Ligand Pharmaceuticals Inc (LGND) 2021 Q1 法說會逐字稿

Good afternoon, and thank you for standing by. Welcome to the Ligand Pharmaceuticals Quarter 1 earnings call. (Operator Instructions)

I would now like to hand the conference over to your speaker today, Mr. [Simon Latner]. Sir, the floor is yours.

Thanks, Rachel. Welcome to Ligand's first quarter of 2021 financial results and business update conference call. All of our speakers for today's call are in separate locations. Speaking today for ligand will be John Higgins, CEO; Matt Foehr, COO; and Matt Korenberg, CFO.

We will use non-GAAP financial measures, and some of our statements will be forward-looking, including those related to our financial condition, results of operations, financial guidance and the impact of the COVID-19 pandemic. Additional information concerning risk factors and other matters concerning ligand can be found in our earnings press release and our periodic filings with the SEC. We undertake no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call.

A reconciliation between the non-GAAP financial measures we discuss and the closest GAAP financial measure can be found in our earnings release issued today.

I'd now like to turn the call over to John Higgins.

Good afternoon, and thank you for joining our first quarter 2021 earnings call. This year is off to an excellent start for Ligand, both operationally and financially. It feels great to be well into 2021 as now, we're really beginning to leverage our acquisitions from last year scientifically, and the U.S. is advancing into a better phase of the pandemic.

As the health environment improves in the U.S., we are seeing it now pick in business activity. The Ligand team across the board has done an excellent job managing the business this past year. And now we see increasing interest for licensing our platforms and expanding work with partners, including with new and existing big pharma partners, who see the value our technologies bring.

Also, I'm very pleased to report business travel is coming back for the leadership at Ligand. It's invigorating to be able to interact directly with our scientists once again across our multiple laboratories in the U.S., especially since we added many new members to our team, through acquisitions during the pandemic.

Matt Foehr will give an update on the business, and I note that each of our major tech platforms is performing very well. We have rebranded our protein expression platform from Pfenex to Pelican. The team of scientists we brought on board with that company is outstanding, and we see promising opportunities for new deals later this year and good progress on some early-stage internal programs.

Our Icagen Ion channel unit is firing on all cylinders. And again, the team driving that platform is A-plus. They're brilliant scientists with great instincts for partner support that fits so well with our business model. Our Icagen team closed a major new deal with GSK a few months ago and continues to deliver superb support to our partner, Roche, for multiple targets. The outlook for Icagen is very promising as we've been investing in internal -- in an internal program that we believe may be up for licensing in the coming months.

Our OmniAb platform has been a big success over the past 5 years and is primed to really flourish now over the next couple of years. More licensing deals coming online, the most advanced, late-stage calendar of clinical and regulatory news and expectations for our first OmniAb-based product royalties beginning later this year.

Five years ago, we started to build our antibody platform. Today, I can say we are very pleased to be a market leader in this space. Antibody research is a primary focus for R&D investment by pharma and big biotech. Significant amounts of money are being allocated to antibody discovery programs for promising medical targets.

We have an end-to-end integrated discovery platform with a deep tech stack built on artificial intelligence and a rich history and foundation of biological intelligence. Our partners get access to what we believe is the world's most advanced antibody repertoires and screening technologies to enable unparalleled discovery of next-generation therapeutics.

As for Captisol, we expect that 2021 will be our largest year ever in terms of sales. After stepping up to support Gilead and the remdesivir consortium last year, our manufacturing work was radically rescaled to provide manyfold higher quantities of Captisol to support demand. The trends with the pandemic are shifting rapidly and forecasting is challenging at this time. Matt Korenberg will go into that more and the factors driving flex to our planning. But nonetheless, we are proud to be serving a vital role supporting this major COVID-19 treatment, and we will be there to support our global partners for whatever they require.

Our thoughts are with those in India and other countries who are now facing the worst of the pandemic.

We acquired Captisol 10 years ago, and it has been an amazing and important success on many levels. In addition to remdesivir, we are proud to note that Captisol is an integral proprietary ingredient in many life-saving medicines.

The outlook for the rest of the year is promising as we see as many as 4 new royalty-bearing partnered products being approved and getting launched. Two are from our OmniAb business and 2 are from our Pelican unit. And as we look to next year, we have growing anticipation for the potential approval of sparsentan from Travere. Given the quality of clinical data Travere announced in Q1, along with the market need and the size of our royalty, we believe this product has the potential to become one of our largest royalty-bearing assets.

