh with MLV & Co.

Please proceed with your question.

Good morning, everyone.

Thanks for taking my question.

I want to congratulate you on a really strong first-quarter performance.

I think all of us are impressed by the results you just posted, but clearly, where you are in the second quarter, in terms of guidance, is below where we were.

And while we understand, now, that Avinza is part of that, can you just give us a sense, maybe, of how comfortable you are right now with your thoughts around the Captisol business?

Where might there be sources of upside relative to your guidance for the second quarter?

Graig, thanks for the question and participating on the call.

We are now five weeks into the quarter, so we've got some visibility on the Captisol orders and so on.

As you know, we book on a one-quarter lag for royalties, so we know essentially what the royalty numbers are.

In terms of upside, there is a potential for licensing that may be done ahead of schedule.

As we saw with the Merck milestone, there could be some small milestone events that might happen ahead of schedule.

Captisol orders, we do the best job to predict.

We get long-term forecast for commercial orders.

The clinical orders are not as predictable.

Generally, although there's a lot of variables in our business, and we're very pleased with the financial performance and outlook.

This outlook for Q2 seems reasonable and in line.

As Nishan just mentioned at the end of this call, it is completely in line with our expectation, except for the Merck milestone -- that $1 million instead of Q2, it was a pull-forward to Q1.

Aside from those timing events, the outlook for the full year is unchanged.

Okay.

Thank you for that.

Maybe two more questions before I jump back into queue.

In terms of your R&D -- it sounds like you're very productive in terms of the early-stage compounds.

How are you prioritizing where you spend your R&D?

Maybe give us a sense of, given your current R&D budget, if you know where the percentages are on certain projects and/or platforms?

You highlighted some interesting platforms as well.

Yes, Graig, thanks for the question.

This is Matt.

We have probably 20 programs we could invest in, and we look at a number of factors when we select programs to invest in.

One is, we look where we can answer key questions that are going to significantly increase the partnerability of an asset.

Also, where maybe external science is starting to ripen.

Also, where licensing landscape or where there is a demand for certain assets.

We take all of those and some other things into account as we look at them.

I'll say a couple of years ago, we made the decision to start investing in glucagon receptor antagonist program, knowing that there was a significant need for novel therapies in diabetes.

We have continued that investment, and we feel very good about that investment.

Now, we are at a point where we will be presenting new human data next month at the ADA.

Also, a program like IRAK4, where we've got a commanding position, an early position from an IP and discovery perspective, that is another type of program where we see high -- an opportunity to answer key questions to then drive partnerability.

So, it's a mixture of factors.

I will just add, we're at a unique place with our business model where we can be very objective on what we choose to fund.

This is significant.

A lot of biotech companies, they're therapeutically focused, or they have a real infrastructure in, let's say, in a commercial or manufacturing area, and those factors often drive the prioritization of programming.

At Ligand, we look carefully at the competitive environment, the market potential, we look at the IP of our respective programs -- and as Matt alluded to, the general market demand.

We are focusing on answering those early questions, but we're funding what we think are the priority programs.

Periodically, we are able to pull other programs into our R&D investments.

Okay.

Thank you.

My last question is with respect to Duavee, we were all pleased to hear Pfizer's comments around its support of that product launch.

My question is, at what point do you think, given product launches tend to be slow, at least most of them are -- we've seen example of one being very fast.

At what point do you think we will get a better sense of how that revenue trajectory of this particular product might look like?

Yes, great question.

Pfizer, as you can imagine, a very big company, well established, women's health commercial organization.

We are spending more time trying to build that relationship and get information about their commercial planning and outlook.

We don't have much information right now, frankly.

Our expectation, though, is that once Europe comes online -- approval is targeted for next quarter, over the next 6 to 12 months is where you are going to see global planning and really more, I think, tangible evidence of what the trend lines are.

It's early days, but the category is a multi-billion dollar existing category.

It is our opinion that this is the best-in-class molecule, and Pfizer genuinely seems committed to it.

We are at a bit of a changing environment for the women's health category.

It's not going to be a flip-the-switch commercial response.

But, I think the environment is very positive, and our view is it's going to take 6 to 12 months before we really start to see the evidence of trend.

And Graig, just a couple of factors, obviously, on the segment itself.

The number of women in the US with postmenopausal symptoms is expected to be over 50 million by 2020.

It's a big category, as John was saying.

70% of those women are not being treated at all for their postmenopausal symptoms, and a large portion of those, about 60%-plus haven't even pursued treatment for the symptoms.

