Thank you for joining us. My name is Benjamin, and I will be your conference operator today. I would like to welcome everyone to the Ligand First Quarter 2024 Earnings Webcast. I will now turn the call over to Michael Zhang from Investor Relations. Please proceed.

Hello, everyone, and welcome to our earnings call for the first quarter of 2024. During the call today, we will review the financial results we released after today's market close and offer commentary on our partnered pipeline and business development activities, after which we will host a question-and-answer session. Our earnings release and link to the webcast of today's call can be found in the Investor Relations section of our website at ligand.com. Participating on the call today will be our CEO, Todd Davis, our COO, Matt Korenberg; our CFO, Octavio Espinoza, our Senior VP, Investments and Business Development, Paul Hadden and our Senior VP of Clinical Strategy Investment, Dr. Karen Reeves. This call is being recorded, and the audio portion will be archived in the Investors section of our website. Today on our call, we will make forward-looking statements regarding our financial results and other matters related to the company's business. Please refer to this 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 currently available information. Ligand serves 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 Ligand filed with the Securities and Exchange Commission, including our most recent Forms 10-Q and 10-K. With that, I will now turn the call over to Todd.

Thank you, Michael, and welcome, everyone, to our First Quarter 2024 Earnings Call. I'm pleased to report a strong start to 2024. We continue to deliver on our strategy of enabling the clinical development of high-value medicines by entering well-structured financial and licensing partnerships. I'm happy to say that over the last year, we have executed on this strategy, which we expect will propel Ligand into the next stage of growth. I'm excited about our prospects. Slide 3 summarizes our financial and portfolio highlights for 2024, some of which have already come to fruition in the first quarter. To recap, here's how we have supported our growth strategy so far this year and the outlook that we see for the remainder of 2024. First, we entered the second quarter with a strong balance sheet and a rich funnel of investment opportunities. As of March 31, we had $311 million of cash and investments, including our holdings in Viking Therapeutics stock. We are pleased with this balance sheet and expect to generate an additional $60 million in cash from operations in the remainder of the year. Adding this to our $75 million revolving credit facility capacity, we are in a strong financial position and able to continue execution on our strategy. In addition, we are reiterating our 2024 financial guidance as well as our longer-term outlook. Over the next 5 years, we see a royalty revenue CAGR of over 20% and an adjusted EPS CAGR exceeding 25%. This growth projection is driven by 3 asset groups: our current commercial assets, our existing portfolio of development-stage assets and the new assets that we add into our portfolio through technology licensing and our investment activities. With the announcement of Janice's investment this morning, we have added more than 10 assets into our portfolio since mid-2023 when we began execution on this strategy. This is why we have significant confidence in our ability to deliver on our long-term financial growth objectives. Octavio will provide more detail around our financial performance for the quarter and the outlook for the year. Second, we announced the creation of Pelthos Therapeutics and the appointment of Scott Plesha to the role of CEO. In addition, we established a Pelthos Board of Directors with the main goal of making Zelsuvmi commercially available by the end of this year. We believe this product will bring significant improvements to the lives of patients, living with tremendous unmet needs. Karen will provide a more detailed update. But just as a reminder, on January 5, 2024, the FDA approved Zelsuvmi as a first-in-class medication for the treatment of molluscum contagiosum in adults and pediatric patients, 1 year of age or older. You may recall that we purchased 100% of the Zelsuvmi rights as well as rights to the broader nitric oxide platform and its additional clinical assets by navigating Novan's restructuring process in 2023. Third, we see important portfolio developments on the calendar for this year. Most recently, I want to highlight that in April, our partner Travere Therapeutics gained European Commission conditional marketing authorization for Filspari for the treatment of adults with primary IgA nephropathy. We also have several other key catalysts, including the potential FDA approval of Merck's V116 and Verona's ensifentrine, both with PDUFA dates in June. Turning to Slide 4, we will discuss Ligand's strategic differentiation. We are a high-margin biopharmaceutical business creating strong cash flows with a predictable and high rate of growth. We are aggregating royalties and targeting late-stage development assets that are well characterized by data and offer superior risk-reward. There is a high demand for capital, and we are able to invest selectively with significant advantages with regard to information asymmetry. We expect superior outcomes on our ability to handicap products and their probabilities of success. With the 2023 restructuring changes and now focusing our capabilities into our investment channels, we have created a high-margin, high-growth business with lean operations and predictable steady future growth. Turning to Slide 5, we will cover our royalty revenue outlook. The first quarter was an excellent start to the year for Ligand in terms of our financial performance, continuation of our core strategy and investment activity. With these elements, we look forward to a strong and productive 2024. With the addition of 7 new assets from Agenus into our curated portfolio, we continue to create more upside in Ligand's portfolio. We continue to expect to meet or exceed our longer-term outlook provided at Analyst Day. We've spun out the Pelican platform to create Primrose Bio, acquired the nitric oxide platform from the Novan restructuring, which contains multiple programs, and now created Pelthos Therapeutics to launch the lead program, Zelsuvmi, which is now approved for molluscum contagiosum. All this has occurred in the last 10 months. Paul Hadden is joining us today and will speak next to cover today's announced partnership with Agenus.

