Ligand Pharmaceuticals Inc (LGND) 2016 Q2 法說會逐字稿

Greetings and welcome to the Ligand Quarterly Earnings Conference Call. At this time, all participants are in listen-only mode. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Todd Pettingill, Associate Director of Corporate Development and IR for Ligand. Please go ahead.

Thanks, Jerry. Welcome to Ligand's second quarter of 2016 financial results and business update conference call. Speaking today for Ligand are John Higgins, CEO, Matt Foehr, President and COO and Matt Korenberg, 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 and its management regarding its internal and partnered programs. 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 are viewed by the Company as of today, August 4, 2016 and do not necessarily represent the views of any other party. 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.

Thank you. Good morning, investors and analysts. Thanks for joining our second quarter earnings call. At the start of 2016, we outlined an ambitious year of growth, investment and expansion of our portfolio and half way through the year now, I'm very pleased to report the business is doing great and in several ways, it's even ahead of where we expected it to be.

Recently approved products we will earn royalties from are just beginning to generate new revenue for Ligand. We have completed two acquisitions so far this year, we are investing in an important novel diabetes program, we help create a China-focused R&D venture for liver related health and we've completed five other new license agreements.

The business has grown meaningfully over the past couple of quarters. Our core focus continues to be on strong growth in profits and cash flow per share. For 2016, total annual revenue is projected to grow by more than 60% over 2015. We project Company gross margins will exceed 90% in 2016 and by managing with low operating expenses, we estimate we'll generate over $0.60 of pretax cash for every $1 of revenue we generate this year. That is over a 60% cash margin on our revenue.

There are several major items I'd like you to take away from our recent developments with Ligand. Promacta, let's talk about that first. Novartis posted $158 million in quarterly revenues for Q2, that's a big number and the biggest quarter-over-quarter dollar increase. Last quarter's sales were $131 million. Not only is this the biggest quarter-over-quarter dollar increase, but it's also one of the biggest percentages increases as well, which says a lot as the product has been on the market for over seven years. I will also note this is the first quarter in the product's history where sales of Promacta exceeded sales of Nplate, a competitor drug. Scientists at Ligand help discover Promacta, a drug that boosts platelets and we earned a royalty on it from Novartis. So why is Promacta doing so well? Novartis acquired the drug about a year ago from GSK and Novartis has a much larger commercial operation and are active in more markets around the globe than GSK. It's clear they're doing a tremendous job, commercializing this important medicine.

Also, the product has enjoyed continued label expansion and a growing database of safety information. This is a drug that we've always believed has the potential to do at least $1 billion in annual sales. And Novartis similarly described it as having blockbuster potential. This quarter report underscores our shared views.

Now, on to Kyprolis, Amgen reported Q2 revenues of $172 million. This is also a big sales increase, up from $154 million last quarter. On its Q2 call last week, executives at Amgen said and I quote, based on the very strong clinical profile of Kyprolis, we expect this product to be a backbone of multiple myeloma therapy for the foreseeable future. And they went on to say, again, I quote, the early launches from our European organization into second line are very encouraging. Kyprolis has been well received and we continue to gain approvals, country-by-country. Of note, Amgen reported they expect topline results from the CLARION trial, a superiority study in first line setting comparing Kyprolis versus Velcade, both in combination with standards of care with the data expected out in the second half of 2016. As investors who follow Ligand know very well, Kyprolis is an Amgen product that uses Captisol in its formulation, we have a license agreement with Amgen but Ligand is not involved in the commercialization or development of the product.

Now, a quick comment about EVOMELA. After the March FDA approval, our partner Spectrum launched the product in Q2. The product received seven years of orphan drug exclusivity for use in high dose conditioning prior to stem cell transplant in patients with multiple myeloma. It's early days for this Captisol-enabled drug and we look forward to seeing how the product does over the next several quarters. But with a 20% royalty, which is among the highest royalties of all of our programs, this has a potential to move into frame as one of our top revenue-generating programs over the next few years. With positive partner news flow and continued success with licensing and acquisitions, we have seen continued expansion of our portfolio. We now have over 150 Shots on Goal or fully funded programs that are based on licenses that companies have with Ligand. Today, over 150 programs, up from over 140 recently, are being funded by partners that use our inventions, patterns or have come out of our deal making. And today, among those 150 programs, 13 are for proved products that are generating commercial revenues for Ligand.