So, there's a big potential there.

Yes, and it's calling on the doctors, getting them familiar with the medicine, but also, frankly, changing the patient's knowledge and expectation for potential new therapies.

That takes some time.

Again, we are pleased to see the public commentary out of Pfizer's executives around the brand.

Great.

Thank you, again, for taking my questions, and congrats on the quarter.

Thanks, Graig.

Our next question comes from Joe Pantginis with ROTH Capital Partners.

Please proceed with your question.

Hey, guys, good morning.

Thanks for taking the question.

Let me start on Promacta, a couple little points there.

I was just wondering if you have any color regarding how the market is splitting up in Hep C with regard to US and the, as you mentioned, additional territories, and also Europe?

Thanks, Joe.

Obviously, the Hep C landscape is dynamic one, and everybody knows Promacta has always been designed to treat that sickest subset of patients whose livers are failing or have failed, and to get them to a point where their platelets can be boosted.

GSK has reported contribution -- growing contribution from Hep C in the US and Europe.

Now, they have expanded into close to 50 markets for Hep C, so that global expansion and rollout is still occurring.

We expect they will continue expanding until they reached the 94, 95 markets that Promacta is in for ITP.

Still in an expansion phase, still rolling out, but still a significant contributor.

Yes, and there's no specific quantification by GSK in terms of ITP or Hep C. Qualitatively, the recent developments in the Hep C space is, perhaps, not helping the analytics.

On one hand, it is absolutely bringing more patients into the doctor's office and creating more awareness.

On the other hand, as you can imagine, there has been a real preoccupation with the new therapies.

So, on balance, this is an important medicine for a subset of the sickest patients, but one that is one of a kind.

It is unique in what it does and how it supports those patients.

And, to our knowledge, there is no other competition out there.

The Hep C story is in its very early days still.

Actually, I don't want to overstate because you just mentioned, obviously, some the issues regarding the direct antivirals in the US and what have you.

We do anticipate some encouraging support for the Promacta franchise, ex-US, because interferon will still sort of remain a mainstay of therapy because they are non-genotype 1 viruses, primarily?

Yes, absolutely, Joe.

And, I think that's part of the rationale for the aggressive global expansion around the indication is that the expectation is that those interferon therapies will be around for a long time in those markets.

Somewhat related, we made comments in my remarks about the Novartis acquisition.

Novartis is acquiring GSK's oncology division, Promacta is a part of that.

We have been very pleased with GSK's management of the asset, and frankly, everything they have done with it.

It is still nine months out before that deal closes, but we think that this drug in Novartis' hands, commercially, we view as a positive.

We're pleased with what GSK is doing, whatever GSK's rationale was for divesting their business unit is their call, but the Novartis commercial infrastructure, we view as going to be a net incremental positive for all of the indications, the ITP, the hepatitis, and potentially the future oncology indications.

Sure.

And then, to wrap up on Promacta, you did mention, I believe, you are looking for a supplemental NDA filing in 2015 for MDS/AML, and was curious, is that more of a supportive-care study at this point?

Yes.

At this point, they've got a number of studies ongoing, and they haven't disclosed the exact -- how the indication will be defined in MDS/AML, just that they plan a filing in 2015.

Okay.

Do you expect that we'll see additional data that will support the anecdotes to date with regard to the disease-modifying potential of the drug?

I would, Joe.

GSK has been very prolific in publishing at all of the relevant global and regional hematology meetings, and we expect that to continue.

They are generating a lot of data.

Obviously, over 25 active clinical trials, far more than that when you include the investigator work.

We would expect to see a continued flow of that data.

Great.

My last quick question, if you don't mind, regard to 6972, can you characterize sort of the discussions you have had to date, or the level of maturity of the discussions?

Could one assume you have potential partners for 6972 sort of waiting in the wings for these data to be presented at ADA?

Yes, Joe.

I'll say we are just at the point, now, the data is coming in.

We are preparing it and reviewing it.

We are excited about our presentation in mid-June at ADA.

We, of course, get inbound calls from the folks you would expect, but no real kind of detailed update on maturity of those discussions really.

And generally, though, diabetes -- huge category, we have, we believe, strong IP.

We are pleased with the data we have so far.

Lilly continues to conduct late-stage studies.

Some other companies are indicating that they are working in this field.

We do believe this is a very solid area to be participating in on the research side.

Thanks a lot, guys.

Joe, thank you.

Thank you.

