Ligand Pharmaceuticals Inc (LGND) 2025 Q4 法說會逐字稿

Thank you for standing by, and welcome to Ligand's fourth quarter 2025 earnings call. (Operator Instructions)

I would now like to turn the conference over to Melanie Herman. You may begin.

Good morning, everyone, and welcome to Ligand's fourth quarter and full-year 2025 earnings call. With me on the call today are CEO, Todd Davis; Chief Financial Officer, Thabo Espinoza; and Vice President of Portfolio Strategy and Investments, Lauren Hay.

During the call today, we will review the financial results released earlier today and provide commentary on our partner portfolio and business development activity, followed by a question-and-answer session.

Before we get started, I would like to point out that we will be discussing non-GAAP results, which exclude certain items such as stock-based compensation, amortization of intangible assets, amortization or impairment of financial assets, gains or losses from derivative assets, and gain on the sale of the Palhos business amongst others. I encourage you to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP measures, which can be found in today's release available on our website.

We believe these suggested measures provide valuable insight into our core operating performance both historically and moving forward.

Our release today and a link to today's webcast can be found in the investor relations section of our website at ligand.com.

This call is being recorded and the audio portion will be archived in the investors section of our website. On today's call, we will make forward-looking statements regarding our financial results and other matters related to the company's business.

Please refer to the Safe Harbor statement related to these forward-looking statements which are subject to risks and uncertainties.

We remind you that actual events or results may differ materially from those projected or discussed, and that all forward-looking statements are based upon current available information.

Ligen assumes no obligation to update these statements.

To better understand the risks and uncertainties that could cause actual results to differ, we refer you to the documents that LIAND files with the Securities and Exchange Commission, or SEC that can be found on LIGAND's website at ligand.com or on the SEC's website at sec.gov.

And with that, I will now turn the call over to Todd.

Thank you, Melanie, and good morning everyone. We appreciate you joining us today. 2025 was a defining year for LIGAN.

We delivered exceptional financial performance with full year adjusted EPS exceeding our original 2025 guidance by more than 30%.

That growth reflects the strategic changes we began implementing in 2023 the lean operating structure, the talented team, the focused investment strategy, and the strength and depth of our royalty portfolio, which continues to outperform expectations.

Full year royalty revenue grew 48% over the prior year and full year adjusted EPS increased 42%, reflecting strong performance across the portfolio.

Key drivers contributed to the 48% growth include the continued ramp of Felspari, successful launches of Merck's 02V and capfaxi, and the commercial launch of Zelsumi, and continued growth of record RDs Karziba.

With substantial cash and investments on hand, we are well positioned to pursue disciplined investments that create new clinically differentiated product royalty streams and enhance long-term shareholder value.

I'd like to take a moment to congratulate our partner Palvella Therapeutics on their announcement this week of positive top-line data for their Phase 3 Silva trial of ketorin rapamycin for the treatment of microcystic lymphatic malformations, also known as MLM.

Based on the strong trial results, we believe ketorin rapamycin is likely to become the first FDA approved therapy for more than 30,000 diagnosed patients with MLM, a serious, rare, and debilitating disease. We are proud to partner with Pavella and commend them on their hard work and dedication to develop transformative, high clinical impact treatments for patients living with this rare disease for which there are currently no approved therapies.

Separately in 2025, our deal team executed on a special situations transaction through the strategic merger and financing of Telcos and Channel Therapeutics.

Our special situations efforts can require significant effort, but we are rewarded with our efforts with superior risk adjusted investment returns.

Our team was patient and thoughtful, creating a subsidiary, building out a top-notch management team, and spinning Pelhos out into a publicly traded entity and creating significant equity and royalty value for LAd investors.

Importantly, we were also able to rescue and shepherd Zel Sumi from bankruptcy through to FDA approval and into the hands of a capable team at Peltos Therapeutics that will now serve millions of patients that are impacted by molluscum contagiosum.

As we look ahead to 2026, we are accelerating our business development efforts. Our team is expanding. Our pipeline is deeper. Our capital base is stronger than ever in our efforts to fuel our growth initiatives. Additionally, in 2025, we launched a systematic portfolio management strategy to drive value in our development stage partnerships.