Before I turn the call over to Matt Foehr, I want to mention for those new to Ligand that we are a unique company offering investors a business that is balanced between strong financial performance, driven by attractive topline growth projections, high margin, disciplined spending and a large and diverse portfolio of technologies and partners. We are financial stewards, drug discoverers, technology inventors and deal makers. By operating in the important biopharmaceutical industry, our primary focus is to pursue medicines with partners that improve the lives of patients and maximize cash flow per share for our shareholders.

I'll now ask Matt Foehr to add some color on some of our other partnered programs.

Thanks, John. I'm going to start off this morning with a discussion of some additional developments with partner programs. I'll also provide updates on our business and licensing progress with the OmniAb technology and with Captisol and I'll also touch on recently announced deals, centered around the Ligand-invented LTP or Liver-targeted Prodrug technology.

Let me begin with some recent partnered program developments. Our partners at Melinta, highlighted their delafloxacin or Baxdela program at the ASM Microbe meeting in June. This followed their announcement of confirmatory Phase III clinical data for the program in May and their plans to file an NDA for Baxdela in the second half of this year.

Sage Therapeutics continues to announce data and events related to Captisol-enabled SAGE-547. This is an asset getting significant attention, given its known and growing clinical dataset. At the recent American Academy and Neurology meeting, data from an open label Phase I/II trial in super refractory status epilepticus or SRSE demonstrated that the previously reported 77% key efficacy endpoint response rate was not related to age, gender, ethnicity, comorbid medical condition or to underline anti-epileptic or third line agents. Additional data presented at the meeting also illustrated that SRSE has a high burden of illness with significant morbidity, lengthy hospitalizations and significant utilization of ICU and overall hospital resources.

Merrimack presented an expanded analysis of its Phase II trial with MM-121 in combination with other agents in HER2-negative hormone receptor-positive metastatic breast cancer at the recent AACR meeting. This was in addition to announcing the initiation of a Phase I study with MM-151 in colorectal cancer as well as a study combining both MM-151 and MM-121 in a variety of cancers, utilizing specific biomarkers, analyzing the study to match patients to treatment approaches.

I also want to briefly highlight our portfolio of biosimilars. This portfolio of assets continues to progress well as the technical and global regulatory landscape continues to become clear in the biosimilar space. In recent quarters, two biosimilars have launched that are now paying us royalties. And we see continuing reports of progress from other biosimilar partners, specifically Coherus BioSciences for the etanercept biosimilar (CHS-0214) that recently reported positive clinical data and Oncobiologics announcing the progress and plans for ONS-3010, their adalimumab biosimilar.

With recent licensing deal flow and additions and expansions to our platform assets, as John mentioned, our portfolio of Shots on Goal continues to grow and now stands at over 150. This is driven in part by our technologies and our continuing licensing activity relating to those technologies. We recently disclosed new OmniAb platform deals with Gilead and with F-Star, both of whom were existing partners of Ligand's, prior to those new OmniAb deals. We're pleased to have been able to expand our relationships with these companies and enter into new platform license agreements with them that give them access to our transgenic animals to develop novel antibodies. A little more than a couple of quarters into owning the OmniAb technology, we continue to be pleased with the progress of the partners and the new deal flow and we expect to continue to add more partners who also see the value that OmniAb brings to efficient discovery of fully human therapeutic antibodies. We've now entered into five new platform agreements since acquiring the OmniAb platform.

I'll also note that in the second quarter, our existing OmniAb partner Wuxi out-licensed an IND-ready OmniAb antibody to a partner that we expect will enter the clinic in the coming quarters. Our rights to that antibody transferred along with that license. Based on recent ordering and usage patterns, we estimate that our existing OmniAb partners are currently testing well over 50 antibody targets using OmniAb and we've also learned that an OmniRat derived antibody is currently in the clinic. We see these as representations of the value that OmniAb is bringing to those that use the platform.