Our next question comes from the line of Matt Hewitt with Craig-Hallum Capital Group.

Please proceed with your question.

Good morning, gentlemen.

Congratulations on the progress.

Matt, thank you.

Thanks for joining the call.

A couple of questions for me.

First, regarding Merck and the Noxafil opportunity, how is that progressing since they received FDA approval?

How should we be thinking about the ramp, I guess, as this year progresses and going forward into 2015?

Thanks, Matt.

This is Matt Foehr.

They, very quickly, as we said, they got approval earlier than expected, and we were very pleased to see that.

Shortly thereafter, they made the product available.

It was a very quick launch.

It's still probably too early to comment on it, but it is clear that it is a high-priority program for them.

We have been very impressed with the resource they're putting behind it and the team they've got on it.

Obviously, they have global footprint for oral form of Noxafil already.

We feel very good about this drug in their hands.

Okay.

Great.

As far as SARM is concerned, how have the partnering opportunities evolved, so far, this year?

The interesting developments around SARM, and just a little history for those who may not be as familiar with it, it's a selective antigen receptor modulator.

It is an area of research that Ligand really was the pioneer in about 15 to 18 years ago.

We conducted some early studies a couple of years ago, got encouraging data, not only safety, but also in healthy volunteers, some real activity of drug efficacy.

The interest is coming from prospective partners, some international companies, as well as investigators, and even there has been some inquiries from government sources that want to advance research in this area.

We are pleased, one, with our package.

The market is evolving.

There is another company that has a SARM that completed some Phase 3 studies, and they're advancing their discussions with the regulatory agencies in Europe and in US.

We believe that we are drafting in some of their progress.

They may still have some clinical work left.

Also, the area of muscle wasting, muscle health, is a big field, and we are just in the process of working with various partners to navigate our path forward for getting that drug back into the clinic.

Okay.

Great.

Maybe one last one for me.

As far as Promacta is concerned, any update on the potential for a pediatric indication?

Yes, Matt.

We expect -- GSK completed a Phase 3 in pediatric ITP in the last few months.

We expect that data will be presented fairly soon.

That was a large Phase 3 study.

It is important to note, half -- over half of the new diagnoses of ITP, annually, are in pediatric patients, so a big opportunity for growth for Promacta.

We expect to see the data in the coming months.

Great.

Thank you very much.

Thank you, Matt.

Thank you.

Our next question comes from Christopher James with Brinson Patrick Securities.

Please proceed with your question.

Hi, good morning, and let me add my congratulations on your progress this quarter.

Thanks for taking my questions.

My first question is regarding the upcoming data at ADA with your glucagon receptor antagonist.

How should we think about, as you sort through the data, how should we think about procuring in advance to interpret some of these data relative to other glucagon antagonists?

I am assuming we are going to see data on a fasting blood glucose and PK/PD, but how should we think about these data with respect to other compounds in development?

Yes, Chris, thanks.

We've specifically designed this first [enhanced] study to answer as many questions as possible, and included both healthy volunteers, as well as type-two diabetics in the trial.

Obviously, we will get a full suite of PK/PD data, also some indications of efficacy as well.

We really felt very good about the design, and I was very pleased.

The team did a great job working with the FDA to design and define the trial that will answer a lot of questions and provide some insights into our molecule.

We feel we have a more potent molecule than what's currently in development and have what could be a best-in-class in this mechanism of action.

That is kind of the general summary, obviously we will present the data in middle of June, and we are looking forward to getting it out there.

Okay, great.

Speaking of the FDA, is there a plan to meet with FDA after completion of the study, or will you wait for a partner -- partnership?

Yes.

We've had, like in any IND, obviously, we had ongoing interaction with the FDA leading up to our IND and afterwards.

We feel like we understand the plan, based on those discussions, there would be no need to have too much further dialogue.

Obviously, we'd submit protocols for future studies, et cetera, as one normally does with an IND.

Great.

I think we were -- just moving on to the BACE inhibitor, we were, I think, expecting an update from Merck.

I personally did not see a whole lot that came from the analyst day regarding that program.

Have you had a chance to meet with or discuss this program with Merck?

Chris, you are probably referring to Merck's R&D day, which was yesterday.

They, in their plan that they had mapped out in advance, were covering other programs.

They did discuss the BACE inhibitor briefly and reiterated their commitment around the program.

Obviously, they've got two large Phase 3 trials running now.

Those won't read out for a little while.

We continue to see them as being very committed and excited about those programs.