And with that, I will turn the call over to Matt Korenberg for a more detailed review of our financial performance. Matt?

Thanks, John. The first quarter of 2021 provided a strong start to the year for Ligand. Total revenue for the quarter was $55.2 million, up from $33.2 million a year ago. With respect to royalties, royalty revenue increased to $7.1 million from $6.6 million a year ago.

The pandemic negatively impacted sales for many pharmaceutical products in Q1, including Amgen's. Amgen reported $251 million of sales for Kyprolis, our largest royalty-bearing asset. These sales were lower than we expected. Amgen commented on their earnings call last week that they experienced negative pressure specifically on their oncology business due to the impact of the pandemic on patient treatments in Q1. But we've read that Amgen and the industry overall expect oncology sales to ramp back up later this year with the success of COVID-19 vaccinations and as pandemic trends improve in major commercial markets.

Captisol sales were $31.3 million in the quarter, and this is up 48% from $21.1 million a year ago. Our Q1 Captisol revenue came in a bit lower than we expected as the business was impacted by the extreme cold weather in the Southern United States, where one of our new Captisol manufacturing sites is located. As a result of the weather, the site paused manufacturing for an extended period of time in February, pushing out production of approximately $12 million of Captisol finished goods.

Our contract revenue in Q1 2021 was $16.8 million compared with $5.5 million a year ago. The 2021 quarter includes strong contract revenue from all our technologies, with approximately $4 million from OmniAb, $3 million from Pelican, $4 million from Icagen, $3 million from Vernalis and $2 million from various new chemical entity, Captisol and other technologies.

While Q1 might be higher than the average we expect for the year, it illustrates the diversity and robustness of our contract revenue line.

Adjusted diluted EPS for Q1 2021 was $1.41 compared with $0.89 last year or an increase of 58%. The strong earnings performance this quarter was in part driven by a large volume of contract milestone payments, which are typically 100% gross margin.

We exited the quarter with approximately $339 million of cash, cash equivalents and short-term investments. This cash balance reflects the repurchase of $104.5 million of convertible bonds during Q1. We now have about $391 million of face value of convertible bonds outstanding.

Turning now to financial guidance. We're leaving our guidance for 2021 revenue and adjusted diluted EPS unchanged. While we're guiding for total revenues of approximately $291 million, we expect the mix of revenue and expected revenue level may fluctuate significantly from our initial expectations, mostly due to evolving demand for Captisol related to remdesivir. The outlook for Captisol sales will likely fluctuate as the year progresses given the highly unpredictable nature of the pandemic both in the United States and globally. In the U.S., successful vaccine rollout was better than expected. And when combined with the high vaccine efficacy has resulted in a reduction in hospitalizations that has led to lower demand for remdesivir.

In addition, based on our discussions with external experts, we now estimate minimal government stockpiling of remdesivir around the world. Our initial expectations for 2021 included government stockpiling as we described at our Analyst Day last year.

On the flip side, the urgent need in India has significantly increased demand from the consortium partners that are manufacturing remdesivir for that region. Given this highly dynamic environment, we've seen rapid changes in evolution of demand signals. And accordingly, we may update total revenue guidance as the year progresses, either higher or lower.

Despite these uncertainties, we are closely monitoring all of our revenue, expenses and income, and we plan to work to adjust accordingly under the various scenarios. We believe we can deliver our outlook for adjusted diluted EPS of approximately $6.15 in these scenarios.

With respect to quarterly pacing, as discussed on our call -- our last call, we expect our royalty line will follow the typical trend with a lower Q1 and an increasing each subsequent quarter through Q4. Our expected pacing for Captisol quarterly revenue has evolved from previous guidance. Q2 looks to be significantly higher than Q1 as a result of the extreme weather issues I mentioned. We currently expect Q2 Captisol sales will be approximately $50 million. And depending on production, timing, export logistics and deliveries, sales for the quarter have the potential to be even higher.

Between Q3 and Q4, we expect the second half of the year will be more heavily weighted to Q4, but we should have greater clarity on that when we report our second quarter results.