We're now focused on more proactively communicating with our partners and doing what we do best, identifying new opportunities to provide additional investments or expand the partnerships in other ways.

I also want to address how we view royalty financing in the current biopharmaceutical funding environment.

Importantly, we are seeing growth in the demand for royalty capital as evidenced by the doubling of the royalty funding market over the last 5 years.

Even with improvement in the equity markets, royalty financing has become a strategic capital structure tool companies are choosing regardless of the broader market conditions.

Our partners value royalties because they are non-diluive, complementary to equity capital, and aligned with our partners' long-term development cycles.

Additionally, only a small portion of the overall royalty financing market is tied to development stage assets.

LAND is uniquely positioned in this way within a rapidly expanding biopharmaceutical royalty financing sector where demand per capital is high.

Since 2022 we've been on a strong upward growth trajectory. Earnings have more than tripled as our royalty portfolio has scaled, and we have aggressively managed our operating margins.

Core revenue has also grown meaningfully from $108 million in 2022 to $240 million this year, and we are now expecting $265 million in 2026. That's based upon the midpoint range of our guidance.

And more than 430 million is expected by 2030.

Adjusted EPS reflects the same momentum, moving from $2.44 a share in 2022 to more than $8 per share this year, with visibility to over $13.50 per share by 2030.

Looking ahead to 2030, I would like to highlight our 5 year royalty receipts outlook which we shared at our investor day in December of 2025.

We now expect a 23% compound annual growth rate in royalty receipts from 2025 through 2030. This growth is driven by contributions across the entire portfolio.

The commercial programs form the core of the growth profile and contribute to an expected 15% annual growth.

These products are already marketed, supported by strong partners, and in some cases have the opportunity for additional label or geographic expansion.

Additionally, the farm team, which represents significantly risk adjusted development stage programs currently in LIGAN's portfolio, is expected to contribute an additional 5%, and future investments should add at least another 3%.

We believe the strength of our recent results, the continued momentum of our royalty portfolio, and our investment team's disciplined capital deployment approach positions us to deliver sustained long-term growth for years to come.

And with that, I'd like to turn it over to Thabo for the financial update.

Thanks, Todd, and good morning, everyone.

I'll start with a brief overview of our full year of 2025 financial performance, followed by the fourth quarter highlights and then discuss our 2026 outlook.

2025 was a breakout year financially for LIAND, driven by strong execution across our royalty portfolio and disciplined capital deployment. For the full year, total GAAP revenue was $268 million up from $167 million in 2024. This includes a gain related to the sale of the Pelto's business. Excluding that gain, core revenue was $240 million reflecting 43% year over year growth.

Royalty revenue grew to $161 million an increase of 48% year over year, driven primarily by Filspari, Auer, Katbaxis, and Karziba.

From an earnings perspective, core adjusted diluted earnings per share increased to $8.13 up 42% year over year, reflecting strong operating leverage in the model and higher royalty contribution.

Importantly, while 2025 benefited from the $25 million sell zooming out license fee, the underlying royalty portfolio delivered substantial organic growth independent of that one-time item.

Turning to the fourth quarter, total revenue in Q4 was $59.7 million representing a 39% increase compared to the same period last year.

Royalty revenue was $50.5 million up 45% year over year, and again represented the primary driver of growth.

Key royalty contributors during the quarter included continued strength and Fospari with US net sales of $103 million. This represents 108% growth year over year and $322 million of net sales for the full fiscal year.

As a reminder, we also received a royalty on net sales of Travier's partner in Europe, CSLV4. In total, we recorded royalties of $32 million on approximately $355 million in global Silsfari sales in 2025, including those reported by CSLV4.

Merck's Otuber, which reported net sales of $178 million in the in the partial fourth quarter on a full quarter basis, accounting for the fact that Verona owned the asset for the first seven days of the quarter, sales were just under $200 million.

US net sales of Hauteuvre for the full year 2025 were $506 million.

Merckx capvaxiv, which reported net sales of $279 million in the fourth quarter and $755 million for the full year, is rapidly approaching blockbuster status.

