Ligand Pharmaceuticals FY Conference Summary Company Overview - **Company**: Ligand Pharmaceuticals (NasdaqGM:LGND) - **Industry**: Biopharmaceuticals - **Business Model**: Royalty aggregation, focusing on investing in royalty contracts rather than equity or debt securities [2][3] Key Points and Arguments Business Strategy - Ligand operates as a royalty aggregator, managing a portfolio of over 100 partnerships, with 12 major commercial-stage royalty streams generating over $150 million in positive cash flow for the year [3][4] - The company emphasizes a diversified cash flow model, reducing reliance on single asset success [3][4] - Ligand has a low SG&A and OPEX relative to revenues, leveraging existing infrastructure from partner companies [4] Financial Performance - In Q3, Ligand reported total revenue of $87 million, a 68% increase year-over-year, and updated guidance for total revenue to $225 million-$235 million [21][24] - Q3 royalties reached $47 million, a 47% increase from the previous year, with adjusted EPS growing 68% to $3.09 per share [21][22] - The company ended the quarter with $665 million in cash and investments, totaling over $1 billion in deployable capital [23] Growth Drivers - Recent product approvals include Pilthos' Zelsuvmy, Merck's Capvaxive, and Verona's Ohtuvayre, contributing to expected future growth [20][21] - Ligand anticipates a 22% CAGR in royalty receipts over the next five years, driven by existing commercial programs and new investments [25][26] Competitive Landscape - Ligand has not faced direct competition in its investment strategy over the past three years, primarily competing with equity and debt alternatives [28][30] - The company operates in a niche market with limited capital available for late-stage clinical development, positioning itself favorably against larger competitors [18][19] Risk Management - Ligand's investment strategy includes a focus on minimizing financing risk, as royalties are non-dilutable and protected under bankruptcy codes [6][7] - The company employs a private equity-style investment process, ensuring thorough due diligence and risk assessment before making investments [5][17] Future Outlook - Ligand's royalty portfolio is expected to grow significantly, with products like O2VARE projected to reach peak sales of $3 billion, potentially up to $6 billion [26][27] - The company is actively pursuing new investments and partnerships to enhance its portfolio and revenue streams [25][40] Additional Important Information - Ligand's Captisol business operates with minimal infrastructure, allowing for efficient management and high margins [9][10] - The company has a strong management team with diverse expertise in both scientific and financial domains, enhancing its investment decision-making process [34][35] - Ligand's approach to royalty monetization includes offering upfront payments for royalty rights from inventors and institutions, providing a strategic advantage in risk management [11][12] This summary encapsulates the key insights from Ligand Pharmaceuticals' FY conference, highlighting its business model, financial performance, growth strategies, competitive positioning, and future outlook.

Core Insights - Merck (MRK) has made significant investments in strategic mergers and acquisitions to enhance its long-term portfolio and growth prospects [1] M&A Activity - Merck announced an agreement to acquire Cidara Therapeutics (CDTX) for $221.50 per share, totaling nearly $9.2 billion, which will enhance its respiratory portfolio with the addition of CD388, a candidate for influenza prevention [2][10] - The acquisition is expected to close in Q1 2026, pending customary conditions [2] - This follows Merck's recent acquisition of Verona Pharma for approximately $10 billion, which added Ohtuvayre for COPD treatment, strengthening its cardio-pulmonary portfolio [5] Product Development - CD388, developed using CDTX's Cloudbreak platform, is a long-acting small molecule inhibitor targeting influenza, currently in phase III trials for high-risk patients [3] - CD388 offers broad protection against seasonal and pandemic flu strains with a single injection, independent of the body's immune response, and has received Fast Track and Breakthrough Therapy designations from the FDA [4] Strategic Focus - Merck's management highlighted that strategic business development is a key priority, with ongoing assessments for further investments to drive growth and shareholder value [6] - Recent multi-billion-dollar deals with Chinese biotechs have broadened Merck's pipeline beyond its reliance on the PD-L1 inhibitor Keytruda, positioning it for sustainable revenue growth over the next decade [7] Industry Trends - M&A activity in the pharma/biotech sector is increasing, with a focus on innovation-driven acquisitions rather than large-scale consolidation, shifting therapeutic focus towards metabolic and cardio-metabolic diseases and respiratory conditions [8]