Lastly, our contract revenue for the remainder of the year is expected to be realized about 25% in each of Q2 and Q3 and 50% in Q4. This is largely driven by the expectation that the $6 million Travere NDA milestone will be earned in Q4.

Regarding strategic M&A, we continue to maintain an active evaluation of M&A opportunities as well as our capital deployment strategy overall. Our main focus now is on assets and technology that will further bolster our best-in-class OmniAb antibody platform.

Just before I turn the call over to Matt Foehr, I'll direct listeners to review our Q1 earnings press release issued earlier today and available on our website for a reconciliation of our adjusted financial results with GAAP financial results.

With that, I'll turn the call over to Matt for some comments on our portfolio and pipeline. Matt?

Thanks, Matt. This afternoon, I'm going to review the status, plans and recent developments involving a couple of our core technology platforms, starting with OmniAb. I'll then provide updates on certain partner programs with major events expected later this year and also update plans for our Captisol-enabled iohexol program.

OmniAb is our most valuable platform technology, and it continues to offer a powerful combination of advanced antibody discovery tools. Partners who license our OmniAb technologies are supported by our team of respected scientists and a track record of quickly discovering high-quality antibodies. Two OmniAb partners have submitted applications for approval, and we expect both regulatory decisions this year, which, if approved, we believe will be the first of many for the platform.

Specifically, C-Stone Pharmaceuticals announced recently that their investigational OmniAb-derived anti-PD-L1 antibody, sugemalimab, has been granted breakthrough therapy designation by the China NMPA for the treatment of patients with relapsed or refractory extranodal natural killer T-cell lymphoma. Sugemalimab has also been granted orphan drug designation for the treatment of T-cell lymphoma and breakthrough therapy designation by the U.S. FDA back in October of last year.

An NDA for sugemalimab is under review at the NMPA for Stage 4 nonsmall cell lung cancer and C-Stone has said the expected determination with respect to this NDA in the second half of this year. As a reminder, C-Stone and Pfizer formed a strategic alliance around the development and commercialization of sugemalimab in China.

The other OmniAb program I'll highlight briefly today is zimberelimab, which is an investigational OmniAb-derived anti-PD-1 monoclonal antibody that was discovered using OmniRat. Gloria Pharmaceuticals filed its NMPA in China for recurrent refractory classical Hodgkin's lymphoma with approval also expected this year.

In addition to the precommercialization regulatory work [Lori] is doing, Arcus Biosciences is conducting Phase II studies, including zimberelimab, in first-line metastatic nonsmall cell lung cancer in combo with an anti-TIGIT antibody and an adenosine receptor antagonist and also Phase III work that started in recent months in combination with an anti-TIGIT in PD-L1 positive locally advanced or metastatic nonsmall cell lung cancer in an open-label setting.

Arcus and Gilead formed a 10-year partnership last year to co-develop and co-commercialize Arcus' product candidates, including zimberelimab. We continue to actively innovate and invest in our OmniAb platform with internal R&D and technology development through collaborations with leading academic centers like the Scripps and Wistar Institute and through targeted bolt-on acquisitions.

Our partners place considerable value on the work we do, and they understand the importance of quickly and efficiently discovering fully human antibodies in a variety of formats. Our OmniAb technology is differentiated by leveraging artificial intelligence or AI capabilities, combined with our deep history of novel genetic engineering and the biological intelligence or BI of our proprietary transgenic animals.

The BI elements allow us to operate a highly efficient business model in serving our broad partner base. Our best-in-class technology stack is enabling our OmniAb business team to secure new license agreements with expanded economic terms. We see a trend forming in the industry toward more end-to-end discovery partnerships and believe that the tech stack we have assembled and developed is ideally suited to meet those needs.

We have an updated and aggressive investment plan for OmniAb in 2021 given exciting opportunities that our recent acquisitions have presented. We're adding staff and plan to increase our laboratory footprint at our facility in Emeryville, California as we look to consolidate our Menlo Park and Emeryville operations into a single facility here in Emeryville.

We're making these investments in the technology for the long term and in preference to single asset types of investments that we generally invested in previously.

As John mentioned, during the quarter, our team rolled out new branding for the protein expression technology platform that we gained through the Pfenex acquisition last year. And this platform is now known as the Pelican Expression Technology. Our Pelican Expression Technology, which is a differentiated platform in the industry leverages proprietary strains of pseudomonas fluorescence to express complex antibody derivatives and other engineered next-generation protein modalities.