Switching gears now to Captisol, we're continuing to expand our reach, both with new customers and partners as well as new users of Captisol. In addition to our partners that are developing intravenous formulations, we now have partners gearing up for Phase III or pivotal trials with eye drop formulations containing Captisol and multiple oral Captisol enabled formulations are now in the clinic. In addition, we expect upcoming FDA action for Lundbeck's Carnexiv, a Captisol-enabled IV drug targeted at the seizure market and as mentioned, the near-term filing of Melinta's NDA for their novel antibiotic Baxdela, also an IV drug that uses Captisol. Both of these late-stage events if achieved will trigger milestone payments to Ligand.

As more Captisol enabled products progress through late-stage development and with the growth of our drug master files and our growing safety database, inbound interest in Captisol continues to increase significantly. Additionally, we continue to invest in our Captisol IP portfolio and recently had an additional US patent allowed which will broaden the coverage of Captisol technology if and when it is used and provide additional protection to 2033.

I'll now touch briefly on our Liver-targeted Prodrug or LTP technology. Late last week, we announced a multi-product deal with a venture backed company called Nucorion Pharmaceuticals, a company that was co-founded by Ligand and a professor at The Ohio State University. Nucorion is majority funded by an Asia-based venture fund called Silver River Investments and is focused on developing novel products focused on liver related disease, primarily for the Chinese market, where liver disease is a large and growing problem. The LTP technology was developed by our scientists here at Ligand and is well suited for delivering a broad set of actives to deliver. With a continued growth of our portfolio and multiple strategic platform deals, Ligand is in a position that affords us a pretty unique viewpoint on the industry and allows us to leverage that information as we choose areas to focus on from a licensing, deal making and asset investment or acquisition perspective.

I'll continue with a brief remark about our internal pipeline, specifically our Glucagon Receptor Antagonist or GRA program. Our R&D team continues to make significant progress towards initiation of our Phase II study. We recently completed a lead-up clinical study comparing the oral liquid formulation that we used in our Phase I studies to a more traditional solid dosage form that we will use in our Phase II. The results from that clinical study came back as we expected, further illustrating the clear drug ability and formulatability of our novel GRA compound known as LGD-6972.

We're in the final stages of site approvals for our multi-center Phase II trial that we plan to initiate later here in Q3. We expect that Phase II trial will yield data next year and if successful, we plan to partner the program. I'm also pleased to report today that we recently received word that a manuscript of our Phase 1a and Phase 1b clinical results for LGD-6972 has been accepted for publication in the Journal Diabetes, Obesity and Metabolism and we expect the paper to go to press in the near future.

With that, I'll turn the call over to Matt Korenberg to discuss the financials.

Thanks, Matt. I'll start my remarks with some financial highlights from our earnings release issued earlier today. Total revenues for the second quarter of 2016 were $19.5 million and included royalty revenue of $9.8 million. The royalty revenue increase of 48% versus the year-ago period largely reflected higher Promacta and Kyprolis royalties. Captisol materials sales for Q2 were $3.9 million, which was in line with our expectations and license fees and milestones for Q2 were $5.9 million, which includes the addition of revenue from OMT and its OmniAb platform.

With respect to gross margins, as John mentioned, our corporate gross margins are expected to exceed 90% for the year. Our royalty revenue and our license and milestone fees have limited costs associated with them and are reported net on the income statement at 100% gross margin. The only revenue item associated with cost of goods sold is our material sales for which we continue to see higher gross margins driven by both mix and volume.

On the expense side, our cash R&D and G&A expenses were in line with our expectations and we continue to be on track for $26 million to $28 million of cash expenses for the year. For the second half of 2016, we therefore expect a little more than $14 million of cash operating expenses. In addition to the recurring non-cash expenses such as stock-based comp, we had a large non-cash expense for the quarter related to our Viking equity holdings. As a result of the financing Viking completed during the second quarter, under GAAP, we recorded a $10 million or $0.48 per share non-cash write down to our existing holdings to account for the dilution from the Viking financing. Currently, we require the value of Viking using the equity method, which requires us to estimate the dilution to our position upon Viking issuing new shares to third parties. This loss was a non-cash unrealized loss that impacted GAAP income. Also, following their financing, Viking repaid a portion of its note outstanding to Ligand. We received a $1.5 million payment of the approximately $5.5 million balance owed to Ligand on the note, part in cash, part in equity. Taking into account the Viking financing and the note payment, Ligand's ownership in Viking decreased from approximately 49% prior to the transactions to approximately 33% today.

