Ligand Pharmaceuticals Inc (LGND) 2015 Q2 法說會逐字稿

  • 公布時間
    15/08/04
  • 本季實際 EPS
    -
  • EPS 市場預期
    -
  • EPS 年成長
    -

完整原文

使用警語:中文譯文來源為 Google 翻譯,僅供參考,實際內容請以英文原文為主

  • Operator

  • Greetings, and welcome to the Ligand Pharmaceuticals second quarter 2015 earnings call. (Operator Instructions). As a reminder, this conference is being recorded.

  • It is now my pleasure to introduce your hosts, Todd Pettingill, Senior Manager, Corporate Development for Ligand Pharmaceuticals. Thank you, Mr. Pettingill. You may begin.

  • Todd Pettingill - Senior Management - Corporate Development

  • Welcome to Ligand's second quarter financial results for 2015 and business update conference call. Speaking today for Ligand are John Higgins, CEO; Matt Foehr, President and COO; and Melanie Herman, Interim 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 partner programs, including Promacta and Kyprolis, 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 can be found in Ligand's public periodic filings with the Securities and Exchange Commission, which are available at www.sec.gov.

  • The information in this conference call related to projections or other forward-looking statements represents the Company's best judgment based on information available and reviewed by the Company as of today, August 4, 2015, and do not necessarily represent the views of Novartis, 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'll turn the call over to John Higgins.

  • John Higgins - CEO

  • Thank you, Todd. Good afternoon. Welcome, and thanks for joining us for our second quarter 2015 earnings call. I'll open up by saying, simply, Ligand is firing on all cylinders. Our financial performance is very strong, as plainly shown by our robust top line revenue growth, our increased operating margins, and positive cash flow.

  • The core of Ligand's financial strength is our growing royalties and lean expense structure, clearly on display the past several quarters, and continuing to fuel bottom line earnings growth and cash flow.

  • And our portfolio of programs and operations are equally strong. Our two lead partner programs, Promacta and Kyprolis, continue to produce important new data. Both received expanded marketing approvals in the past couple of months, and the products generated record Q2 sales, with both products enjoying significant quarter-over-quarter increases.

  • We have seen a very active past few months in terms of positive news events from our partner portfolio. In addition, Viking closed its IPO in Q2; we acquired more royalty-bearing assets; and we announced clinical safety and efficacy data for our lead development program, our GRA drug for diabetes.

  • Now, first, some comments about Promacta. Promacta is now well situated in Novartis' hands following the product acquisition from GSK in March of this year. Q2 sales were an impressive $116 million for the second quarter, up from $99 million for total sales in Q1 2015.

  • Notably, the 3 months of the second quarter were the three highest months ever for total US prescriptions for Promacta. In June, the product received US approval for use in a pediatric ITP population, which opens a new usage for the drug and, importantly, underscores the continued safety profile being established for the product. The product is pending approval for the same indication in Europe, and numerous other trials are ongoing for other potential indications.

  • Now, on Novartis' Q2 call last week, they said, quote -- Promacta is one of the fastest-growing products now in our product line, and one which we have blockbuster expectations around -- end quote. It's our sense the product is getting significant attention from the senior leadership of Novartis. It's a major oncology company, and the future potential for Promacta has never been stronger.

  • Now, a few comments about Kyprolis. As most of you know, Kyprolis is a Captisol-enabled drug under license with Amgen. It continues to grow nicely in commercial opportunity for both Amgen and Ligand. The product posted revenue of $119 million in the second quarter, an increase over Q1 of $108 million.

  • Now, it's early days for Kyprolis, and we see the product being in the sunrise of its potential. As we discussed on our Q1 call, Amgen's Phase 3 ENDEAVOR data for the drug came in earlier than we expected and, frankly, better than expected.

  • It was a defining event that has catalyzed the potential for the product. Not only will more patients have access to the drug, but Amgen is now publicly commenting that they project that the length of therapy will increase over time by more than a doubling.

  • The positive developments over the past few months set Ligand up for the higher Q2 Captisol orders, as orders for Captisol supply came earlier in 2015 than expected, helping drive our strong Q2 performance.

  • Less than 2 weeks ago, Kyprolis received approval for its US-filed sNDA for expanded use in relapsed multiple myeloma based on the Phase 3 ASPIRE data; and Amgen launched the new indication just last week. The drug is pending approval in Europe, which is anticipated to happen later this year.