It's known and understood as a technology that makes the manufacturing of complex drugs possible. These complex drugs have the potential for greater specificity, improved side effect profiles and ultimately successful therapeutic outcomes. And these characteristics make this an area of substantial biopharmaceutical development.

We're leveraging a rich history with the platform and with high throughput screening technologies and proprietary computer-driven automation to identify robust production strains very quickly. We believe that our CMC development prowess and our state-of-the-art analytical capabilities position us very well to be a leader in the space for some time to come. We believe the Pelican Expression Technology delivers significant competitive advantages to our partners, including the speed with which they enter into clinical production, increase product quality and lower cost of goods.

Our platform has a success rate of more than 80% in producing proteins that have failed in traditional host systems like those that are based on E.coli or CHO cells. For anyone looking to get a deeper understanding of the technology, I'd encourage you to visit our new pelicanexpression.com website. Pelican is supported by a robust patent portfolio in the areas of biosimilars, microbial toxins and vaccine antigen production as well as a growing number of patents that cover the technology itself, including promoters, secretion leader sequences, methods for high-throughput screening, protein expression, strain engineering and marker systems.

Together, there are more than 200 issued patents worldwide and nearly 50 pending applications related to the Pelican technology. We were pleased to see Merck's updates last week on the V114 program and expect approvals this year for that program. V114 is the next-generation pneumococcal vaccine utilizing Pelican's CRM197 and containing 15 serotypes, which is 2 more than Pfizer's Prevnar 13.

We're also excited about Jazz Pharmaceutical's recombinant Erwinia asparaginase, which beautifully illustrates the value of the Pelican technology. For those who may not know the space, there's been a history of shortages of Erwinaze, which is an important part of the treatment regimen for patients with ALL. Our partners at Jazz sought to develop a recombinant Erwinia asparaginase to provide reliable and high-quality supply, and the Pelican technology facilitated exactly that.

Jazz submitted a BLA to the FDA in December with potential approval and launch later this year, and we look forward to further updates from them. I also want to highlight one other promising late-stage asset in our portfolio, and that's sparsentan with Travere. In the first quarter, Travere announced that sparsentan achieved its prespecified interim focal segmental glomerular sclerosis partial remission of proteinuria endpoint or FPRE in the DUPLEX Phase III study after 36 weeks of treatment.

Sparsentan demonstrated a statistically significant response on FPRE compared with the active control irbesartan with a p-value of 0.0094. Travere also indicated that preliminary results from the interim analysis suggested that sparsentan was generally well tolerated and showed a comparable safety profile to irbesartan. Based on the data from the interim analysis, Travere intends to pursue submissions for accelerated approval of sparsentan for FSGS in the second half of this year.

Additionally, in the first quarter, the European Commission granted orphan designation to sparsentan for the treatment of IgA nephropathy, which is a rare kidney disorder and a leading cause of end-stage kidney disease. Travere is conducting an ongoing global pivotal Phase III clinical trial called the PROTECT trial to evaluate the safety and efficacy of sparsentan for the treatment of IgA nephropathy. And Travere has stated that it anticipates top line interim efficacy data coming up fairly soon in the third quarter of this year.

And I'll finish off this afternoon with an update on our internal Captisol-enabled iohexol program. We've had inbound partnering interest in this program. And as we've assessed that interest, we recently decided to take a pause on the start of the clinical trial that we plan to run this year as we realize a potential partner might have their own views as to specific elements of the design of the trial and other components of later-stage label-enabling product development.

We don't plan to initiate the trial at this time as we assess the potential partnering or future partner involvement in any downstream clinical work, and we'll plan to update more as plans form around this asset.

And with that, I will turn the call back over to the operator for questions. Operator?

(Operator Instructions) Our first question comes from the line of Joe Pantginis from H.C. Wainwright.

A couple of questions. First -- and Matt, thanks for the clarity on Captisol and everything that's going on with that. So with that said, I just wanted to -- let's go back to the core aspect of the business as you've been seeing significant growth even before the remdesivir opportunity.

So how can you sort of describe your ongoing business development and the types of new deals that you might be able to bring in to continue the growth that it's seen?