Thank you, Todd, and good afternoon, everyone. Turning to Slide 6. We are excited about the Agenus investment, which will deploy $75 million upfront with an option to invest an additional $25 million. This investment is unique in that it combines our team's strong ability to value partnered clinical-stage royalty assets while also supporting promising clinical stage programs using royalty structures. This nondilutive capital infusion is exactly the type of partnership we hope to bring to other forward-thinking and creative biopharma companies like Agenus, who have high-value clinical assets and strong operational teams. The Agenus investment significantly increases Ligand's portfolio exposure to the next generation of immuno-oncology or IO for short. Our $75 million investment will provide us access to economics on 7 IO programs. The IO category seeks to bring life-saving therapies to patients with terminal cancer. The IO category includes multibillion dollar blockbusters such as Yervoy, Opdivo and Keytruda. Agenus; BOT/BAL is a compelling next-generation I-O combination therapy, utilizing the same mechanistic pathways as those blockbuster drugs, namely CTLA-4 and PD-1, seeking to offer significant improvements in both efficacy and safety. Dr. Karen Reeves will profile BOT/BAL in more detail, but suffice it to say, our diligence team was impressed by BOT/BAL's clinical program in highly refractory colorectal cancer patients as well as other solid tumors. The other 6 IO programs are partnered with primarily large biopharma companies, who have deep oncology experience and franchises. These 6 partner programs offer Ligand future potential royalties in the low single digits as well as over $400 million in potential milestones. Our investment team, which has significant healthcare domain and royalty investing experience, spent considerable time with the Agenus team during our confidential due diligence process, including manufacturing site visits to Agenus' Emeryville facility. Our team's diligence revealed excitement among key opinion leaders for BOT/BAL and the value it could deliver to patients and their families. By expanding the investment to the additional 6 partner programs, we diversified our risk but also our exposure to this innovative category of therapeutics. Agenus has the ability to raise an additional $125 million in the same structure, creating a very nice additional nondilutive capital option for Agenus. Turning to Slide 7. The Agenus transaction illustrates the type of opportunities we are looking for in our investment criteria. We have near-term potential cash flows with a potential accelerated approval for BOT/BAL and potential near-term milestones from the partnered programs. The most recent clinical data referenced in Agenus' April press release for BOT/BAL shows durable responses in a patient population that has extremely limited treatment options. There is significant royalty duration on each of these 7 assets, far into the next decade by virtue of both patents and biologics exclusivity. Ligand has good structural alignment with Agenus, who retains a significant majority of economics in BOT/BAL and in the partnered programs where oncology-focused and promising potential of highly innovative targets continue to provide enthusiasm for partners to invest in bringing these treatments to market. Ultimately, this yields an attractive risk-reward profile for Ligand and provides nondilutive capital at a key juncture for Agenus to advance their BOT/BAL program.