  • Now, Kyprolis has demonstrated a very strong therapeutic profile compared to Velcade, its main competitive product in the field. The efficacy differentiation is profound, with Kyprolis showing a doubling of progression-free survival, or PFS, of 18.7 months, versus 9.4 months with Velcade. Now, of note, in 2014 Velcade sold $3.1 billion worldwide. That's a market we expect Amgen to go after and potentially expand upon.

  • On another topic, Ligand's partner Viking completed its IPO in Q2. Viking's underwriters and management team closed a successful financing that raised a significant amount of money that will now be used to advance Viking's Phase 2-stage assets for muscle wasting and liver disease. Like with our other partnerships, Ligand is entitled to receive milestones and royalties from the Viking partner programs.

  • Of note, Viking is now the third company that Ligand owns public stock in through its various licensing deals. The other two companies Ligand owns stock in are Retrophin and TG Therapeutics. Stock in Retrophin that Ligand received from its license for Sparsentan has increased over 12-fold since it was issued about 3 years ago; and TG stock has nearly doubled in value from the license equity payment we received just last summer.

  • We know that the equity markets for biotech stocks are strong now, and stock values across the board have moved up nicely. But what these deals should underscore for Ligand's investors, is our interest in having an equity participation in companies that have competent operating teams and promising assets.

  • Ligand's business has successfully evolved, such that we have a strong balance sheet, so do not need to rely on cash license fees to fund our operations. Selectively, we will choose to participate in the equity upside of companies as they create value beyond just receiving potential milestones and royalties.

  • Now, a few comments about our GRA program, the drug we are advancing as a glucagon receptor antagonist for diabetes. We completed a Phase 1b multi-dose trial in the second quarter that showed a clean safety profile and a nice dose-dependent response in diabetic patients.

  • GRA is a novel diabetes target with a highly differentiated mechanism from other classes of diabetes medicines, such as DPP-4, GLP-1s, and SGLT2-based therapies. While GRA is a highly differentiated and novel mechanism, it is believed that the GRAs could also be used in combination with these other classes of diabetes medicines.

  • Given all the data we have seen from our program and published by competitors, we believe we have the best-in-class GRA. We're now working on completing work to initiate a Phase 2 trial in 2016. Diabetes is a major drug category that continues to grow, and it is clearly in need of new and better medicines.

  • Following on our success in discovering other important small-molecule drugs, Ligand is pleased to be advancing this program for a novel target in a major medical market.

  • On other news, today we announced that Matt Korenberg will be joining us as CFO. We are very excited to welcome Matt to our senior leadership team. I've worked with Matt for over a decade. He has strong credentials and deal experience as a former healthcare investment banker with Goldman Sachs. He has great industry contacts; is a good strategic thinker; and clearly understands the issues, the challenges and the opportunities in our industry.

  • And, of note, I should add, Matt has worked on several projects with Ligand in the past, and he knows Ligand and our business model very, very well. I want to acknowledge and thank Melanie, our very capable Director of Accounting, for serving as Interim CFO as we conducted our CFO search.

  • And finally, I want to acknowledge the new analysts and major investors who've become involved with Ligand over the past couple of quarters. We appreciate your time and interest in what we are building. We are very pleased with how our business is developing and expanding, and we look forward to updating you more on our business and plans at conferences and investor programs later this fall.

  • With that, I'll turn it over to Matt for more details on some of our pipeline assets.

  • Matt Foehr - President and COO

  • Thanks, John. I'm going to start off this afternoon by briefly highlighting progress that some partners for our pipeline programs have reported over the last months.

  • Late last year, we profiled six assets for investors that we called the big six, and that was really in an effort to focus attention on some of the assets in our portfolio that differentiate themselves, given the potential impacts that they can have. Since that time, all six of them have had -- have made significant progress. But I'll briefly highlight recent events for a few of them.

  • Our partners at SAGE Therapeutics recently initiated a Phase 3 trial of Captisol-enabled SAGE-547 in super-refractory status epilepticus, or SRSE. This Phase 3 trial start followed their announcement of positive Phase 1/2 data that showed that SAGE-547 had achieved an impressive 77% response rate in patients with SRSE.