Yes, Joe, from a -- you're speaking from a Captisol perspective. I mean, candidly, the interest in Captisol in terms of inbound interest, sample requests, new licensing has really never been higher. We've -- the visibility of a product like Veklury and the impact that Captisol has had, it's clearly extremely important, right? Veklury is playing a critical role as a standard of care. It's treated approximately 4 million patients in the course of about a year. That sort of scientific visibility drives a lot of interest from the scientific community. And we see a number of new partners reaching out to us who are interested in Captisol, largely driven by, one, its global reach, the validation of the science, the intellectual property portfolio we've built up over many years. The drug master files, which have been enhanced substantially over the last year, not only from a safety database perspective, but also from a manufacturing perspective now that we have 4 manufacturing sites spread around the globe, including one here in the U.S. for final step manufacturing. And it's really that reproducibility, quality, scale. All of those things continue to create a lot of visibility for the platform.

Got it. That's helpful. And then, Matt, I'll just stay with you then. Hopefully, I'm not getting too much into the weeds here, but another one of your partners is really starting to gain visibility with their programs. And that's Sermonix. So I was just curious if you could just give a brief update on that because lasofoxifene, obviously, was developed for something different originally, but now has a cancer program. I was just curious if you could give an update on the status and maybe 2 seconds on the mechanism by which efficacy could be seen in a cancer setting.

Yes. Yes. Thanks, Joe. You're right to highlight it. Lasofoxifene is a program that really has a rich heritage at Ligand, back to our early discovery days and has a large database of data behind it. We partnered it with Sermonix, a very nice licensing deal largely because of the rich heritage and the data that have been generated over many years.

It's a -- just a background. It's a potent selective estrogen receptor modulator, or SERM, And the team at Sermonix has been making fantastic progress progressing that quickly through trials in metastatic breast cancer. They also announced a partnership with Lilly, and so they're progressing some trials with Lilly as well. So we're continuing to keep an eye on that and cheering them on. And you're right to bring it up because it's a program that our science team is actually very excited about and sees a lot of potential promise and looks forward to the pending data.

Our next question comes from the line of Larry Solow from CJS Securities.

Clearly, a bunch of moving parts. Can you maybe -- just on the outlook, and it sounds like -- just to clarify. So Captisol, it sounds like the narrative there is just maybe moving in different directions a little bit, up and down. But overall, are you still confident in sort of hitting that $200 million number? Or does it seem like -- or I'm more reading that the range could be much lower than $200 million or maybe over $200 million. It seems like there's just more volatility around that in the short run. Is that fair to say?

Yes. Yes, Larry. I'll add a comment, and then Matt Korenberg can double back on some of his remarks. Yes, your summary is correct. The last really 6 weeks or so has been a period of partly enormous success with the vaccine rollout, the efficacy rates. Now I'll say the abundance of vaccine availability, it's really a positive for getting this pandemic under control, at least in the U.S. and some other major markets. That is impacting decisions, what we're hearing. We're talking to experts, it's impacting the decisions around stockpiling. And while stockpiling for antivirals is absolutely a strategy we've seen it deployed in other cases. Here, if there's an abundance of vaccine, the efficacy is that high. The focus is more on treatment, on treating. And what we are seeing is lower stockpiling outlook right now.

That's offset by India, a few other markets where, frankly, the instance rates is skyrocketing. And we are seeing a very, very meaningful pickup of demand from our consortium partners. So these are a bit of an offset. They're happening at the same time, literally the last 6 weeks or so, just since the end of last quarter into April. And we're processing. As Matt said, our guidance is unchanged. We feel good about the business. Q1 royalty is a little below expectation. We think it's going to come back. Partnering revenue is meaningfully higher for Q1, and we see that trend continuing. And Captisol, again, I think we need more time to really square up on exactly where we'll land this year. But that is our outlook right now.

Right. Okay. No, and it sounds like -- just to touch on that, it sounds like on the flip side, your contract revenue, although hard, I know some of that clearly is timing. I know you don't guide to the quarter, but that seems like maybe that's ahead of the pace.

Matt? Yes. Matt, do you want to comment on that?

Yes. That's right, Larry. We -- as we said on these calls generally that there's a portfolio of contract payments and events that are happening at any one time. And we're always trying to give you and investors a window into what we think is going to happen in this year and a probability adjusted view of that.