And Recordatis Karziba reported net sales of €159 million for the full year 2025, representing 12% growth.

Adjusted net income for the quarter was $42.7 million or $2.02 per diluted share compared with $1.27 in the prior year period.

The increase was driven almost entirely by higher royalty revenue, reflecting the scalability of our model.

On the expense side, R&D expense declined to $3.5 million in the quarter compared to $4.4 million last year, and G&A expense was $25 million relatively flat year over year as we maintained discipline cost management while supporting portfolio growth.

Overall, the 4th quarter capped a year of accelerating earnings and expanding margins.

For the full year, R&D expense was $81.2 million compared to $21.4 million in the prior year.

2025 full year R&D costs include $62 million related to the accounting treatment of Castle Creek and Orchestra Investments. Full year G&A costs for 2025 were $92.4 million compared to $78.7 million driven by stock-based compensation costs, PLTOs transaction costs, and other headcount related costs primarily to scale the BD function.

We also ended the year with a very strong balance sheet including $734 million in cash equivalents, and short-term investments. When combined with our equity holdings in Peltos Therapeutics and available capacity under our credit facility, we ended 2025 with over $1 billion in deployable capital.

Turning now to 2026, we are reaffirming the financial guidance we introduced at our investor day in December. For the full year, we expect adjusted EPS of approximately $8 to $9 per share.

Royalty revenue of 200 to $225 million representing 32% growth at the midpoint.

Cap to all revenue of $35 to $40 million and contract revenue of $10 to $20 million.

In total, we expect revenue of 245 to $285 million for 2026.

As a reminder, the year over year adjusted EPS growth appears modest at the midpoint due to the one-time self-soothing out licensed income recognized in 2025.

Excluding that item, the underlying earnings power of the business continues to grow meaningfully.

Royalty growth in 2026 is expected to be driven primarily by Silspari, Outubert, captive, and Sosumi.

All of which remain in relatively early stages of their commercial life cycle. With that, I'd now like to turn the call over to Lauren for a portfolio update.

Thanks Paavo and good morning everyone. I'd like to provide more detail on our new portfolio management strategy that Todd touched on earlier. We recently launched a more sophisticated and systematic portfolio management process designed to actively drive value across our partnerships.

This approach allows us to track progress and catalyst in a more disciplined manner, to increase the frequency and depth of our partner dialogue, and to proactively identify new investment opportunities.

This positions us to take initiative to ensure our partners have what they need to be successful, whether that means adding investment behind programs in which we have high conviction, broadening the scope of existing collaborations, or identifying novel ways to expand the partnership.

In short, it's all about being more proactive, more data-driven, and more investment focused across the portfolio.

Moving to the next slide, I'd like to provide an update on one positive development from our recent portfolio management efforts.

Lisafoxopen is a program that has been in our portfolio for quite some time.

The product was originally discovered in 1,991 through a research collaboration between Ligand and Pfizer and is currently midway through its phase 3 trial for the treatment of positive HER2 negative metastatic breast cancer in patients with ESR-1 mutations.

Lasafoxxopene has a compelling value proposition. In phase 2 studies, lasafoxxopene demonstrated a 13 month median PFS in combination with abemicyclib significantly stronger than the 3 to 6 month median of currently approved monotherapies.

Lasafoxxacene also has a unique mechanism of action as a selective estrogen receptor modulator, or SERM, presenting potential advantages in tolerability, as well as bone and neurogenital health.

Additionally, the product has a large safety database of approximately 10,000 patients from prior Pfizer studies.

Leafoxxacene was being developed by Sermonix Pharmaceuticals, who ran into financial challenges midway through the pivotal study.

Late last year we worked collaboratively with Sermonix Equity Investors to successfully assign the license to Leona Bao, previously Othera Pharma.

In conjunction with the license, Leona completed a $90 million pipe with very strong investor demand led by Perceptive, Commodore, and TCGX with additional potential financing of $146 million to support the program.

LIAD participated in the pipe to signal our support and partnership with Leona, and we are encouraged to see this important late stage program backed by a strong investor base under the leadership of the talented team at Leona.