Core Insights - Merck's shares have increased by 9.6% over the past month, recovering from a dip following the third-quarter earnings report, which beat estimates for earnings and sales but saw Keytruda miss sales expectations [1][3] - The company has narrowed its sales guidance while raising its EPS outlook, and the stock has shown recovery due to positive pipeline updates and the acquisition of Cidara Therapeutics for approximately $9.2 billion [1][2] Keytruda's Performance - Keytruda remains Merck's most significant asset, accounting for over 50% of pharmaceutical sales, with sales reaching $23.3 billion in the first nine months of 2025, an 8% increase year-over-year [4][5] - The drug's growth is driven by its uptake in early-stage non-small cell lung cancer and continued momentum in metastatic indications [5] - Merck is pursuing strategies to enhance Keytruda's long-term growth, including innovative combinations and a new subcutaneous formulation approved by the FDA [6][7] Pipeline and M&A Activity - Merck's phase III pipeline has nearly tripled since 2021, positioning the company to launch around 20 new vaccines and drugs in the coming years, including a new pneumococcal conjugate vaccine and a drug for pulmonary arterial hypertension [9][10] - The acquisition of Verona for $10 billion added a novel treatment for chronic obstructive pulmonary disease, enhancing Merck's cardio-pulmonary portfolio [13] Challenges and Declines - Sales of the Gardasil vaccine, Merck's second-largest product, have declined by 40% in the first nine months of 2025, primarily due to weak demand in China [14][15] - Other vaccines and diabetes products are also experiencing declining sales, raising concerns about Merck's ability to diversify its product lineup ahead of Keytruda's patent expiration in 2028 [16][17] Stock Performance and Valuation - Merck's shares have underperformed the industry and the S&P 500, losing 6.5% year-to-date compared to a 14% increase in the industry [20][21] - The company's shares are trading at a forward P/E ratio of 10.04, lower than the industry average of 16.72, indicating a potentially attractive valuation [23] Future Outlook - Despite the challenges, Merck's new products are showing strong launches, and the approval of Keytruda Qlex may mitigate the impact of Keytruda's loss of exclusivity in 2028 [28] - The company is advised to adopt a wait-and-see approach due to uncertainties surrounding Gardasil's performance, competition for Keytruda, and rising pressures on other products [30]

Financial Data and Key Metrics Changes - Total revenue and other income for Q3 2025 on a GAAP basis was $115.5 million, up from $51.8 million in the same quarter last year, with core revenue growing 68% year over year to $86.9 million [26][34] - Royalty revenue rose 47% year over year to $46.6 million, and adjusted EPS increased 68% to $3.09 [26][34] - The company raised its full-year 2025 guidance, now expecting core revenue of $225-$235 million and adjusted EPS of $7.40-$7.65 [35][36] Business Line Data and Key Metrics Changes - Royalty revenue growth was driven by strong performances from products like Travere's Filspari, Merck's Ohtuvayre, and Capvaxive, with Filspari becoming the largest royalty-generating asset [30][31] - Filspari reported Q3 sales of $90.9 million, a 155% year-over-year increase, while O2VARE sales reached $136 million, a 32% sequential increase [30][31] - Capvaxive generated $244 million in sales, an 89% sequential increase, reinforcing its market position [31] Market Data and Key Metrics Changes - The company noted strong uptake of Zelsuvmi in its early launch phase, with expectations for continued momentum [7] - Ohtuvayre is tracking ahead of initial forecasts, with Q3 sales growing 32% sequentially, and projected sales of $2 billion by 2029 [10][11] - The FDA has assigned a PDUFA date of January 13, 2026, for Filspari's second indication, FSGS, which could significantly expand its market opportunity [18] Company Strategy and Development Direction - The company has focused on building a diversified portfolio of high-margin royalties and has successfully executed a convertible debt financing to support growth initiatives [5][6] - The strategic direction set in 2022 has led to significant growth across core revenue and adjusted EPS, with a long-term royalty growth outlook of 22% CAGR [9][10] - The company is actively pursuing high-quality investment opportunities and expanding its business development team to capitalize on its robust pipeline [27][29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of the commercial royalty portfolio and the potential for indication and geographic expansion of key products [36][37] - The company highlighted the positive developments in the FDA's approach to accelerating timelines for innovative treatments, which aligns with its investment strategy [16][49] - Management remains optimistic about the ongoing progress of the Pelthos team and the launch momentum of Zelsuvmi [37] Other Important Information - The company ended the quarter with approximately $1 billion in deployable capital, including cash and investments [7][27] - The Pelthos transaction resulted in a $53 million gain recognized in Q3, reflecting the strategic value of the spin-out [24][25] - The company has seen record-setting origination activity, reviewing over 130 investment opportunities in the first three quarters of the year [13] Q&A Session Summary Question: Opportunities and special situations related to Pelthos and Palvella - Management indicated a robust opportunity set in special situations, focusing on companies needing more than just capital [38][39] Question: Changes in investment opportunities and capital demands - Management noted that while the deal flow may shift with market conditions, the demand for royalty capital remains high, particularly for development-stage assets [44][45] Question: Insights on the ZELSUVMI launch and future expectations - Management provided limited additional information but indicated that more specifics would be available during the upcoming earnings call [50][51] Question: Competitive landscape for royalty assets - Management acknowledged potential future competition but noted that they have not yet seen significant changes in the competitive landscape [53][54] Question: Thoughts on the recent approval of Furoscix - Management expressed optimism about Furoscix's potential to provide a differentiated treatment option in the market [56]