  • For those that aren't familiar with SRSE, it's a critical condition in which the brain is in a state of persistent seizure, where patients are placed into a medically-induced coma in an attempt to stabilize them, and where conventional and approved therapies failed to awaken the patients.

  • Currently, there are no therapies approved for SRSE, and I'll say that we're impressed with the work that the team at SAGE is doing, and continue to see SAGE-547 as an asset that has the potential to meet significant and global unmet needs, and garner major attention in the medical community.

  • Our scientists at Ligand, in partnership with the team at TG Therapeutics, recently presented data relating to the IRAK4 inhibitors program that we partnered with TG last year. The data we generated with TG demonstrated clear anti-cancer activity and synergy with other active sediment for our partner's IRAK4 inhibitors. And TG is quickly moving this novel program toward the first-in-human clinical studies.

  • Our partners at Spectrum Pharmaceuticals recently presented new data on EVOMELA at the APhA Meeting here in San Diego, showing the product is more stable and -- than currently-available formulations, allowing for longer use time and simplified administration. These benefits are in addition to this Captisol-enabled product being free of propylene glycol, which is present in currently-marketed formulations and is associated with cardiac and renal toxicities.

  • Spectrum is seeking approval for EVOMELA for use as a high-dose conditioning treatment prior to stem cell transplant in patients with multiple myeloma; and they're also seeking approval for the palliative treatment of patients with multiple myeloma, for whom oral therapy is not appropriate.

  • Now, when we struck the deal with Spectrum for EVOMELA a couple of years ago, we anticipated that they would pursue a stem cell transplant indication. So, we're pleased that they're also seeking a palliative treatment indication for the drug as well. The FDA action for EVOMELA is October 23, so less than 3 months away at this point.

  • These represent just a few examples of the progress that our partners are making and reporting publicly.

  • Now, overall, our portfolio of fully-funded programs is the largest it's ever been. In the middle of 2013 our portfolio stood at over 85 programs. Today, we have over 120 shots on goal.

  • Additionally, our portfolio is balanced across multiple technologies and patent families. Currently, about one-quarter are novel, active or discovery-related opportunities; about a third relate to the novel biologic expression technology originally developed by Selexis; and the rest are -- the rest of our partnerships are Captisol-enabled programs.

  • And our Captisol business is thriving. Financially, it's a very successful business, and it's gaining momentum in terms of customers and therapeutic applications. It's clear that the Captisol technology is benefiting greatly from further scientific and regulatory validation and visibility, and a growing and increasingly valuable drug master file and safety database.

  • We are now gaining some efficiencies in Captisol manufacturing due to the scale of production, and those efficiencies are being -- are beginning to be reflected in our COGS line. And, with the success of our partners both clinically and commercially, we're beginning to get more visibility of customer needs further into the future. Anticipating further growth, we're continuing to invest in longer-term expansion of manufacturing capacity.

  • It's very encouraging to see that more of our partners are using Captisol in new ways. We now have clinical-stage Captisol partners that are using Captisol orally or in dermal applications, as well as in Captisol-enabled eye drop formulations.

  • Also, recent data reported by our partners and university-based collaborators has shown Captisol use in topical formulations can facilitate solubility and skin transmission, specifically for formulations of topical ibuprofen and topical testosterone, which are commonly used as models for such studies.

  • And we continue to add new Captisol partners and expand our relationships with existing ones. Last week we announced the expansion of our relationship with Sanofi. They are developing Captisol-enabled SAR-125844 in oncology, and we look forward to seeing their program progress. It's a potent MET kinase inhibitor that's in Phase 2, and Sanofi has presented clinical data on the program from studies in patients with advanced solid tumors, and have shown favorable tolerance and PK profiles, and evidence of anti-tumor activity.

  • Also, we recently signed a new deal with AiCuris for an undisclosed Captisol-enabled program. AiCuris is based in Germany and was founded about 10 years ago as a spinoff of the anti-infectives unit of Bayer HealthCare, which has a long history of successful anti-infective drug development, including blockbuster antibiotics such as ciprofloxacin and moxifloxacin. They're a highly experienced team at AiCuris, focused on life-threatening infectious diseases, and we're pleased to add them to our growing list of over 70 partners.