Great.

Thanks.

Then, a quick Promacta question before I wrap up.

I think we -- so now we have a good sense of timing around approval in aplastic anemia.

Do you have a better sense of the size of the opportunity here?

I think you mentioned, last time, there are about 10,000 US patients.

Do you have a sense of what the size and scope of this could be?

Yes.

That's about right, Chris.

It's obviously a niche indication.

It is one that these patients really have very limited-to-no treatment options.

The data that was presented at EHA last year was really very exciting, not only for the patient population, of course, but also scientifically suggesting, as we said in the title of the presentation, potential curative effects of Promacta in aplastic anemia.

I think that's why it has moved so quickly through the regulatory process so far.

Yes, you're generally in the right range, I think, in terms of the opportunity.

We are excited to see that progress and hopefully get rolled out.

Thanks for taking my questions.

Thank you, Chris.

Thank you.

Our next question comes from Keith Markey with Griffin Securities.

Please proceed with your question.

Good morning, and congratulations on a great quarter.

Just a quick question for you about the Captisol-enabled drug program.

How many clinical trials are currently ongoing with those drugs, and how would you expect that number to change in 2015?

Yes.

Keith, it is growing all the time.

The only reason -- it's hard to give you an exact number is we get more and more requests for IND cross-reference letters.

We've got more partners starting more and more trials and more indications.

It has grown significantly over the last year or two --

Yes, there's probably, right now, this year, 2014, maybe over 50 trials ongoing.

Yes.

I think that's about right, and it's growing --

It could be double from where it was three or four years ago.

Okay, and what does that equate to in terms of number of drugs do you think?

The way we look at this, as you know, we quote, our portfolio of Shots-On-Goal a fully funded partnerships or programs, we have over 90.

And, a rough estimate, probably two-thirds are Captisol related.

Some of those are the same program for two or three indications.

There are probably over 50 distinct programs -- or molecules, and over 60 different indications, so a very significant element of our portfolio.

And one that -- Matt, he referenced the customer service, but we're getting realtime feedback, not only on the utilization, but the quality of the service and what the technology does to make drugs possible.

Okay.

Thank you, but part of my question had to do with, perhaps, the outlook for Captisol-enabled -- well, Captisol sales for 2015.

Do you see that coming up since some of the clinical trials might be coming to fruition in the near future?

Or, do you see it as going up because more drugs will be in clinical trials?

Generally, we gave some outlook for 2015 revenues several months ago.

Our outlook hasn't changed.

It was north of $80 million.

The two factors that are driving Captisol demand is, one, to your point, the number of clinical trials.

We've got more partners' drugs in development, and as those programs are successful, they're moving into larger studies.

Frankly, early studies, pre-clinical, Phase 1, they're using Captisol, but their requirements may be small.

As they move into Phase 2 or 3 trials, that's where we're seeing larger orders in customers.

Also, as products go commercial -- we now have Kyprolis.

We now have Noxafil.

We may have Carbella, Lundbeck's drug, approved at year end.

That's another factor.

The outlook -- we get outlook from customers on a 3- to12-month basis, obviously we account for that in our current-year guidance, but we aren't getting any more granular onto 2015.

Generally, the trends -- the demand for Captisol, the interest, I'll say the success of the technology, is clear and growing.

Great.

Thank you very much.

Keith, thank you.

There are no further questions at this time.

I would like to turn the call over to Mr. Higgins for closing comments.

Thank you.

Appreciate everybody's interest and time on the call this morning.

We are pleased with the start of 2014, not only financially, we are heartened particularly by the improvement in our balance sheet, stronger cash position, significant increase in shareholders' equity, debt is going down.

It's real evidence that this business model is successful.

We have always said, you haven't created real value until you have created or generated sustainable cash flow.

Now, a few quarters into generating profits and cash flow, there is more clarity and evidence of the momentum of our business model than ever before.

Also, while we highlighted several of our programs today, the late-stage royalty assets, as well as some of the earlier programs, our portfolio has never been larger.

Frankly, we have never had a calendar with more significant news events coming up the next 6 to 12 months.

On balance, we are very pleased with the business.

Today, we are at the Deutsche Bank conference.

We will be presenting at 4:10.

We will have some new slides in our corporate investor deck.

Later this month, we will be participating in the Bank of America conference, and at the end of May, at the Craig-Hallum investor conference.

We look forward to being on the road and meeting with investors and giving more updates to our story.

Thanks for joining us.

This concludes today's teleconference.

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