Thanks, Paul, and thank you, Todd, for the earlier introduction. As Todd mentioned, I'll be touching on a few of our pipeline programs, namely Zelsuvmi, Filspari, ensifentrine and V116. But first, I'd like to just make a few comments on today's Agenus announcement. Regarding Agenus' BOT/BAL, this is an exciting program, and in my view, the potential impact on colorectal cancer is very promising. Approximately 900 patients have been treated with BOT/BAL in clinical trials across 9 different difficult-to-treat solid tumor cancers. The novel therapeutic regimen has demonstrated the potential to be combined with chemotherapy and other standard of care therapies and as an immunotherapy only combo in colorectal cancer, one of the most prevalent solid tumors globally. In April 2023, Agenus was granted Fast Track Designation from the FDA, for the investigation of the BOT/BAL combination in patients with metastatic relapsed/refractory microsatellite stable, CRC with non-liver metastases. Botensilimab is an investigational, multifunctional, anti-CTLA-4 immune activator designed to boost both innate and adaptive antitumor immune responses. Its novel design potentially leverages mechanisms of action to extend immunotherapy benefits to cold tumors, which generally respond poorly to standard of care or are refractory to conventional PD-1 CTLA-4 therapies and other investigational therapies. Botensilimab potentially augments immune responses across a wide range of tumor types by priming and activating T-cells, down-regulating intratumor regulatory T-cells, activating myeloid cells and inducing long-term memory responses. Okay. Let me move on to the next slide and focus now on Zelsuvmi. Zelsuvmi approved by the FDA on January 5, 2024, and is a first-in-class nitric oxide releasing product for the treatment of molluscum contagiosum, a highly contagious viral skin infection, predominantly affecting children with no other approved at-home treatment. Molluscum is a poxvirus causing chronic dome-shaped skin papules with a central indentation and can appear as multiple lesions anywhere on the body, lasting from 6 to 8 months and even up to 5 years. Zelsuvmi is approved for pediatric patients, 1 year of age and older, and adults. Molluscum affects an estimated 6 million children and up to 5% of the general population in the U.S. This FDA-approved treatment can be applied by patients, parents or caregivers at home outside of the physician's office. One of the challenges of treating molluscum has been the available destructive therapies such as cryotherapy and curettage have major drawbacks, especially for children, such as pain and potential for scarring. So Zelsuvmi is a much more patient-friendly treatment. Even though molluscum can affect quality of life and cause social distress and persist for many months or years, approximately 70% of children go untreated. Therefore, the at-home treatment is a distinct advantage for both treatment and compliance. Zelsuvmi's ease of use as well as being available for children as young as 1, will hopefully open the doors for more treatment for this disfiguring contagious viral illness. As recently disclosed in our press releases, we have created a new stand-alone company called Pelthos Therapeutics that will commercialize Zelsuvmi. This company creation effort is very similar to our prior efforts related to Viking Therapeutics and Primrose Bio. Pelthos will be operated fully independent of Ligand, although we expect to own a significant equity stake in the business at inception. We are excited to have attracted the talented leadership of Scott Plesha and our 2 highly experienced independent directors, Peter Greenleaf and Matt Pauls. Let's turn to ensifentrine with an FDA PDUFA date of June 26. Verona Pharma is developing and commercializing ensifentrine, a novel, selective, dual inhibitor of phosphodiesterase, PD-3 and PD-4 for maintenance treatment of COPD by inhalation therapy. Both Phase III efficacy and safety trials, ENHANCE-1 and 2 met the primary bronchodilation FEV1 endpoint. Improvement of symptoms was