For the quarter, we reported adjusted net income of $10.8 million or $0.50 per diluted share. We had a GAAP net loss of $5.8 million or $0.28 per share, which includes that significant non-cash loss related to Viking that I discussed. As a final point on GAAP income, we continue to pay less than 2% cash taxes, but for GAAP purposes, we show a fully taxed GAAP income to reflect the rate at which we're utilizing our NOLs.

On the balance sheet, we ended the quarter with approximately $107 million of cash and investments, we generated operating cash flow of $10.4 million during the quarter as a result of our growing royalties and other revenues combined with our relatively stable low cost expense structure. As a reminder, we closed the CorMatrix acquisition in the second quarter and used $17.5 million of cash. The acquisition of the economic rights to the CorMatrix portfolio has performed well since the acquisition has already begun adding to our revenue and earnings.

As discussed in our earnings news release, we're maintaining our full-year 2016 guidance. We expect full-year 2016 revenues to be between $115 million and $119 million and adjusted earnings per diluted share to be between $3.41 and $3.46. This guidance implies second half revenue of $66 million to $70 million and adjusted earnings per diluted share of $1.94 to $1.99. From a quarterly perspective, we continue to expect revenue and earnings to be more heavily weighted to the fourth quarter of the year and would expect to see about one-third, two-third split between the third and fourth quarter respectively. Our adjusted earnings per diluted share guidance excludes stock-based compensation expense, non-cash debt related costs, amortization related acquisitions, changes in contingent liabilities, non-cash net losses of Viking Therapeutics, mark-to-market adjustments for amount owed to licensors, fair value adjustments to the Viking Therapeutics Convert and warrants, non-cash tax benefit or expense and unissued shares relating to the senior convertible note along with adjustments for discontinued operations, net of non-cash tax expense.

With that, I'll turn it back to the operator and open up for questions.

(Operator Instructions) Matt Tiampo, Craig Hallum.

Good morning, gentlemen. Congrats on a solid quarter and great first half of the year. Maybe quickly we can start with the easy one. It looks like gross margin on material sales continues to outperform, is that driven mostly by mix towards clinical or are you seeing additional efficiencies within your commercial supply as well?

Thanks, Matt. Yes. The mix continues to be favorable. I think on the volume side, I've said on a last couple of calls that we continue to benefit from the volumes at which we're purchasing and selling Captisol and I think from the mix side, it's more difficult to know which way the mix is going to go from quarter-to-quarter. From a volume side, I think we know enough now that we can say that the volumes should be at this level for the balance of the year, should benefit from the volume side and hopefully mix continues to be favorable as well.

Great. As I look at the reported royalty revenue, it's maybe a little bit higher than we have modeled marginally, and just wondering it appears to me that outside of Promacta and Kyprolis you had maybe an uptick in royalties from other sources this quarter just wondering if you could get a little bit more granular on maybe which products or subset of products was driving that?

As you know obviously Promacta and Kyprolis are knowable ahead of time and those numbers obviously were exactly as you would have guessed. The rest of the balance the commercial royalties tend not to be reported by our partners and so they're little harder to know but generally they're products are all performing pretty well across that bucket and it is not one particular product over another.

Is CorMatrix booked on one quarter lag also? Was there any CorMatrix royalty booked in Q2? Or is that all going to start in Q3?

Good question, Matt. CorMatrix is not on a one quarter lag because we have the annual minimum royalties and because of the reporting structure of CorMatrix, the relationship between Ligand and CorMatrix, we know those royalties monthly and we can book it real-time, so that might be the extra bit in there.

Joe Pantginis, Roth Capital Partners.