  • I'll also highlight that we continue to invest in and expand our intellectual property portfolio for Captisol, and have recently added additional patents granted in Europe, and also new patent allowances for specific formulations containing Captisol, that our R&D team has developed -- for instance, specific formulations of Captisol with clopidogrel, which is the active ingredient in Plavix, and Captisol in conjunction with budesonide in inhaled formulations.

  • With that, I'll turn the call over to Melanie to review the financials for Q2.

  • Melanie Herman - Interim CFO

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

  • Total revenues for the quarter were $18.4 million and included royalty revenue of $6.6 million, which is an increase of 26% versus the year-ago period, and largely reflected higher Promacta and Kyprolis royalties.

  • Captisol material sales for the second quarter were $10.7 million, a significant increase versus the year-ago period, primarily due to timing of customer purchases for clinical use. Collaborative R&D revenues were in line with expectations, given the roster of potential milestones and events in the portfolio that were expected for Q2.

  • Now, on the expense side, our cash, R&D and G&A expenses increased approximately 10% compared to the year-ago period, primarily due to business development activities in our glucagon program.

  • A quick comment about cost of goods. In the first half of the year, Captisol sales increased meaningfully from $9.2 million to $14.4 million, and our cost of goods were essentially flat. We're pleased to see an improvement in our margins for two reasons -- the clinical versus commercial mix of sales, and a better cost overall.

  • For the quarter, we've reported adjusted earnings of $38.5 million, or $1.81 per diluted share, compared to $5.2 million, or $0.24 per diluted share for the same period last year. The primary driver of the increase is due to the impact of the Viking Therapeutics IPO.

  • As previously summarized in an earlier release, we recognized a gain on deconsolidation of $28.2 million, primarily related to the equity milestone received from Viking upon the close of its IPO.

  • We now own approximately 48% of Viking's outstanding common stock, and following deconsolidation we record our proportionate share of Viking's losses on our statement of operations. As this is a non-cash provision, the amount is excluded from our adjusted earnings per share.

  • Additionally, following the IPO, the convertible note receivable from Viking no longer eliminates in deconsolidation, and is now recorded on our balance sheet.

  • In the second quarter we saw an increase in contingent liabilities. These represent the estimated value of contingent value rights owed to holders of CVRs. The increase for the period was primarily the result of successful completion of the Viking IPO, as well as positive data announced related to our diabetes program.

  • On the balance sheet, we ended the quarter with over $180 million of cash and investments. We generated operating cash flow of $17.6 million during the quarter, a meaningful increase from the $6.6 million of operating cash flow in the year-ago period. This significant increase illustrates the leverage in Ligand's business model of growing royalties and top line revenues combined with a low-cost infrastructure.

  • Currently, we reaffirm our previous full-year guidance of total revenues between $81 million and $83 million, and adjusted earnings per diluted share between $3.45 and $3.50 per diluted share. For the second half of 2015, we expect total revenues to be between $48 million and $50 million, and adjusted EPS to be between $1.29 and $1.34 per share.

  • Our adjusted earnings per share guidance for both the full year and second half of 2015 exclude changes in contingent liabilities, mark-to-market adjustment for investments owed to licensors, non-cash stock-based compensation expense, equity and net losses of Viking, and non-cash debt-related costs.

  • As mentioned on our first quarter call, Ligand has been sustainably profitable for approximately 3 years, and we currently anticipate releasing the valuation allowance in the second half of 2015. Releasing the allowance creates a gain on the income statement, as the taxed asset will then appear on the balance sheet.

  • We estimate the gain will be over $200 million, and we will add that back for adjusted earnings, so our guidance will remain unchanged due to this event. After the valuation allowance been released, the book EPS will appear as fully taxed on our income statement going forward, at approximately 38%, even though we will continue to pay cash taxes of less than 5%.

  • With that, I will turn the call over to the operator and open it up for questions.

  • Operator

  • (Operator Instructions). Matt Tiampo, Craig-Hallum.

  • Matt Tiampo - Analyst

  • Congratulations on another successful quarter. I want to drill down a little bit more on Captisol and the outperformance this quarter, and also the dynamics for the rest of the year. It seems like maybe you pulled a little bit forward from at least where the [Street's set up] for Q3, which I know doesn't mean a whole bunch, but it sounds like maybe a couple of orders came forward. Just wondering, sort of, what drove that, and if it was clinically related or more commercial.