shown across trials and the rate and risk of exacerbation were reduced in a clinically meaningful and consistent manner in the trial. Many COPD patients remain symptomatic even on multiple therapies. Ensifentrine can be used in combination with other approved products and potential competitors. And there is no need to take into consideration smoking status or eosinophilia. Verona estimates there are over 8 million COPD patients currently receiving chronic treatment in the U.S. alone, over half of whom are dissatisfied with their current treatment regimens. If approved, ensifentrine could offer an effective add-on or alternative treatment with a good safety profile to address both symptoms and exacerbations. Verona is currently building its commercial infrastructure to prepare for launch following potential approval in June. Ligand will earn a milestone of approximately $5 million upon approval and $14 million upon launch of ensifentrine. Ligand benefits from a low single-digit royalty on ensifentrine, and we believe the program could be another of our key growth drivers. Moving on to Filspari. The FDA granted an accelerated approval in February 2023, as the first and only non-immunosuppressive therapy for primary IgA nephropathy in patients with a urinary protein-to-creatinine ratio equal to or greater than 1.5 gram, per gram. Travere filed a supplemental NDA for full approval on March 11, 2024, here in the U.S. In the EU, Filspari received European Commission approval for conditional marketing authorization for the treatment of adults with primary IgAN with urine protein excretion equal to or greater than 1.0 grams per day, or urine protein-to-creatinine ratio equal to or greater than 0.75 gram per gram. Filspari is a once-daily, oral medication that directly targets glomerular injury in the kidney, by blocking 2 critical pathways of IgAN disease progression, endothelin-1 and angiotensin II, with potential to be a mainstay for those who don't respond to single-agent ACE or ARB. Just yesterday, Travere announced that the FDA granted priority review of their sNDA to convert Filspari from accelerated approval to full approval for the treatment of IgAN in the U.S. The FDA assigned a PDUFA target action date of September 5, 2024. Filspari is one of our key growth drivers. Travere reported Q1 revenue numbers yesterday afternoon, and the quarter came in nicely with sales of $19.8 million. Travere also continued to disclose the momentum on new patient recruitment. Travere had 511 new patient forms submitted in Q1, bringing the total, since launch, to 1,963. The continued steady addition of potential new patients provides good evidence of future revenue potential. Filspari appears to be on track to meet consensus estimates for 2024, which are at approximately $110 million of revenue for the year. In Europe, CSL Vifor expects to launch Filspari in the second half of 2024. We earn a 9% royalty on net sales, and we expect that this will be a significant driver of long-term growth for our royalties. Moving on to Merck's V116. V116 is a 21-valent pneumococcal vaccine for the prevention of invasive pneumococcal disease in pneumococcal pneumonia. It is potentially the first pneumococcal conjugate vaccine specifically designed for adults, including 8 unique serotypes not found in any currently approved vaccine. According to Merck, V116 is specifically designed to prevent adult invasive pneumococcal disease, and the serotypes covered account for approximately 83% of pneumococcal disease in adults 65 and older, based on CDC data from 2018 to '21. Immune responses were seen to all 21 serotypes and a diversity of adult patients, regardless of immune status or previous vaccine status and higher than comparators in immune response for the serotypes unique to V116. The FDA granted V116 priority review, and we await the fast-approaching PDUFA date of June 17. We will earn a low single-digit royalty on V116. We would earn a $2 million milestone upon the approval of V116. And with that, I will turn it over to Matt for more comments on the portfolio.