Top-line data for latopoxxyene is expected to read out in mid-2027 in the ongoing pivotal Elaine 3 trial, which is currently more than 50% enrolled.

Additionally, Henley's has exclusive rights to lasafoxopene in Asia and certain countries in the Middle East and is currently in phase 3 development in China.

MIAD earns a tier 6 to 10% royalty on worldwide net sales of lasafoxopen, and with management peak sales estimates of approximately a billion dollars, this could potentially result in annual royalties to LIAD of $80 million.

Moving to the next slide, I'd like to provide some important updates on other key assets in Ligan's portfolio.

I will go into more details on palvella's ketorin rapamycin, Trevir's silspari, and Merck's Otuvir on the following slides, but first I'd like to briefly touch on two of our pipeline assets.

This includes Santa Fe's tea yield and a Genesis bot doo.

In October 2025, Tyield was accepted for expedited review for Stage 3 Type 1 diabetes or T1D through the Commissioner's National Priority Review voucher pilot program based on its potential to address a large unmet medical need.

Tzel is currently approved in the US for patients with pre-symptomatic stage 2 disease to delay the onset of Stage 3 in patients who are 8 years of age and older. But if approved, this new indication would expand treatment to patients diagnosed with symptomatic Stage 3 disease.

This represents a much larger and more accessible patient population.

Sanofi expects a regulatory decision in the first half of 2026. Sanofi is also pursuing a lowering of age eligibility from 8 years of age to 1 year of age in the approved Stage 2 indication with a PUFA date of April 29th. In addition, TSE is expanding geographically after recent approvals in Europe and China.

Turning to Agenesisbotball, Aeggenis announced the closing of a strategic collaboration with Zitus designed to accelerate global development and commercialization of Botball.

Agenis has initiated a global phase 3 trial evaluating Botval in patients with refractory, unresectable microsatellite stable colorectal cancer.

The trial will enroll approximately 800 patients across more than 100 sites in Canada, France, Australia, and New Zealand.

The phase 2 data are highly encouraging, demonstrating deep and durable responses is as difficult to treat population, underscoring the meaningful benefit observed in patients who have failed standard therapies.

Moving to the next slide, let's look at Palvello's korin rapamycin.

The successful phase 3 trial results in microcystic lymphatic malformations represent a major positive catalyst for ligand this year.

Palvella announced this week that ketorin rapamycin demonstrated a highly statistically significant outcome on the primary endpoint, the key pre-specified secondary endpoint, and ALL4 additional secondary endpoints.

For the primary endpoint, butorin rapamycin demonstrated a +2.13 point improvement on the MLM Investigator Global Assessment Scale.

This is clinically transformative and even more compelling when viewed in the context of a disease where patients currently have no FDA approved treatments.

95% of trial participants were rated as improved, and 86% of patients were rated as much improved or very much improved. Additionally, ketor and rapamycin was well tolerated with no drug related serious adverse events.

A remarkable 98% of all participants who completed the trial elected to continue to receive treatment through the ongoing extension period.

I'd like to encourage our listeners to review Palvella's presentation on its phase 3 results located on the Palvella website. The work Palvella has done has the potential to be transformative, providing a high clinical impact treatment for patients living with this rare disease.

Pavella plans to submit an NDA in the second half of 2026 and is accelerating US launch readiness for this potentially first FDA approved treatment for MLM in a first-line standard of care treatment for this serious lifelong disease affecting an estimated more than 30,000 diagnosed patients in the US.

As a reminder, ketorin rapamycin has been granted breakthrough therapy designation, orphan drug designation, and fast track designation from the FDA for the treatment of MLM.

Now turning to Palvella's development of cutorin rapamycin for the treatment of cutaneous venous malformations, or CVM.

In December, Palvella announced positive Popline results from its phase 2 toIA study for the treatment of CVM.

Palvella recently completed a very successful CVM breakthrough therapy designation meeting with FDA and plans to submit a breakthrough application shortly.

The FDA has also granted fast track designation toqueorin rapamycin for the treatment of clinically significant angiokeatomas.