Safe Harbor Statement and Disclaimers • This presentation contains forward-looking statements, as defined in Section 21E of the Securities Exchange Act of 1934, by Ligand and its partners thatinvolve risks and uncertainties and reflect Ligand's and its partners' judgmentasofthedateofthispresentation.All statements,otherthan statementsof historicalfact, couldbedeemedtobeforward-lookingstatements, includingstatements thatexpress Ligand'sorits partners'opinions, expectations,objectives, assumptions,plans orpro ...

Core Insights - Ligand Pharmaceuticals reported a significant increase in third quarter revenue, driven by a 47% growth in portfolio royalty revenue, leading to an increase in full-year revenue guidance to $225 million - $235 million from a previous range of $200 million - $225 million [1][11] Financial Performance - Total revenues for Q3 2025 were $115.5 million, a 123% increase from $51.8 million in Q3 2024, primarily due to higher royalty revenue and gains from the Pelthos business sale [3] - Royalty revenue for Q3 2025 reached $46.6 million, up 47% from $31.7 million in Q3 2024, attributed to royalties from Travere Therapeutics' Filspari, Merck/Verona Pharma's Ohtuvayre, and Recordati's Qarziba [3] - Adjusted net income for Q3 2025 was $63.8 million, or $3.09 per diluted share, compared to $35.3 million, or $1.84 per diluted share, in Q3 2024 [5] Year-to-Date Financial Results - For the nine months ended September 30, 2025, total revenues were $208.4 million, a 68% increase from $124.3 million in the same period of 2024, driven by higher royalty revenue and gains from the Pelthos business sale [7] - Year-to-date royalty revenue was $110.5 million, a 49% increase from $74.0 million in 2024 [8] - Core adjusted net income for the nine months ended September 30, 2025, was $122.4 million, or $6.07 per diluted share, compared to $83.0 million, or $4.46 per diluted share, in 2024 [10] Cost Structure - Research and development expenses for Q3 2025 were $21.0 million, significantly higher than $5.7 million in Q3 2024, primarily due to a one-time charge related to a royalty financing agreement [4] - General and administrative expenses increased to $28.4 million in Q3 2025 from $24.5 million in Q3 2024, mainly due to transaction costs associated with the Pelthos transaction [4] Strategic Developments - Ligand completed a $460 million convertible debt financing in August 2025, providing additional resources for strategic investments [2][13] - The company made significant investments in new royalty rights and partnered programs, including a $25 million investment in Orchestra BioMed's cardiology programs [15][16] Portfolio Updates - Ligand's royalty portfolio includes key products like Filspari, which has been highlighted in updated clinical practice guidelines for treating IgA nephropathy [19] - The company is also involved in the development of Qtorin rapamycin for various indications, with ongoing clinical trials expected to yield results in the near future [21][22]