Thanks, Karen. Today, I'll provide some additional comments on a few of the other significant updates from the first quarter across our portfolio in both commercial and development stage programs. A reminder for investors that Ligand's portfolio includes more than 85 partnered programs that drive our royalty revenue, our Captisol material sales and our license milestone and contract revenue. Slide 14 shows our key commercial programs that drive the significant majority of our royalty revenue. Our current commercial portfolio includes over 25 different royalty streams and 30 commercial drivers overall. But these 8 programs are expected to contribute over 95% of our royalty revenue in 2024. Starting with Rylaze, it's marketed by our partner, Jazz Pharmaceuticals, and is a component of a multi-agent chemotherapeutic regimen for the treatment of children and adults with ALL or LDL. This product continues to do extremely well in a market that was previously constrained by supply issues. Last week, Jazz reported its Q1 earnings, including $103 million in Rylaze sales, and Jazz continued to highlight Rylaze as one of its potential growth drivers. Having received approval for Rylaze in Europe in September 2023, Jazz confirmed the ongoing rolling European country-by-country launch. Next, on Vaxneuvance. It's a pneumococcal vaccine utilizing Ligand's CRM197 vaccine carrier-protein produced using our former Pelican Expression Technology platform. Merck is now marketing Vaxneuvance, in both the adult and pediatric populations. Merck announced $219 million in Vaxneuvance sales in Q1 2024. Ligand earns a low single-digit royalty on Vaxneuvance sales. For Tzield, Ligand purchased a royalty on Sanofi's Tzield in November of 2023 from an inventor. We're very happy with Sanofi's continued investment in Tzield and its commitment to the first-ever launch of a disease-modifying therapeutic for Type 1 diabetes. It is still early in the launch, and diagnosis remains a focus. Sanofi has recently stated that they continue to see growth in screening and infusion rates and they're encouraged by the growing infusion rates in pediatric patients. Sanofi continues to describe Tzield as one of its key launches for the organization and is in discussions with regulatory agencies about expansion into the Stage III, type 1 diabetes patients. Transitioning to a few of the pipeline programs in the portfolio, Karen already touched on Zelsuvmi, ensifentrine and V116. So I'll cover VK 2809, soticlestat and ganaxolone. Viking recently announced that in the first quarter of this year, they completed the 52-week biopsies for the Phase IIb VOYAGE study of VK2809 in biopsy-confirmed NASH and fibrosis. As Viking has previously disclosed, the study successfully achieved its primary endpoint after 12 weeks of treatment and affirmed VK2809's potent effect on liver fat along with its favorable tolerability and safety profile. Viking plans to report data on the histologic changes assessed after 52 weeks of treatment later in the second quarter. Ligand earns a 3.5% to 7.5% royalty on potential sales of VK2809, as well as significant clinical, regulatory and commercial milestones. NASH is a very large potential market and that Viking is successful in their development of VK2809, the program will be addressing a multibillion dollar market opportunity. Takeda's developing soticlestat, which is a first-in-class novel compound with the potential to reduce seizure susceptibility. Takeda is currently running 2 Phase III trials and expects to report top-line data by September 2024 and file for approvals in Q1 2025. Ligand earns a tiered royalty of up to 2.6% on this drug, if commercialized as well as up to $86 million of milestones. There remains high unmet need in rare pediatric epilepsies and we believe soticlestat is uniquely positioned to deliver value to patients and caregivers through its demonstrated seizure-reduction capability as well as its strong safety profile and ability to be combined with a broad range of antiepileptic treatments. Marinus Pharmaceuticals provided an update on the Phase III RAISE trial evaluating the safety and efficacy of IV ganaxolone in patients with refractory status epilepticus. The blinded interim analysis did not meet predefined stopping criteria, and Marinus has completed RAISE enrollment at approximately 100 patients with top line results expected in the summer of 2024. Future development of IV ganaxolone in refractory status epilepticus will be assessed following the review of the final RAISE results. We will remain in dialogue with Marinus on the future of the program and will pass along any updates as Marinus provides them to the market. With that, I can turn the call over to Tavo for the financial update.