  • And then, second, it seems like you've managed to sustainably move the margin higher for that business, and I'm wondering what we should think about as a real, good level for gross margin going forward for the Captisol business, given that we were sort of clustered around 50%, 60% previously.

  • Matt Foehr - President and COO

  • Yes. Good -- this is Matt. Matt, thanks for the questions. Yes. As far as the orders go, it basically was timing, as you've generally described. We had line of sight on some commercial committed orders as well as some clinical orders, and they came in a little early.

  • But basically, products are doing better than partners might anticipate, and trials running better, and those sort of things. So, we had a couple of orders that we had visibility on that just came in early. So, it was a timing thing.

  • Matt Tiampo - Analyst

  • Okay. Great. And then on the margin [side]?

  • John Higgins - CEO

  • Yes. And on the margin side -- this is John -- the business -- the overall quantity demand, as we look out the next few years, is clearly going up. We have more products approved for commercial use. As Matt's been describing, we're licensing more partners for accessing Captisol. So, we're basically building scale. As we're building scale, we are building efficiencies in our cost structure.

  • So, as we've described in the past, it's difficult to predict quarter-to-quarter what the blended margin will be. Because a big variable is the mix between the price we sell Captisol for commercial use, which is also royalty-bearing, versus for clinical use.

  • But over an annual period, and going forward, we do see efficiencies -- a lowering of our cost for the actual cost of goods, which is helping to, at least for right now, slightly improve our gross margins.

  • The other comment, just maybe back to your initial question -- specifically, we saw in Q2, Amgen ordering volumes, frankly, that we would have expected later in the second half of 2015. And it was our beginning-of-the-year estimate that that ENDEAVOR data, which really would be a catalyst for clinical and commercial planning, would have happened later in the year.

  • Ligand, and frankly we think much of the market, was very pleased to see that data come out in March, which was a couple if not a few months earlier than expected. So, that was a factor driving, we think, some of the order activity, specifically in the second quarter.

  • Matt Tiampo - Analyst

  • Great. Thanks very much.

  • Operator

  • Gregg Gilbert, Deutsche Bank.

  • Gregg Gilbert - Analyst

  • So, first question is about whether you could provide any help on the lumpiness, if any, for the remaining quarters of the year, on the material sales of $25 million to $35 million in the collaboratives and other revenues of $10 million to $20 million, if those are still relevant?

  • John Higgins - CEO

  • Yes. The general mix for the revenue composition is fundamentally the same as we've been looking at the year. It -- as you know -- but for other investors, there are three main components -- royalties; sale of Captisol material; and then license and milestone payments.

  • The second quarter wound up being a very strong quarter for us financially. We came in a bit higher than our outlook. And again, it's really principally driven by Captisol-based orders. But the composition of total revenues is still driven by those three components, and the outlook for the full year is consistent with our original guidance for the year.

  • Gregg Gilbert - Analyst

  • John, can you talk a little bit about some of the other commercial assets beyond the big two, and how they're doing, maybe calling out some outperformers versus underperformers? I know the big two are clicking on all cylinders, but perhaps some color on the others.

  • John Higgins - CEO

  • Yes. I'll give some remarks, and Matt can jump in as well. So, right now, again, we know in terms of royalties, Promacta and Kyprolis are the main drivers. We also enjoy royalties off of Duavee, a women's health product that Pfizer sells; Nexterone, a product that Baxter is selling. We enjoy [capsule] commercial revenue off Noxafil, a drug by Merck.

  • These are smaller products, mostly, today, in terms of their recent launch timing; but in the last 2 quarters -- 3 quarters -- all three of them have shown very impressive gain. What we've seen with Duavee -- it launched about 15 months ago. A direct-to-consumer campaign hit in the fall, in September; and just in June, Rxs broke 15,000 --

  • Matt Foehr - President and COO

  • Yes. Really approached 16,000 for the first time. That -- wind that back -- Gregg, this is Matt -- but you wind that back to June of last year -- they were under 2,000. So, we're seeing real nice prescription growth for Duavee, and that's just in the US. Obviously Pfizer is pursuing launching in Europe as well -- rapid approval in Europe, and are pursuing premium pricing for Duavee in Europe as well. So, that's another one that's done well.