And early on this year, we've had a lot more success than the averages would say. And so the first quarter came in a little higher, and the rest of the year looks like it's still on track. So at the moment, it does look like there's some nice upside from contract payments, but it's offsetting a little bit some of the comments that John made about the other business, other parts of the business. But right now, overall, the package still looks quite strong.

And with Kyprolis, and obviously, the main driver of royalties, I think, down 10%, just less multiple myeloma patient starts, I guess. But unfortunately, these patients don't go away, right? So it's not like you're missing a haircut. I mean these patients have to either eventually, hopefully, for their sakes, get back to the doctors. And you would think that would start to ramp up, especially with most of -- a lot of other medical things are coming back. I kind of find it strange that, that piece where you think would be one of the most important ones for patients is not coming back so fast. Any thoughts to that?

Yes. No, good comments. The last 5 days has been very helpful, I think, obviously, for analysts, for us. We're monitoring this closely, but a lot of earnings call and our observation, importantly, we got the royalty report when they announced from Amgen. But big pharma, big oncology drugs, last week, the analyst report, the earnings call, it really surprised investors. The performance off of these major products was considerably lower than the Street expected. It is -- it appears to be uniformly explained by low patient visits in January and February, again, the worst days of the pandemic for the U.S. and other major markets.

And so there's a lot of consistency in Amgen, and these other companies were following other analogs that might read out in the markets are saying, Q1 was off. Here's why. But to your point, the disease persists, the life-threatening nature of the cancer and these patients do need their therapies. The markets are recovering, restrictions are being lifted and those markets are coming back.

So while it was a surprise, a bit of a disappointment last week, we were all processing, the market seems to be now recovering very nicely. Those stocks are coming back, and people realize, this is really a blip. At least that's kind of the reaction that we're monitoring.

So accordingly, while we may have given up a bit of revenue in Q1, we do see our trends coming back. And partly the growth of the core brands, even [Melinta] and Kyprolis, but also the potential launch of new products by year-end, again, all that we feel good about.

Got you And if I just may slip in one more question Thanks for the update on the on Pfenex or Pelican on Merck and Jazz, your 2 large partners. Any update on teriparatide and the biosimilar to Forteo? Is that something we might hear some news about during 2021?

Yes, Larry. So with regard to teriparatide. So Alvogen generated positive human factors data for the last remaining trial that needed to be run. That was submitted to the FDA in January. And we obviously are in close contact with Alvogen and have a very collaborative relationship with them. The FDA has confirmed that the review is in progress and that they will "endeavor to complete the review in a timely manner." Again, there's no PDUFA date for this, but it's actively under review at the FDA.

Our next question comes from the line of Jacob Johnson from Stephens, Inc.

This is Mason on for Jacob. Just 1 or 2 quick ones for me here. First, looking at Pfenex or now Pelican, for the $33 million in revenue that was expected to come from this platform in 2023. If you could, is there any color you could give us in terms of their top 4 products? Color on maybe if you had to rank order these top 4 products, which was going to contribute the most down to the smallest amount?

Mason, thanks for the question. We continue to think that the Pelican business is going to be a significant contributor both this year and long term. The breakdown of that, we didn't give those numbers specifically. But generally speaking, you can think that the Serum Institute vaccine in India has already launched. And so we're already generating royalty revenue from that program.

The Jazz program that Matt Foehr talked about on the call already, we've got some milestones coming in from that program through the BLA filing but also if and when it gets approved.

And then similar on the Merck vaccine program, both the Jazz and Merck program, both companies have said they intend to try and launch this year in addition to successful approvals this year. So we'll get some royalty contribution there.

And then lastly, on the Alvogen teriparatide program. Without a TE approval, they'll continue to ramp their sales and prescriptions there. But with the TE approval would accelerate both the pace of revenue on the royalty side, but also there's some milestones tied to the approval there.

So those are the big 4 contributors, but there's a lot of work being done on behalf of partners, other than those 4 as well that's generating contract revenue for us. So it's kind of a mix of all of the above.

Got it. Just one more. Understanding that 2020 was a pretty active year for you guys on the M&A front. As we look forward and more of the drug pipeline continues to shift towards biologics and as we think about long-term capital allocation, would you think we'd continue to see biologics as an area of focus for capital deployment?