Thanks, Matt. First, I want to highlight that I will be discussing non-GAAP results, which exclude certain items, including stock-based compensation, amortization of intangible and financial assets, unrealized gains from short-term investments, our share of losses absorbed from accounting for our investment in Primrose Bio under the equity method, expenses incurred to incubate Pelthos, amongst others. In addition, to further focus our investors on the core business results, we adjust for realized gains from the sale of Viking Therapeutics stock. I encourage you to review the GAAP reconciliation of these non-GAAP measures, which can be found in today's release available on our website. Also, I'd like to point out that starting with this quarter, we are updating how we report royalty revenue to provide increased transparency and better align with our evolving business model. We will now show 2 lines with one labeled as revenue from intangible royalty assets and the other labeled as income from financial royalty assets. Historically, most of our royalty revenue has been earned from programs where we have rights to the underlying intellectual property. We will now refer to this royalty stream as revenue from intangible royalty assets. And starting with this quarter and for prior periods presented, we will also report royalties generated from programs where we do not have rights to the underlying IP as income from financial royalty assets. The amounts recorded to this line item were previously captured in contract revenue and have been relatively small, but we expect it will become a larger portion of our royalty asset portfolio in the future. We kicked off the year with strong results in the first quarter of 2024 with both on the top and bottom lines and are on track to meet or exceed our 2024 financial guidance. On the top line, Royalty revenue grew 8% to $19 million year-over-year. And on the bottom line, we recorded adjusted EPS of $3.84, which includes $2.64 from the sale of Viking stock. Excluding the Viking stock sales, our core adjusted EPS for the quarter was $1.20. As Todd mentioned, we have a strong balance sheet with $311 million in cash and investments as of March 31. Moving over to Slide 17. This slide frames up our financial results in more detail. We reported total Q1 '24 revenue of $31 million versus $44 million in the prior year quarter. The year-over-year decrease was driven by the $15 million milestone that we earned upon the approval of Travere's Filspari in Q1 '23. Royalty revenue increased 8% in Q1 '24 to $19.1 million from $17.6 million in Q1 '23, driven by strength in Filspari, Rylaze, Kyprolis, and Vaxneuvance, partially offset by weakness in Evomela due to generic competition in China. In Q1, '24, Travere reported continued growth in Filspari with sales of $20 million. Jazz reported Rylaze sales of $103 million, which is a 20% increase. Amgen reported Kyprolis sales of $376 million, which was 5% above the prior year, and they attributed the increase to volume growth outside the U.S. Merck announced total sales of $219 million for Vaxneuvance, which is a 107% increase over the prior year period. We expect these products will continue to drive royalty revenue growth in the future. Captisol sales were $9.2 million in Q1 '24 versus $10.6 million in Q1 '23, with the change due to timing of customer orders. Contract revenue this quarter was $2.7 million versus $15.7 million in Q1 '23. As mentioned earlier, last year's quarter included a $15 million milestone payment we earned from Travere upon the FDA's accelerated approval of Filspari. Total R&D and G&A operating expenses decreased by 3% in the first quarter due primarily to lower headcount-related expenses associated with the spin-out of the Pelican business, offset by investments made to incubate the Pelthos business and to build up our business development and investment team in Boston. G&A and R&D expenses were $11 million and $6 million in Q1 '24, versus $10.9 million and $6.7 million in Q1 '23, respectively. GAAP net income from continuing operations in the first quarter of 2024 was $86.1 million or $4.75 per diluted share versus GAAP net income from continuing operations of $43.6 million or $2.43 per diluted share in the prior year quarter. The increase in GAAP net income is due largely to the increase in value on our holdings of Viking Therapeutics stock. Excluding the impact of gains from the sales of Viking stock, core adjusted net income was $21.8 million or $1.20 per diluted share versus $23.4 million or $1.33 per diluted share in Q1 '23. The decrease in core EPS is due to the $15 million Travere milestone, which was earned in Q1 '23, as referenced earlier. Turning to the balance sheet. As of March 31, 2024, we had cash and short-term investments of $311 million, which includes $82 million of our holdings in Viking common stock. We expect that our current cash plus annual cash flow generation will be sufficient to fund the investment activity we anticipate over the foreseeable future. Turning now to guidance. We are reaffirming the 2024 financial guidance we introduced at Investor Day in December. We expect 2024 royalty revenue will be in the range of $90 million to $95 million. Sales of Captisol in the range of $25 million to $27 million and contract revenue in the range of $15 million to $20 million. These revenue components result in total revenue guidance of $130 million to $142 million and core adjusted earnings per diluted share of $4.25 to $4.75. And as Todd mentioned, we also introduced in December for the first time and we reiterate today, a longer-term outlook where we see royalty revenue growing at a compound annual growth rate of above 20% from 2022 to 2028, and adjusted core EPS growing even faster at a compound annual growth rate above 25%. I'll now turn the call over to Todd for closing comments.