First, I was wondering, Matt, can you provide any additional details on the 6972 program, how big the Phase 2 might be, the kinds of endpoints you're looking at, et cetera?

Thanks, Joe. And actually we just -- the trial just got posted to clinicaltrials.gov, as well, obviously it's a double-blind placebo-controlled Phase 2 study focused on our drug of course. We're testing at three doses. So we're looking at a 5-mg, a 10-mg dose and a 15-mg dose, also a placebo and the patients will be randomized 1 to 1 to 1. We expect about 132 patients in total and the primary endpoint is going to be HbA1c at 12 weeks. So I guess that's the general design of the study obviously we're very excited to be moving the study forward, we see a lot of potential advantages for glucagon receptor antagonism delivered in an oral small molecule way, obviously as you compare to other novel mechanisms to treat diabetes whether it's a DPP-IV that comparative when you look at the data out there for glucagon receptor antagonist have showed fairly modest reduction in fasting plasma glucose, there is a potential for glucagon receptors antagonist to overachieve there, GLP-1s of course are only available injectable, we have an oral and SGLT2s are contra indicated for renally impaired patients and we think there is potential for LGD-6972 to be effective in renally impairment patients as well. So we are excited to get the trial running, we'll get the data next year and look at it then.

And just I guess you are at a good position as a company because you have the cash resources now several years ago to be able to run the study and correct me if I'm wrong, is this the study that you will internally take the furthest before you're looking to partner, because having such a relatively large randomized Phase 2 study should put you in a pretty good position if the data are good from a partnering standpoint and leverage.

Joe, it's John here. I'm mean you're correct, your observation on both points partly the financial resources we have to, to make the investment but also our decision, our desire to take this further still with the goal of partner but the partner at a bit later stage, generally for new investors in context with our business we invent drugs, invent technologies typically license at the earliest possible point. Ligand obviously we are enjoying the success, increase profits and cash flows, we are diversifying our investments, obviously we make acquisitions, we have funded some start-up companies but this is another illustration of how we believe we are selectively in a discipline manner choosing to fund other projects that we believe have a potential to generate high value returns. Diabetes is a very large market, enormous medical needs, the cost to advance a drug are very, very high but this next study, the design is fairly straightforward, there are standard protocols and we believe that we can not only efficiently manage the study from a time perspective but also a cost perspective we can afford to do it. And if the trial is successful, it should generate significant data package for us that will be much more substantial for licensing prospects than what we have right now. So, as we have said over the last few years, this is what Ligand we expected it to look like, as we grow up as we mature as a company. We are pleased to have this program in-house and obviously are excited to initiate the study in the next month or two.

Maybe Matt again, I know I'm asking you this to speak on behalf of one of your partners, but when you look at the scripts, and I know -- it's on Duavee, it seems to have plateaued over the last few months. It had a very, very strong start irrespective of the numbers just based on the slope of the curve. I was just wondering if you have any comments on what's going on there?

Joe, we follow the scripts as well. Obviously, Pfizer remains very committed to the products in the US from our dialog with them. Obviously, it's best to talk them specifically about the work they're doing on the commercial marketing side, et cetera. They've had some recent approvals outside the US. So we're starting to watch that now as well, but yes, that's probably the most I can give you there without not wanting to speak for Pfizer.

Carol Werther, HC Wainwright.

I was wondering, Matt, with all the incoming calls about Captisol, are the terms changing, are they improving for you?

Carol, thanks. Since the time we acquired the technology five years ago now, we've invested significantly in the IP portfolio, the safety database has grown significantly and there is more I will say clinical validation regulatory validation on a global basis and also commercial validation of products that candidly wouldn't be on the market were it not for not Captisol. All of those things obviously increased the value proposition for our partners and we have seen that yet reflected in better deal terms over time. Technologies become more valuable, become more known and with that more streamlined regulatory and safety database that our partners enjoy, we do in general garner better terms than I'll say the deals that existed when we bought the technology.