  • John Higgins - CEO

  • And that's a product that -- women's health -- big category. Premarin is a component of that combination therapy. Premarin at peak sold a couple of billion a year. But this is a novel mechanism. It's a very promising drug profile, and one that we know Pfizer is committed to. We're eager to see the activity in a potential European launch by the end of this year.

  • With Nexterone, it's a product that Baxter has had, and it launched about 2 1/2 years ago. Early quarters, it was frankly a small, if not a sleepy product; but the last 2 or 3 quarters, Baxter seems to have really caught a groove with sales.

  • We -- given outlook last quarter that -- we -- I believe that we're on a trend to do over $1 million a year in quarterly revenue off that royalty, that trend absolutely holds. And again, this is essentially US-only sales right now. Baxter is signaling that they expect to launch the product elsewhere.

  • So, those are just some comments about some of these other products. But the quality of the partner, as well as the revenue contribution, is meaningful to Ligand.

  • Matt Foehr - President and COO

  • Yes. I'll make one brief comment about Noxafil IV with Merck as well, Gregg. That's one that -- it's a Captisol-enabled program. Merck originally -- we struck the partnership -- were looking for a way to further grow the Noxafil -- the posaconazole oral Noxafil brand with a new IV form, and that was launched a couple of years ago in the US, and then they've added on Europe and other markets.

  • We've continued to see growth in that -- really, exactly what Merck's original vision was, was that the IV could grow that franchise globally, and we're seeing that happen real-time now.

  • Gregg Gilbert - Analyst

  • Okay. One last question, guys, on the GRA. I've -- Lilly killed this, I believe based on hypertension risk. Do you know whether that was the case, and if so, how closely did you look at that in your program, and how would you characterize the interest in your program now that ADA is well behind this? Thanks.

  • Matt Foehr - President and COO

  • Yes. Great. Thanks for the question. I'll say the interest in the program and the target has never been higher. We -- obviously, our data was very well received. Post the ADA meeting, we were excited to see the data, seeing a nice dose response. Very high potency, and a side effect profile that really leads us to believe that we have a best-in-class molecule.

  • We did see that Lilly discontinued their program. I don't think they've made any statements as to why. But I'll say in our program we've done a considerable amount of looking, not only at the efficacy features of the drug but also the safety, and feel very good about the data that we have. So, we're excited. We've got a lot of work ongoing now, leading up to a Phase 2 trial that we plan to initiate next year.

  • Gregg Gilbert - Analyst

  • Thank you.

  • Operator

  • Larry Solow, CJS Securities.

  • Larry Solow - Analyst

  • Just on Captisol, notwithstanding obviously there were some timing benefits this quarter; but as you look out over the next, say, couple of years, I know you had put a -- sort of, a $25 million to $35 million number on it for this year, and maybe -- I think maybe the -- into 2017 (inaudible) guidance.

  • Fair to say, with sort of the growth in samples and clinical and commercial use, that maybe this number proves conservative as you look out, or there's growth above and beyond that?

  • And then, same question on -- with the developments on manufacturing efficiency, is margin -- I think you had -- in your slide deck, had like a 55% to 60% gross margin. Fair to say that, maybe as you look out over the long term, there is upside to this?

  • John Higgins - CEO

  • Yes. Larry, thanks for the question. And you're asking good questions, and really focusing on some of the key moving parts of this important franchise for us.

  • The business overall -- the Captisol -- is doing extremely well. Matt alluded to some recent patent developments. We're strengthening the IP -- the intellectual property and the like, around the asset. We continue to do new licensing deals.

  • The question specifically about the revenue potential and margins -- I think, now, we're really 7 months into 2015. Our sense is that we've got a pretty good handle on how 2015 looks. You are right -- a good leading indicator -- the sample requests are going up. They're at an all-time high research. The number of research contracts -- all those, to us, are leading indicators that this could predict new contracts and new customers in the future.

  • But the way we build our outlook -- it may be conservative, but we don't have those orders now, and we can't predict with any real accuracy for guidance as to what the mix will be. It depends on the size of trials; how large of a quantity user a particular customer is for clinical use.

  • So, there are a number of variables, despite sampling and research contracting, that are unknown right now. Having said that, as we move into 2016 and beyond, every successive quarter and year we get more information, and on balance we feel very good about the health and the potential of Captisol. We probably need another couple of quarters before we give longer-term outlook on what the margins and revenue expectations will be for that franchise.