Yes. I think that's a good way to summarize it. But I think generally speaking, we're focused on enhancing the technologies across the Ligand platform. But I think, as I said and Matt Foehr referenced in his comments as well, adding technology to the already kind of industry-leading tech stack of OmniAb will be important for the business as we go forward.

And so there's certainly a focus on that area. And obviously, that's directly bolstering the antibody space. So generally speaking, I think you're kind of right in your thinking about focus.

Our next question comes from the line of Balaji Prasad from Barclays.

So just a couple of pending for me. Firstly, on sparsentan, can you help us think about the longer-term value of this program after the Phase III data which came out? And are you still like anticipating potential 2023 royalties of anywhere between $10 million to $20 million? One.

Secondly, on Captisol, a lot of color but I just want to understand if there is any variations in economics for Ligand, based on whether you sell it to Gilead or its licensing partners on (inaudible) and the reason I'm asking is to try to understand the upside potential for the $200 million that you have guided to and reaffirm now in light of potential stockpiles, which could crop up based on what's happening currently.

Thanks, Balaji. Yes. So on sparsentan, we gave some guidance on sparsentan on the last couple of calls. And nothing's really changed from our guidance post an approval. We've surveyed the research communities views of the program. And it does look like they still have in that $10 million to $20 million of potential royalty intent in 2023, 2025 or so number of -- close to $400 million, $500 million of end user sales, which translate to $35 million to $45 million of royalty to us.

Ultimately, I think folks see the product peaking somewhere between $500 million and $1 billion on the one indication. And then if both indications are approved, that's FSGS and IgA nephropathy, then potentially exceeding $1 billion over time. And at a 9% royalty, that's upwards of $100 million of royalty for Ligand. So obviously, a very important product. And we're excited to see the continued progress there.

Turning to Captisol. Generally speaking, we haven't disclosed specific economics for any of the partners. But I think what we've said is that on average, the economics to Ligand are about the same across the universe of partners that are buying Captisol for use with remdesivir. So it's really more of a question of demand and need. And we've seen -- as we -- significant increases in the demand out of India over the last 2 or 3 weeks. And in the U.S., the demand is going the other direction. So it's offsetting week-to-week even -- it's incredibly dynamic. So we are monitoring it very actively, and we'll keep everybody updated.

If I could just squeeze in one more question. I saw that recently that Ligand and Lupin settled patent suite on EVOMELA. And I was just trying to think of the implications of this and see if there are any other major patent challenges that we need to be aware of from Ligand's perspective.

Yes. Yes, Balaji, you're correct. The court documents disclosed that Ligand and Lupin settled the patent case over EVOMELA. Terms of that are undisclosed. And generally, we'll update on those items further when we file our Qs as well. But that's pretty much the update we can provide there given the terms of the settlement.

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

Maybe the first one, and this might be best for Matt Foehr. Last year was a record year for Captisol inquiries and samples. And I'm just curious, how are those discussions going? The conversations that you started having last year, are you seeing some of those initial trials or samples turning into clinical trials? Or maybe an update there?

Yes. Thanks, Matt. Yes, no doubt, the visibility that's been created around the Captisol technology, as I was describing earlier, continues to bring new potential partners to us and folks who know they've got compounds that have solubility or stability issues.

They take a lot of different forms, right? Sometimes, sample requests can take a while to translate into progressing through a development program. Sometimes, folks know exactly what they need and can jump right into clinical trials. So there's a lot of variety and texture there. But overall, we continue to see very strong inbound interest, a lot of diversity of partners that we're shipping to. Increased diversity in the types of programs they're pursuing, not only just injectable drugs but inhaled drugs and intranasal gel caps, topical forms, a whole variety of forms that partners are pursuing, which is also really a testament to the scientific work that our teams put in and the safety database and technical database that's been built up over time.

That's great. And then maybe one regarding the Captisol-enabled iohexol. Thank you so much for the update on that. I'm curious, how long do you anticipate giving these partners to make a decision? Obviously, I think the expectation or the hope would be that if you didn't get that partnership signed, you could get that through a Phase II and potentially launch and run that program yourself. But obviously, if you're going to have meaningful dialogue with partners, you give them some time. I'm just curious how long that time might be.