And also Carol just from a landscape perspective, it may be obvious by our report and the news flow in this call, but over the last year or so, it's remarkable the volume, the quantity of positive data that is coming out of our partners for Captisol-based programs. We can start with Amgen and Kyprolis of course, a lead commercial partner or licensee of ours, but beyond that Spectrum one, approval for EVOMELA earlier this year, an important new medicine, we've talked about SAGE Therapeutics, we've talked about Melinta, Lundbeck, all of these companies are reporting very meaningful data in clinical results for a wide range of programs, this has always been a part of the business for the last few years, we had good partner relationships, but now the late stage nature of the data report is also I think really fuelling interest and increased demand for Captisol sample request. So in terms of landscape, we're in a good place right now not only with our existing partners but with the platform to we believe continue to expand the Captisol-based relationships.

Can you describe at all, like -- should I just assume single-digit royalty from the new partnerships?

As Matt described, we've added tremendous value, the value proposition has increased in ways we've talked about over the last couple of years. We are able to do move our pricing a bit, but generally this is still a technology license. It's an excipient license tied to a patented formulation. Royalties are solid but compared to novel drug discovery like Promacta for instance, or our diabetes drug, the royalties are lower than those novel inventions.

And then, as you look forward to the second half of the year you've signed at least I guess 10 new partnerships if I'm guessing correctly, what should we envision for the second half of the year?

So, we don't give guidance on Shots on Goal outlook, we talk about the current state, and partly because we can't predict acquisitions and we also can't predict attrition rates. When we report out numbers it is a net number, it's accounting for everything that's currently actively funded. So we can't give a forward outlook, however, this year the number has grown by 10, it's come through acquisition. We acquired CorMatrix, some royalty rights there. We have some new license agreements with Nucorion, this Chinese venture we described. We've done a number of new OmniAb related deals. So as we look at that landscape of new deal-making that's how our number is now over 150 shots-on-goal.

Greg Fraser, Deutsche Bank.

Good morning, guys. This is Greg Fraser on for Greg Gilbert. My first question is on the guidance and if you can comment on your expectations for royalties and material sales that are in the $66 million to $70 million target? And also are there any key milestones payments that are included in that guidance range that you call out?

You'll recall that at the beginning of the year that we gave some guidance that said royalties overall would be about half of total revenues for the year. And same for milestones and Captisol, they'd each be about 25%, those are definitely approximations but they still hold for the balance for the full year in total. And so that should be able to get you to the royalty numbers and milestone numbers for the second half of the year, obviously, recognizing that royalties will grow each quarter as we get to the higher tiers for the second half of the year. On the milestone side, you will recall also in the beginning of the year we gave a number of $10 million of approval-related milestones. The biggest of that was obviously the $6 million spectrum milestone. Beyond that there aren't any outsized milestones for the balance of the year that we think are big enough that it's worthwhile mentioning. There is just a continuing significant number of different events of programs moving through the clinic and few approvals that will all contribute in the second half.

Any chunkiness to the material sales expectation for 3Q versus 4Q? You mentioned one-third, two-thirds for the overall revenue but any chunkiness for material sales that we should think about?

Material sales are always very difficult to predict in terms of timing. We are pretty consistent in saying that but we do see a larger fourth quarter every year and expect the same this year as folks getting to the end of their budgets and getting things in the calendar year.

I'm not sure if I missed this but did you say what OMT revenues were in the quarter?

No, recall again that when we -- at the time of the acquisition, we gave guidance of $6 million for the year. And as a reminder to everyone, $12 million for next year, for 2017.

And your 2017 plus outlook hasn't changed since you took control of the business put those numbers out?

It continues to do well, maybe even better than expected. I think we will probably update overall guidance and OmniAb specific guidance if at all at the end of the year, but continuing to be favorable and see at least $12 million next year.

Last question is, what would say are the most important catalysts in the second half? You mentioned the CLARION the study for Kyprolis and the Melinta filing. What other events do you think investors should be particularly focused on in the coming months?