There are currently no FDA approved therapies for the estimated more than 50,000 US patients diagnosed with angiokeatomas.

Palvella plans to initiate a phase 2 trial evaluating Qor and rapamycin for clinically significant angiokeraomas in the second half of 2026.

Across the two lead indications, there are an estimated more than 100,000 patients diagnosed with either MLM or CVM.

Based on payer research and orphan analog launches, Palvella projects an annual per patient price of $1,000,000 to $200,000 per patient.

At peak, this positions the US commercial opportunity for ketorin rapamycin to reach an estimated 1 to $3 billion in annual sales.

This could translate into a potential 100 to $300 million in peak annual royalty revenue to LIGAD.

We congratulate our partner Palvela on their tremendous recent success and their momentum heading into their first potential FDA approval, as well as important development milestones.

The upcoming year will be a very catalyst rich year for our Palvela partnership.

Next, Silspari continues to perform well commercially in IGANN, and it now represents the largest royalty in our portfolio on an annualized go-forward basis.

Q4 sales in IANN reflected initial tailwinds from two important Q3 catalysts, REMs modification, as well as updated Cadigo guidelines.

Additionally, Renalis, who was recently acquired by Chuuai, announced positive phase 3 results and plans to submit an NDA in Japan for IGAN in 2026.

We believe there could be significant commercial upside if approved in Japan based on population estimates.

While we were disappointed to see that the FDA extended the review timeline for the FNDA for Filspari and FSGS, we continue to believe in the potential of Filspari to make a meaningful difference in the lives of patients living with FSGS, and we are encouraged by Trevir's engagement with FDA, their commitment to continue to work with the agency through the extension period, as well as their continued efforts on commercial preparations.

Moving to the next slide, 02ger is tracking well ahead of initial expectations, and it continues to be the strongest launch in COPD history.

Q4 sales grew more than 40% sequentially over the prior quarter, and the product generated approximately $500 million in sales in its first full calendar year of launch.

Additionally, the National Medical Products Administration of China accepted the NDA for 02vi for the maintenance treatment of COPD for review.

O2Vre is currently only approved in the US and has potential for significant upside from geographic expansion.

Beyond the portfolio highlights we reviewed today, we have a wide range of diversified assets with meaningful upcoming catalysts. Collectively, our commercial portfolio is the strongest it has ever been, and it represents a deep pipeline of potential value drivers over the coming years.

With that, I will turn the call back over to Todd for his closing remarks.

Thank you, Lauren. We are pleased with the progress of our latest development pipeline, specifically the strong trial results of Palvela's Phase 3 MLM trial and the recent new partnering of lasafoxopen with Leona Bio.

We've always had strong conviction around these important late stage programs and are encouraged to see both the clinical development progress of Qorin rapamycin in MLM and to see lasafoxyenne, now backed by a strong investor base under the leadership of a talented team.

When we combine the strong launch momentum we've seen across multiple products in our commercial stage portfolio and build on that with our late stage development pipeline, it's easy to see how quickly momentum can build and begin to predictably compound.

Our strong origination capabilities, our investment team, and our robust investment process are driving meaningful portfolio growth.

Our deal team's ability to identify, access, and create high-quality investments sets S L Y apart.

Thank you everyone for joining us for today's earnings call. I will now pass it back to the operator and open it up for questions.

(Operator Instructions) Thomas Allred, Oppenheimer.

Hey, good morning, everyone. It's Trevor. Congrats on the quarter and, the recent Palvela data. Had a question regarding clinical update expectations for your latest royalty portfolio. So we all know about the big update for Pilsparri and FSGS, but what other clinical updates might we expect for other assets during 2026 that investors might be overlooking?

Thanks, Trevor. I think, in terms of our latest pipeline, it's quite active. I think if you look at it holistically, there's kind of a short list here, but you have Karziva, in the study for US approval, Karziva and Ewing sarcoma, that's with Record ID.

Bo Bell of the genus is in phase 3.

With orchestra, you've got both the AI therapy and virtue SAB trials in phase 3 with our Castle Creek partnership.