Thank you, Tavo. We are very pleased with our strong start to 2024, and I'm enthusiastic about the progress we've made to take Ligand to the next stage of growth. We've entered the second quarter with a strong balance sheet and continue to generate more cash, which provides us the power to invest in high-margin royalty assets, like the Agenus investment announced earlier today. I'm excited about the potential significant catalysts in the coming months with Pelthos's Zelsuvmi, Verona's ensifentrine, Merck's V116 and Takeda's Soticlestat. As our 2024 guidance and longer-term outlook imply, we look toward significant long-term revenue and EPS growth. Thank you. And with that, we will open it up to questions.

The first question comes from the line of Matthew Hewitt with Craig-Hallum Capital Group.

Congratulations on the strong start to the year. Maybe first up on the Agenus partnership. Congratulations on making that deal. I guess a couple of things. One, walk us through the process on how you kind of got engaged with them and where you see the most excitement within those 6 different properties or programs? And then secondly, what will be the deciding factor in the follow-on $25 million investment? And how long do you have to make that decision?

Yes. Paul, why don't you go ahead and take that?

Yes. So great. Process-wise, we've been in direct discussions with the company for several months, and we had reached out to them given where they were in the space in biopharma, recognizing they've got a number of different royalty assets. And obviously, we're developing BOT/BAL themselves. So that covers the process question you asked. In terms of what's exciting, obviously, Karen alluded to our excitement about BOT/BAL, and I touched on it. And that's obviously an important asset in the mix. But the basket is also quite interesting as well in terms of the partners that are involved there, the different mechanisms and the fact that it's multiple products in the bag in terms of the overall portfolio. So we kind of view it as a very broad basket in that respect. So I think that's the attractive aspect of it. And then to your third question, I think there is a time limit; I have to go back to the 8-K in terms of what's been disclosed about the option to invest further. But obviously, it's at our option, and potentially future events, future clinical events, data would influence our decision as to whether or not we should invest more capital.

Yes. Got it. And then maybe a separate question regarding the Pelthos opportunity, I guess, is the way to call it. Are you still having discussions with potential partners on that or at this stage of the game are you looking to just kind of run that and see how it goes for a while?

Yes, we are examining all options to maximize the value of the asset for our shareholders. This includes strategic discussions as well as the potential for a spinout, similar to what we did previously with Viking Therapeutics and Primrose Bio, both of which were successful. We have positioned this as a stand-alone company to maintain as much flexibility around the asset as we can. That process is currently in motion at Pelthos. Additionally, I’d like to reiterate what Paul mentioned earlier. It’s important for investors to understand that most of these opportunities are not publicly marketed deals that involve a large process. Instead, we proactively identify assets of interest and engage with the companies directly. These deals are essentially created by us. We maintain a very stringent selection process, focusing on late-stage assets that have high clinical value and are well-documented in terms of safety and efficacy. This approach allows us to conduct thorough analyses and engage in discussions with the counterparties. Overall, it's a proactive, outbound-oriented process that we follow.

Your next question comes from the line of Balaji Prasad with Barclays.

This is Balaji. Regarding your Agenus deal announced this morning, for the low single-digit royalties on the BOT/BAL combination, considering where the combination stands in the regulatory process now, how much should we factor into the $230 million royalties revenue goal you have for 2028?

Thank you for the question. We do not anticipate these deals to have any impact in 2024. While we have not revealed how much they will contribute in subsequent years, we will provide more detailed information at a later date.

Yes. And I think, Tavo, I would just add that on that 5-year chart that we've shown was in today's slides, there's a slice of that that is intended to capture all the capital we deploy and the new deals that we'll invest in, and this deal would be one of those, right? So we've got a bar in there that's intended to capture kind of the potential for these future deals. And we'll continue to add to that bucket with all the capital we deploy. And if it's appropriate at a time in the future, we'll update that chart to reflect the amount of deals that we've done and the potential for that future. But for now, we are maintaining our sort of 2028 outlook, as Tavo described in his comments.

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

This is Justin on for Larry. First question on Kyprolis. You mentioned growth slowed to 5% as reported by Amgen in Q1. Was this consistent with your expectations? And then can you update us on the 2–3 year outlook as this will go off-patent in 2027?