Greg, this is Matt Foehr. We have a number of actions coming up, we've got as I mentioned in that prepared remarks, Carnexiv action coming up. We will see clinical data out of a number or some of our big six programs as we characterize them. SAGE-547, SAGE has talked about data events in the second half of this year. Also Retrophin for Sparsentan said they expect data in the third quarter for Sparsentan and the focal segmental glomerulosclerosis program. Also mentioned as you said the filing of the Baxdela NDA by Melinta. So those are just a few obviously. And now with a portfolio of over 150, we continue to see significant progress in the development pipeline. And then on top of that commercially obviously EVOMELA just was launched in April so we will see commercial reports out of spectrum for EVOMELA as well which is one of the newer commercial assets in the portfolio.

Larry Solow, CJS Securities.

Good morning. This is actually Robert Magic filling in for Larry this morning. Speaking to your two primary commercial drugs and starting with Kyprolis, there was some noise coming out this year's ASCO meeting about potentially increased competition in the space. Any thoughts there?

Yes, there has obviously been a lot of innovation in the multiple myeloma space for quite a while that's no secret, we follow the space closely, we attend the scientific meetings, talked to experts, we're close to it. As Amgen said on their call last week, the Kyprolis drug they see as a backbone of therapy, as a backbone of proteasome inhibition in the mission that would be combined with a lot of the other drugs and you see that you spend any time on clinicaltrials.gov, you see the number of trials that involve Kyprolis, it is a very large number of trials. So that is bearing out in the clinical landscape as well. So, we continue to see it as Amgen does, and obviously direct people to them for any kind of specific market dynamics questions.

Just some of the color, again just our perspective, Amgen is the marketer. So they should obviously be commenting directly about their products and plans, but our view is that the market is growing. The good news is there is a number of promising drugs out there, patients are living longer, they're staying on medications longer, and as a matter of course the multiple myeloma category is increasing in terms of dollar potential. Kyprolis by our review is a widely used drug with investigator sponsored trials. We think that's an indicator of physician interest, success patients are having using the medicine and I think what we're reading coming out of Amgen is it's a question of what these drugs are labeled for that all the new drugs aren't sharing the same label, so usage might be different and secondly there is an expectation of concomitant use, drugs used in combination. So for a variety of reasons when you look at the market factors coupled with as Amgen reports country-by-country, new markets are coming online, in Europe, we know Japan recently saw approval for ONO's license of the product. So variety of reasons coupled with the recent quarterly sales report, we are encouraged by what we are seeing and hearing out of Amgen.

And then on Promacta, when might we see some results from the multiple cancer-related thrombocytopenia clinical trials and is that a 2017 event?

Obviously, over 40 trials ongoing with Promacta currently the MDS/AML, a lot of work were continuing in expansion or specific indications aplastic anemia, continued work in ITP, there are recent studies that have started up in bone marrow transplant as well. Also in the last couple of months, Novartis has reported out the data specifically in the MDS/AML at the EHA meeting in Europe, showed some positive data in MDS/AML there. We probably expect to see more data coming out of those trials in 2017. So we are keeping an eye on that and that's just based on the publicly available information.

(Operator Instructions) Eugene Fox, Cardinal Capital Management LLC.

Matt could you give us some insight into what the standards are for the CLARION study, are we looking at progression free survival and any insight, because I think you said this was originally designed by Onyx. So any color you can give us on how we should frame the results would be helpful?

Eugene, in terms of specifics of the design of a study, I will tell you what Amgen said publicly on their call last week which is that's a study, the CLARION study, it's a Phase 3 design versus bortezomib in newly diagnosed transplant in eligible multiple myeloma patients. The update that Amgen provided on their call last week was that they now expect data from that study in the second half of this year. So that was an update on their earnings call last week, but in terms of any kind of finer details on the clinical trial, I'd really direct folks to go back to Amgen to discuss that.

Thank you. That wraps up the line of questions, really appreciate the turnout this morning. I know it's a busy day for earnings call as the quarter cycle winds up. Just a quick outlook. We will be on the road, we've been invited to a few conferences. We will be at the HC Wainwright Conference and the Morgan Stanley Conference in September, and then the Stevens Conference in November. We have a busy calendar of medical conference events as well with posters, presentations and partner updates, and we look forward to updating investors along the way.

Thanks for your time and interest this morning.

Ladies and gentlemen this concludes today's conference. You may disconnect your lines at this time thank you for participating.