  • Larry Solow - Analyst

  • Okay. No. Fair enough. On Promacta, can you just help us frame the size of the pediatric ITP market compared to, sort of, the adult market that it's been approved for? And was -- is -- was there any off-label use already, or -- that you're aware of, or -- ?

  • John Higgins - CEO

  • Yes, Larry. Thanks. Good question. We sense, and our general view is, that the product is used really almost entirely to the label. That's been the case with a drug like Promacta for really -- for essentially all of its life.

  • As far as your comment about pediatric, about half of the new diagnoses of ITP per year are in peds. So, there's a substantial opportunity there. And I think that's what Novartis was focused on, and we're pleased to see them with that approval and rolling it out.

  • Larry Solow - Analyst

  • Okay. So, that really, essentially, at least in the near term, sort of doubles the addressable market?

  • John Higgins - CEO

  • Yes. It's hard --

  • Larry Solow - Analyst

  • Addressable, not reachable, or --

  • John Higgins - CEO

  • Yes.

  • Larry Solow - Analyst

  • -- per se.

  • John Higgins - CEO

  • Some factors -- again, and we aren't on the front lines selling the product, so this is really just our observations. The patient market -- the population -- the demographics in pediatric ITP are significant. And on a pure numbers basis, it would be a meaningful increase.

  • However, I think we're realistic to know that children are known to recover from their thrombocytopenia perhaps more quickly than adults. And so, their need for longer-term therapy perhaps is less. And also, realistically, physicians are likely to be more conservative in dosing in pediatric. So, that's why -- I made the comment in my remarks, the expanded label's important, but the expansion to the body of safety data is really important.

  • The way we look at the product's commercial potential is how the sell-siders -- the third party analysts that cover Promacta -- it's not our business to give guidance. If Novartis gives guidance, we'll follow that; but one thing I will say is that Novartis just closed their acquisition 4 months ago. They saw a very, very impressive jump in dollar and percent growth in their first quarter owning the product. Very impressive US prescriptions.

  • And now, we're polling Wall Street sell-side analysts -- there are more analysts who are breaking out Promacta; and notably, some of the larger banks that cover Novartis showed a very significant increase in their peak Promacta sales coming off of Novartis' second quarter call.

  • We monitor all of this closely. And I think the qualitative developments and the recent regulatory developments support our belief and confidence in the asset. But clearly, the third party analysts that we really don't have a dialog with -- they see it the same way as well.

  • Larry Solow - Analyst

  • Okay. On that line of thinking, just in terms of -- and obviously you're not in there; you don't exactly know what Wall Street analysts are thinking.

  • But in terms of Kyprolis, do you -- in terms of the -- Amgen's statement that, over time, therapy, or the amount of therapy, or the duration of therapy will double, do you think that some of that expectation is somewhat built in? Or, any -- I don't know if there's any way to gauge that but, you know --

  • John Higgins - CEO

  • Well, just a couple of observations, or facts. I mean, right now, we know it came off of second quarter doing $119 million. Most of that's US. Maybe $7 million, $8 million was outside of US markets.

  • But if you annualize that number, you're at roughly about $475 million. All right? And that is principally US-only sales for third-line use. It's important to note, this expanded indication was approved 2 weeks ago, and it was only approved -- or, only launched one week ago. And we believe that much of that usage has been on-label.

  • So, this isn't a quantitative answer, but if you take US and approve it for a much larger market, and you had the potential to double -- instead of 4 to 5 months of treatment duration, 9 to 10 months -- you can imagine, in the US alone, a significant chance to expand that underlying revenue.

  • Europe is pending approval. It is our expectation, given US activity and all the data we've seen, that Europe should come online. And, of course, we know that Amgen has a partner in Japan as well.

  • So, the Street right now -- we're seeing estimates at the [lower] of about $1 billion in peak sales, and the high estimates show over $3 billion in peak estimates. Which -- frankly, it's a high end that's not a surprise; that dovetails right in line with what Velcade did last year -- $3.1 billion in 2014 dollars.