Yes. Matt, thanks for the question. Deals are always dynamic and every deal is a little different. But I think, generally speaking, we would anticipate a couple of months at least to figure out where the partners are going to want to go and if they're going to want to move forward with a trial similar to how we designed it or different -- or move forward at all.

So I think on the short end, it's a couple of months. On the long end, it could drag out. But generally speaking, I think it's several months.

Our next question comes from the line of Scott Henry from ROTH Capital.

Just a couple of questions. First, on the royalty line, would you expect second quarter to be an improving quarter or all the way back to normal already? I certainly would expect second half to be at normal rates, but just curious how you think about second quarter, if you have any comments on that.

Yes. Thanks, Scott. Look, it's hard for us to say exactly, but the commentary that we're seeing out of many of the large pharma partners that are marketing products that are not necessarily tied to our royalties and also some that are tied to our royalties, it seems that the messages they're trying to deliver is that patient demand is back or getting back and that they expect that missed patient visits in Q1 and early Q2 should be made up in the back half of the year.

So I think at a minimum, we'd expect a trend to increasing quarterly numbers. But some of the comments could certainly be interpreted to anything missed will be made up in the back half of the year, which is why you've seen a lot of these larger pharma companies perhaps missing a bit on Q1 but not changing guidance for the year. So at the moment, that's our hope and expectation.

Okay. That's helpful. And then could you remind me of what the sparsentan -- what amount the sparsentan milestone is in Q4?

Yes. It's very -- it's like just a smidge under $6 million, $5.99 million. It was disclosed a couple of years ago in a filing by both [drenatrophin] and then also us. So it's out there specifically to the dollar.

Okay. Great. And then final, just clarification. The 2 approvals in China, I believe the C-Stone wanted to expect it in the second half of '21. have you given any sort of -- I realize there's not PDUFA dates for these, but any target for the Gloria approval? Is that also second half '21 expected...

Yes. Yes, Scott. It was -- you're correct, C-Stone is anticipated to be in the second half of the year. Gloria's NDA was accepted on February 18, 2020. So that's when NMPA confirmed acceptance of the NDA. So difficult to say exactly when the timing will be, but I think, generally, folks are anticipating to be second half of the year.

Our next question comes from the line of Dana Flanders from Guggenheim.

My first one was just on the biosimilar opportunity for you guys on Forteo in Europe. Just wondering how competitive of a market is that? I know in the U.S. you have the potential to be exclusive for some time. So just trying to think of the relative contribution of Forteo, kind of U.S. versus ex U.S. or versus Europe.

And then just my second question. Can you remind me, is the generic consortium, how tight is that to India? And wondering if your Captisol and remdesivir is being used in other kind of emerging markets, where we're seeing a spike in cases and the potential for that?

Yes, Dana, I can comment on the consortium, and Matt K. may want to comment on the Europe and Forteo.

So the consortium, actually, it not only -- the members of the consortium not only supply India but 127 other countries as well, most of which are low- and middle-income countries that obviously includes India. So they're obviously supplying other countries as well in addition to India.

Yes. Thanks, Matt. And Dana, on the Forteo or teriparatide biosimilar opportunity, it's a good question, important to point out that the product rights that we hold through Pelican and now through Alvogen and others are actually worldwide rights. So we do have the potential to generate royalty or profit sharing around the world.

I think as folks probably know, the environment outside the U.S. is more dynamic. There's country to country and region to region. There's many biosimilars already approved in lots of different territories.

In Europe, specifically, I'd say that's probably a positive that most of the territories already have approvals, and our products are launching. But the competition in those markets make the opportunity for us a lot smaller.

Probably the second-largest opportunity for us outside the United States is actually probably in China, where the product is partnered there and our partner is moving towards approval. And then obviously, the U.S. will be the largest of the 3 general regions between U.S., Europe and Asia.

There are no further questions at this time. Presenters, please continue.

Thank you, operator. Appreciate it. Appreciate people's turning out today and questions.

It's exciting to be in 2021. We talked about the acquisitions that were foundational in fortifying our OmniAb business, expanding our technology offering. And we're really pleased to see the integration is going well.

We look forward to updates throughout the year. We are at a few virtual conferences coming up early June. We'll be at Craig-Hallum and Jefferies. And then in July, we'll be at the CJS conference. So thank you very much. We appreciate you tuning up.

This concludes today's conference call. Thank you for participating. You may now disconnect.