Yes. On Kyprolis, the sales figures came in line with consensus and also pretty much in line with what we were expecting in our internal models. And we have been messaging, consistent with what Amgen has been saying about Kyprolis that we expect in late 2027, for the generic competition to come in and take share.

Okay. That's helpful. And then on Filspari, can you remind us what you sized the opportunity in the U.S. market? Is that still around $3 billion? And then pending the second half '24 launch in Europe, what's the opportunity there?

Yes. Thanks for the question, Justin. A reminder to investors that Filspari is approved for IgA nephropathy in the U.S. and now in the EU. The patient population in the U.S. is about 140,000, of which Filspari has said publicly that about 30,000 to 50,000 are applicable for treatment with Filspari. They haven't given the same corresponding numbers in Europe in terms of the applicability, but the patient population is in the same neighborhood. From a market-sizing standpoint, based on the pricing that Filspari is there, certainly, the potential, if they got every single patient would be in that neighborhood of $3 billion that you described, so that's more of a TAM, if you will, for the current approved indication and applicable patient population. If you look at the research consensus estimates, that are out there for the Filspari covering analysts, they talk about more in the $500 million to $750 million range for potential sales. And I think Tavo has said on our Analyst Day back in December that our 5-year model incorporates those $500 million to $700 million type estimates.

Your next question comes from the line of Joe Pantginis with H.C. Wainwright.

So also, I want to add my congratulations for the Agenus deal today. And I think I want to ask my question. Hopefully, it's a self-fulfilling prophecy. You had very important cash deployment today that you announced, and I guess the obvious question to me is, to your earlier strategy changes that you've made that you're choosing opportunities, but it's agnostic with regards to the level of investment that you make. Is that correct now? It just seems to be so.

Thank you for the question, Joe. We are not indifferent to the level of investment. We see ourselves as a portfolio aimed at creating a risk-mitigated and predictable growth portfolio for our investors. Similar to any portfolio manager, we manage our exposure accordingly. We generally aim for about $40 million of exposure per product; if a product is significantly less risky, we may increase our investment. On the other hand, if a product has high potential but involves more risk, we might reduce our investment. Regarding the Agenus deal, given the number of opportunities available, the $75 million we are exposed to seems very appropriate for the type of portfolio we are building. Does that address your question?

It absolutely does. I have two logistical questions. First, regarding Pelthos, I wanted to inquire about its future impact on the profit and loss statement. Will this be similar to your Viking investment, where your investment directly affects the P&L, or are there other impacts to consider?

Yes, thank you for the question, Joe. In terms of how we account for the investment in the incubation of Pelthos, it aligns with the adjustments we made for Viking, where we excluded the gains on Viking Therapeutics stock. We are also taking out the operating expenses related to incubating Pelthos, which you will see in our GAAP to non-GAAP reconciliation. The run rate from Q4 is essentially what we are experiencing this quarter.

Great. And then the other housekeeping question is regarding how you're viewing the current Captisol mix with regard to research use and commercial use? And how do you view the current inbounds with regard to inquiries with regard to the asset?

Yes. Thanks, Joe. The Captisol business continues to be very strong. I'll address your second part first. The inbounds on licensing and interest in the platform continue to be as strong as ever. We obviously saw a significant increase in those inbounds during the COVID pandemic, but we've kind of returned to the normal pace of those where we've tended to do 5 or 6 different new partnerships every year on average over the life of the time we've had the technology. We're still continuing to see that level of interest and hope to do that many deals this year if we continue out the rest of the year. In terms of the mix between commercial and clinical use, it continues to be about where it has been the last couple of quarters. There's nothing material one way or the other. Obviously, our larger commercial partners, Kyprolis and some of the others continue to grow. And so the commercial use is growing. The clinical use is somewhat dependent on the timing and pacing of the clinical work and some of the larger Phase III trials that have gone on over time.

We have no further questions at this time. This concludes today's conference. Thank you for participating. You may now disconnect.