They're working on another treatment for DEB, similar to Crystal's drug, called B5 that is in phase 3, and we mentioned, obviously, and significantly discussed the MLM, but quickly coming in behind MLM for Corin, rapamycin at pelvella is the cutaneous venous malformations. Where they read out some new data in December, and then you heard about lasafoxetine today, and we have Tild with ongoing studies in type 1 diabetes that could expand the use of the drug there. So it, it's, we should have a number of robust updates on all of those over the coming, several quarters, and I would just point out that. A significant majority of these have been added into the portfolio in the last, 2. 5 years.

And those efforts are accelerating, so you can expect additional late stage assets to continue to be added into our pipeline so that is kind of core to our business model and will be a key driver for our growth going forward.

Matt Hewitt, Craig Hallum.

Good morning and congratulations on the strong finish to the year. Maybe first up, and this is a question for Lauren. I know that you've been champion with, monetizing, some of the older assets in the portfolio. I'm just wondering if you could give us an update on that and whether or not you see some potential for low hanging fruit, some reinvigoration of that older pipeline.

Yeah, Matt, thanks for joining and thanks for the question. The answer is yes, definitely. So we have 5 to 10 opportunities across the portfolio across the portfolio where we're, very actively engaged at the moment. Some of those would be new investment opportunities for LIGAD. Others are. Opportunities where you know we do have operating capabilities on our senior team in terms of really a lot of depth and breadth of experience scientifically across the regulatory domain and then commercially where we could offer, advice and support to our partners.

And then looking at the balance of the year there's another 10 opportunities on our list where we plan to engage over the next couple quarters. So I imagine that we'll see, publicly another, announcement or two by the end of the year, but it's, I think as an example with Lasa Fox has seen a strategy that's already yielding quite a bit of value to our portfolio and some of those legacy investments that you referenced.

Annabel Samimy, Stifel.

Hi, thanks for taking my question and, congratulations on a strong year. I guess in the last few months we've been hearing a lot more about T yields. It's a low royalty, but it seems like it could be a decent market. Can you talk a little bit more about the larger opportunity that you see and do you have any sense of a peak sales size, and what that can contribute to, ligan given the low royalty?

Yeah, thanks, Annabelle, for the question and thanks for joining.

So, you're right, our royalty on Tyield is on the lower side relative to some of our other partnerships, but you know this is a potentially blockbuster opportunity that Sanofi has. The current indication where they're approved is. In stage 2 type 1 diabetes, which is a little bit complex to sort of digest, and there's a lot of, words associated with that indication, but basically what that means is that they're going out and looking for patients who are pre-symptomatic. So if a patient is diagnosed with stage 1 type 1 diabetes, what they do is they go out and they screen the family members and see if there are any. Patients who may be pre-symptomatic who would be progressing to symptomatic disease and then they treat them with Tel.

Sanofi is doing a fantastic job building out that market. However, it's very difficult, as you can imagine, going out and screening large numbers of these pre-symptomatic patients. So we're continuing to see kind of gradual growth in that indication. The one where they have the commissioner's voucher, that indication is in stage 3 disease and so those are newly diagnosed symptomatic patients. Those are much more accessible commercially just because they're already in the healthcare system and being treated, so commercially that that opportunity is probably. Much larger, Sanofi acquired this asset from Prevention Bio, and they have a lot of conviction around it, and so we're, eager to see the decision on that, page 3 indication at sometime in the first half of this year.

Yigal Nochomovitz, Citigroup.

Hi, good morning. This is Juwan Kim on for you.

Congrats on the quarter and thanks for taking our question.

We were wondering if you could.

Help contextualize the reiterated guidance range given the slight delay for FSGS approval and how much, if anything, did the low end of the range assume for FSGS royalties in addition to continued ICANN royalties.

Yeah, thanks for the que, thank, yeah, thanks for the question. We assumed, relatively, we have a relatively modest, assumption and it is a risk adjusted number on FSGS, going into the, 2026, royalty guide. We did disclose that number. It's in our investor day slides. It's, $4 million in 2026, and obviously at the time we had the January 13th Paduca date, moving it out of quarter, impacts that number, minimally. I believe it is a risk adjusted number. So if it's a, obviously if it's a a a good outcome on. The approval then that that is a de-risk input and it's somewhere north of that 4 million, but it's overall overall FSGS is going to be, we think, a minor minor contributor in 2026. Obviously that becomes more significant and more meaningful as we get out to the later into the later years and. Yeah, so that's the, that's the input on FSGS.