Core Insights - Merck (MRK) reported Q3 2025 adjusted EPS of $2.58, exceeding the Zacks Consensus Estimate of $2.36, with a year-over-year increase of 64% on a reported basis and 65% excluding foreign exchange [1][10] - Revenues for Q3 increased by 4% year-over-year to $17.28 billion, surpassing the Zacks Consensus Estimate of $17.06 billion [1][10] Sales Performance of Key Products - Keytruda, Merck's leading oncology drug, generated sales of $8.14 billion, an 8% increase year-over-year, but fell short of the Zacks Consensus Estimate of $8.40 billion [3] - Alliance revenues from Lynparza and Lenvima contributed positively, with Lynparza sales rising 12% to $379 million and Lenvima revenues totaling $258 million, up 2% [4] - Welireg recorded sales of $196 million, reflecting a 41% increase due to higher demand in the U.S. and early uptake in Europe [5] - HPV vaccines, Gardasil and Gardasil 9, saw a 25% decline in sales to $1.75 billion, primarily due to lower demand in China and Japan [6] - Capvaxive, a new pneumococcal vaccine, generated $244 million in sales, up from $129 million in the previous quarter [7] - The diabetes drug franchise, Januvia/Janumet, saw a 29% increase in sales to $624 million, driven by higher net pricing in the U.S. [8] Animal Health Segment - The animal health segment generated revenues of $1.62 billion, a 9% increase year-over-year, driven by higher demand for livestock products [11] 2025 Guidance - Merck narrowed its 2025 sales guidance to $64.5-$65.0 billion, reflecting a slight adjustment from the previous range [12] - Adjusted EPS guidance for 2025 was raised to a range of $8.93 to $8.98, incorporating a revised negative impact from foreign exchange [13] - The updated EPS outlook includes benefits from a revised AstraZeneca deal and improved operations, partially offset by costs from the acquisition of Verona Pharma [14][15] Market Reaction - Despite strong Q3 results, Merck's shares fell over 2% in pre-market trading due to Keytruda's weaker-than-expected sales and the narrowed sales guidance [19]

Core Insights - Merck & Co reported higher third-quarter revenue driven by growth in its cancer drug Keytruda, despite a decline in sales of the HPV vaccine Gardasil in China [1][5] - Shares fell nearly 2% after the company lowered its full-year revenue forecast to $64.5 billion to $65.0 billion from a previous range of $64.3 billion to $65.3 billion [1][2] Financial Performance - The company posted revenue of $17.28 billion for the quarter, exceeding analyst estimates of $16.96 billion [4] - Adjusted earnings per share were $2.58, surpassing Wall Street estimates by 23 cents [5] - Keytruda sales increased by 10% to $8.1 billion, while Gardasil sales fell to $1.75 billion, which was still above the forecast of $1.66 billion [5] Market Dynamics - Merck's stock has declined approximately 5% in 2025 as investors assess the company's growth strategies beyond Keytruda amid potential U.S. drug pricing reforms [2] - The CFO indicated that while Keytruda is expected to continue growing, the pace may slow due to peak penetration in some indications and pricing pressures in international markets [3] Product Pipeline - The company is focusing on new drugs, including Winrevair, which saw a 141% increase in sales to $360 million, and Ohtuvayre, acquired in a $10 billion deal [4] - However, sales of Winrevair were below expectations, raising concerns about its role as a key growth driver [4] Regional Sales Performance - Gardasil sales outside of China fell by 3%, primarily due to decreased sales in Japan after the end of a reimbursement program for catch-up vaccinations [5] - The company has paused new shipments of Gardasil to China as distributors manage existing inventories amid reduced demand [5] Earnings Outlook - Merck expects full-year earnings to be in the range of $8.93 to $8.98 per share, an increase from the previous forecast of $8.87 to $8.97 [6]

Group 1 - Merck & Co. has completed the acquisition of Verona Pharma for approximately $10 billion, making Verona a wholly-owned subsidiary [1][3] - The acquisition enhances Merck's cardio-pulmonary portfolio by adding Ohtuvayre, a first-in-class drug approved for the maintenance treatment of chronic obstructive pulmonary disease (COPD) [2][3] - Ohtuvayre represents the first novel inhaled mechanism for COPD maintenance treatment in over 20 years and is also being evaluated for non-cystic fibrosis bronchiectasis [3] Group 2 - Merck operates globally as a healthcare company, providing human health pharmaceuticals, veterinary pharmaceuticals, vaccines, and health management solutions [4]

Core Insights - Verona Pharma plc (NASDAQ:VRNA) is undergoing a $10 billion acquisition by Merck & Co. (NYSE:MRK), with shareholders approving the deal on October 1, 2023, at a price of $107 per American Depositary Share [2][3] - The acquisition is set to finalize on October 7, 2023, following a judicial hearing, and Nasdaq trading for VRNA shares will be suspended on the same day [2][3] - Verona Pharma's COPD medication, Ohtuvayre, has shown promising results in Phase 3 ENHANCE trials, which will be presented at the International Congress of the European Respiratory Society [3] Company Overview - Verona Pharma plc specializes in treatments for chronic respiratory conditions, with Ohtuvayre being its primary medication for COPD [4] - The acquisition by Merck is significant as Ohtuvayre represents the first novel inhaled treatment mechanism for COPD in over two decades, highlighting its potential impact on the market [3]