  • So, given the substantial body of data that's coming out -- and we would like to direct investors and analysts to the narrative from Amgen. In the last 6 to 8 weeks, the narrative coming out of Amgen -- there's much more information and much better color in terms of how they are positioning and what their expectations are for this product.

  • So, I do believe, in the summer of 2015, we are really at a turning point -- kind of a catalyst for how people will view this asset, and what the long-term potential might be. We're eager to see, really, how the European regulatory process shakes out.

  • And really, again, like Promacta, we inform our thinking about the potential based on what the third party sell-side analysts' view is, and we'll be monitoring and polling those reports over the next 2 quarters.

  • Larry Solow - Analyst

  • Okay. Got you. Just a more 50,000-foot question -- somewhat new to the name. Just -- I think there are many reasons why people like the story. And obviously, I think one of them is just the amount of shots on goal, as you like to call them -- the partnerships, and fully funded in that. And the greater than 120 is -- clearly offers a lot of different opportunities.

  • But I think another aspect people like is that the growth that you've -- the projection of growth, from $85 million last year and much smaller amount if you go back a few years -- does just the sheer amount of partnerships -- is there still legs to that story?

  • And -- or, might you need another round of acquisitions? Or if you have -- I think there's some talk -- some people whispering, that maybe you can't keep the operating expenses at such a low level and might that have to increase over time?

  • John Higgins - CEO

  • Well, Larry, good questions. The -- there's one thing is certainly the case. Not all programs are of equal value. And frankly, some drug markets are smaller; the royalty rate may be lower or higher. So, I mean, we're -- while we don't have the liberty to disclose the details on every program, we give as much information as partners allow. And we understand some programs are bigger than others.

  • Having said that -- and this is a case study that we talked about one on one with investors and analysts -- 3 or 4 years ago when we bought Cydex, people gave very little attention to Kyprolis.

  • We had a very good sense of what Captisol was doing to enable Kyprolis. And there's also, at the time, some pretty good data out there. But the market, frankly, wasn't focusing on it. Matt might be able to elaborate; but just the last week or two, we announced a deal with Sanofi for their MET kinase drug. It's a cancer drug going for solid tumors. It's just an illustration of another recently-announced deal.

  • But what we have shared with investors is that there may well be 5, 10 -- another 20 or so -- Kyprolis-type programs in our existing stable of assets. Important cancer- or non-cancer-based medicines; comparable, if not maybe higher, royalties; targeting similar-size markets. And again, we understand we can't bury investors with all the details of every program. But this is a part of our story.

  • Now, to your model, or your question about the sustainability of our model, we're at a point where we continue to fund three to five research projects a year. Our diabetes is obviously our lead program that we're funding right now, but we're investing in novel research projects that could be the basis of new, important licensing deals.

  • But on the other hand, on technology, we have both Captisol and LTP, the liver-targeted prodrug technology -- that did not exist a couple of years ago. That's a brand-new technology. We're licensing off both of those, and the cost -- the opportunity cost as it relates to our operating budget to do new deals, is very, very low.

  • In the case of Captisol, in some cases it literally is a matter of sending out a 20-milligram sample -- all the cost of $15 for a FedEx shipment -- to answer a sample request. 2 months later, we get a response with the partners saying they're interested; technologically it's a good fit; and they want to proceed with a licensing agreement.

  • So, we'll spend $15 any day of the week to incubate those sort of proof-of-concept studies. And those are the basis of some interesting new deals.

  • So, it's a business that is, we think, not only large in quantity, but also full of substantial potential partners; and also, a business model that is absolutely sustainable in terms of our ability to drive new deal-making off the technology and investment we're currently making.

  • Larry Solow - Analyst

  • Got it. Okay. Great. Thank you.

  • Operator

  • Thank you. There are no further questions at this time. I'd like to turn the floor back over to Mr. Higgins for closing comments.

  • John Higgins - CEO

  • Good. Well, thank you, Devon; appreciate your time orchestrating the call. We appreciate everybody dialing in. A great attendance here, for early August in the late afternoon call.

  • Again, we're pleased with the business and our performance. We'll be on the road, of course, later this fall at some conferences, and also expect to have an Analyst Day some time in the next 3 to 6 months. We'll tie that to various partner events once we have a bit more clarity on the corporate calendar. But, again, thank you for your time and interest in the Company, and we'll keep you posted as the business develops.

  • Operator

  • This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.