Joe Pantginis, H.C. Wainwright.

Everybody, good morning. Thanks for all the details as usual. So first, maybe for Todd or anyone else that wants to chimes in, chime in, off of your recent analyst day, and combined with your very strong deployable capital, do you have any thoughts, or does it stay the same with regards to any changes or updates toward your selection criteria for potential partnerships, for example, the sizes or anything else?

Hey Joe, thanks for the question. This is Todd. Well, I think that in general as the value of our portfolio grows and it is growing rapidly, the average value per deal that we want to capture will go up proportionately and so just as a matter of kind of functional strategy, you can increase proportionately your deal size. Or you can do more deals. We really like the range that we're in because we're very focused on these high clinical value assets.

Many, a lot of times you can create really significant value. We face three studies that are, in the, 30 to $80 million dollar cost range in total, and that's a very good investment target for us. Where there's a high demand for capital and there's relatively few solutions in terms of structured finance or royalty financing, so we'd like to stay in that space, but on average we are going to be looking for, greater value generation and having that accelerate over time through a combination of maybe slightly larger deals and more deals.

That no, that's really helpful. Thanks a lot. And then maybe a question for Lauren if you don't mind. So maybe you can remind us or provide some detail, and I know obviously get more information for the company, but with regard to the Castle Creek technology, we had a lot of familiarity with that. But I think maybe it's important to remind us or talk about any potential differentiations with regard to Vaijuvec because obviously. For example, any differences in potential surface area addressed or any other sort of differentiation you might want to discuss.

Yeah, great. Thanks, Joe, for the question. So we have a lot of conviction in Defi, which is, the Castle Creek treatment that, as you mentioned, is the same indication as Crystals Vigik. The investment thesis here is that we think it's a validated target. So we're looking at a phase 3 gene modified autologous cell therapy with Castle Creek. The differentiation here is that it's injectable.

So it could expand the body surface area whereas Vudek has a live HSV vector and is applied topically, so they're pretty limited in terms of the accessible body surface area for any individual patient. And we also think that Baijuk has really validated the market here, so they did just under $400 million in 2025 sales. So we think D5 could come in and be a nice complementary treatment for patients with DEB. They have, the vast majority of their body surface areas affected by these really debilitating wounds. And so if you offer patients, a range of treatments where Vivec as an example.

Needs to be dosed on open wounds, whereas these patients have, they develop over time a lot of these chronic wounds that get kind of crusted over and so they're not accessible with a topical treatment like Zyju.

But when you introduce an injectable into the marketplace, then it really expands the treatment options for patients.

Longer-term, there could be a potential to also use this treatment in the hands and feet, whereas patients with DEB they get almost sort of a webbing in between their fingers and toes. It really limits their ability to, perform activities of daily living. So, longer-term that could be on the horizon as well, the really strong team in place at Castle Creek, and so we think that, with the differentiation and a validated target, we're we're pretty optimistic about the trajectory for this one.

Larry Solo, CJS Securities.

Hi, good morning. It's Pete Lucas for Larry. Just a couple of questions on Phil Sparri. Does delay in approval in FSGS have any impact on your 2026 outlook, or can we assume negligible or no expectations and guidance?

Yeah.

It's going to be, thanks for the question. It's going to be a net negligible. It's a relatively small assumption from FSGS in 2026. We did disclose at our investor day that we are, we're assuming $4 million contribution from FSGS in 2026, so relatively minor.

Great, thanks. And can you remind us of the potential market size opportunity in the US for a Filspari FSGS versus IGAN and outside of the US it's been approved in Europe and trials underway in Japan. Can you give us an idea there also of the market opportunities outside of the US?

Go ahead, Lauren.

Sure, thanks for the question. So consensus estimates for Sspari in, IGAN and in FSGS are around a billion dollars, per indication. Just as a reminder, our royalty is 9% here, so that would be a potential of around $90 million royalty revenue to LIGAN for each indication standalone. So FSGS, they're expecting will launch more quickly than IVAN because there are no treatment options. It's a more rapidly progressing disease. The patients are younger and Trevire has really built out all of the commercial or the vast majority of the commercial infrastructure that they. Need they've shared that they'll be adding some sales reps to help cover the pediatric nephrologist, but they already have a lot of the infrastructure in place, so they, they've guided to the fact that the launch, if approved, would probably, ramp more quickly than an IANN.

I think that on the Japan side of things, IANN is quite prevalent in Japan, so there could be a pretty sizable commercial opportunity there, Trevir and then Shidai have not shared anything externally in terms of their expectations there. We'll have to see, if the drug is approved, how the pricing comes in, but we're we're optimistic that there could be some real value to unlock there.

John Vandermosten. Zacks.

Thank you. Jazz is Riley's beat estimates in 4th quarter, and I'm wondering if that was enough to push it into your category of key role to drivers, and then also what are your thoughts on this asset as we look ahead towards the rest of the year.

Yeah, great. So thanks for the question. Riley's is one of the more mature products in our portfolio, so we don't talk about it as much as we do some of the products that we have that are newer to the portfolio in terms of launching and ramping, and a lot of growth, but what we continue to see is real strength in the performance of Riley's and as you've evidenced by the recent, strong quarter that they shared. We don't have a lot of catalysts in terms of inflection points that could drive the sales of that drug up or down. It is one of our key royalty revenue drivers, and we expect that it will continue to be over the coming quarters and years, but probably, nothing on the near term horizon that we see that would, materially drive the sales to grow substantially from here.

Okay, thank you. And looking at PAOs and your equity holding in that asset, do you see that as a source of cash or is that just a good place to to stay as they roll out their portfolio and add new assets?

Yeah, I think, with obviously with a strategic transaction like that where you end up with a real significant percentage in in the company, we're going to have a very long-term view on that as holders we're not looking for liquidity right away and we think there's a lot of upside there as well so overall in terms of our equity strategy, I mean between warrants and.

Legacy investments and things like that, we still have a million shares in Viking, for example. We have had a general philosophy that once these things are mature and at the appropriate time, of course we do look for liquidity and we do see them as a source of cash in some cases.

Got it. And then last question is just, it's just a broader one on the markets at all and all. So M&A was kind of up in the second half of 2,525, and then kind of it's maybe slowed a bit this year and the IPO market has been fairly weak for our space. What, how is that affecting the opportunities that you see?

I think that I mean it's generally I would say an okay market right now and better than it was 2 years ago, for example, but for us, John, in good markets and in bad, I think royalty financing is growing rapidly regardless. It's doubled in the last 5 years.

People are seeing it as much more a mainstream part of their capital structure.

For lack of a better term, there's debt, there's equity, and there's royalty financing available for companies. It used to be, 10 years ago when you would approach a company and offer royalty financing, there was typically, not always, but typically an education process required. Now most of the CFOs and CEOs out there immediately know what you're talking about conceptually and understand how it fits into the capital structure. And they also realize that there's many advantages. I mean, it's not better, but it's different than other forms of financing. So for example, our investments are extremely long-term and they're tied much better to the life cycle of assets within the kind of biopharmaceutical development timelines because we're attached to the assets over time even when they trade hands and so.

There's a lot of advantages to doing this, and obviously at some points if people think their equity is significantly undervalued on a relative basis it can it can look attractive for that reason. So in good markets and in bad we have just found our pipelines to be quite robust. Paul Haddon and the investment team simply have more deals to do than they can possibly do. So we're really culling our pipeline. Of opportunities pretty aggressively to make sure that we're spending our time on things with a high probability of closing that offer, good assets meet all of our asset criteria that we look at and we'll offer appropriate returns as well.

Thank you, and that concludes our question-and-answer session. I would like to thank our speakers for today's presentation and thank you all for joining us. This now concludes today's conference call. You may now disconnect.