Ligand Pharmaceuticals Incorporated (LGND) Earnings Call Transcript & Summary

Hello, and welcome to today's webcast. My name is Renz, and I'll be your event specialist today. [Operator Instructions] Today's webcast is being recorded. [Operator Instructions] It is now my pleasure to turn today’s program over to Mr. Patrick O'Brien, Senior Vice President, Investor Relations. Sir, the floor is yours.

Thank you, and welcome to the 2020 Virtual Ligand Investor and Analyst Day Conference Call. Consistent with the recommendations for social distancing, most of our speakers for today's call are in separate locations. Presenting today for Ligand will be John Higgins, CEO; Matt Foehr, COO; Matt Korenberg, CFO; Vince Antle, SVP, Technical Operations and Quality Assurance; and Patrick Lucy, SVP and CBO, Protein Expression business. We are also very pleased to have 2 guest speakers as well. Monica Tijerina, Executive Director, Formulations and Process Development from Gilead; Matt Davis, Infectious Disease clinical pharmacist at the UCLA Ronald Reagan Medical Center. We will be using slides to guide our discussions today. We will also be using non-GAAP financial measures and some of our statements will be forward-looking. We will have a Q&A session to conclude our formal remarks. Additional information regarding the risk factors and other matters concerning Ligand can be found in our Ligand's investor and analyst summary press release that will be issued later today, the slides associated with this call in our periodic filings with the SEC. Ligand undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. I would now like to turn the call over to John Higgins.

Patrick, thank you, and welcome, everybody. Good morning. We appreciate people turning out for our investor analyst event here in the fourth quarter of 2020. The business program today is broken roughly into 3 sections. I'm going to open up with an overview of the company and to frame our performance and our outlook. We're going to then walk through some major updates on our key technology platforms, OmniAb and Captisol and give some highlights on our internal R&D investments. In the middle of the program, we're very pleased to have 2 guest speakers joining us. Dr. Monica Tijerina from Gilead is going to discuss our Captisol partnership. And then we have Dr. Matt Davis, an infectious disease thought leader joining us from UCLA, who's going to talk about the COVID-19 treatment landscape. In the last portion of the section, we are going to have Patrick Lucy walk through our new Pfenex Protein Expression technology. This is the acquisition we closed 3 weeks ago. We're very excited about this new business and what it means for us from a science and a financial perspective. He's going to be doing a deep dive on that. And then we'll conclude with a financial overview and substantial updates around our outlook going forward from Matt Korenberg. When I turn to Slide 5, about Ligand, most of you joining us know Ligand, but at the core of our business is innovation. We are working on innovation to answer key questions to drive value for our shareholders. As we build out the business, it's about people, it's about our scientists, about our thought leaders, our -- people driving the business, the technology, the tools and the resources that we have either invented or acquired to serve our customers. Our customers are our pharmaceutical partners. We have a very large and a growing array of partners who are coming to us seeking answers, solutions to challenges that they have. Those are the factors, the people, the technology and the partners that are ultimately driving our financial growth. When we look at Slide 6, without question, Ligand adds value. And as we say in our subtitle, you can ask any one of our 130 partners. When I joined a little over 13 years ago, we had fewer than 10 partners. Companies that had been assembled through 20, 25 years of our research. Over the last 10, 12 years, due to a very strong commitment to science and research investment and through acquisitions, we've substantially expanded our partner base, and ultimately, our research and technology is doing 3 things: discovering medicine; helping improve safety; and helping our partners reduce their manufacturing costs. 3 vital factors that are key to solving some of the major challenges in the industry. Ultimately, if we are successful, if we can deliver our tools and technology and our partners are able to successfully advance a product to the market, our end game is to share in their success, by getting a royalty on their product sales, sharing in their revenue. When we look at slide 7, this is a simple snapshot, select partners, 16 are listed here. 16 out of our over 130. But it's an illustration of the breadth and the depth of our partnerships, big pharma, big biotech, smaller mid-cap companies, even some private companies. But these are important partners that really show that we've got a strong presence throughout the industry. When we look at Slide 8, Ligand's operations have evolved over the last 10 years or so. We used to have 1 facility in San Diego. And through acquisitions and investments, we've built now 4 sites across the United States that are driving our 4 key platforms. In Emeryville, the Bay Area, we are driving our antibody business, the OmniAb business. Down in San Diego, this is going to be the nexus of our Protein Expression business. In Middle America in Kansas, that is where we're driving our Captisol unit. And in Raleigh, North Carolina is where our Ion Channel team is located. Today, we have 158 employees, 80% are in R&D. Half of those people have PhDs. It's a very R&D, science-focused business and we are proud of this national footprint, with exposure to different communities as well as close proximity to many of our partners. One note, in 2021, we planned to change our company headquarters to the Bay Area. OmniAb is the largest driving factor for our business we see going forward. It's an area of significant investment and expansion. And we see this as a very opportune location for us to relocate our headquarters. When we look at Slide 9, this is a simple chart that breaks down our business across different segments of the R&D pharmaceutical industry, but also how we play a role. We show 4 segments: the discovery, the early part of literally identifying medicines; the development stage, testing and doing the trial and error to see if a drug is safe and effective; manufacturing to scale up, trying to solve the challenges to make the manufacturing possible or to reduce the cost; and ultimately, commercialization. Of these 4 segments, we have an important role in the first 3. Our partners manage all the regulatory and the commercialization elements. When we go down this chart, there are 5 segments. OmniAb, this is discovery. We have several genetically modified animal species that help our partners discover antibody meta sets. The Ion Channel is a chemistry-based discovery platform that straddles discovery but also helps some development elements as well. Our Captisol is our formulation excipient business that is squarely in the area of improving development and manufacturing. And ultimately, our Protein Expression crosses all 3 of these channels, serving partners' needs in a variety of manners. Across the bottom, we have internal R&D. There is 4 or 5 other technologies and platforms that we employ internally to help us discover our own medicines through early development to advance ultimately towards licensing. Now what I'd like to do is transition my remarks to commenting about our outlook for the business, and it's based on accelerating growth. Again, I've been here a little over 13 years, and the business has grown tremendously over that period of time. But I believe, given our investments and given the portfolio we've assembled that we are now gathering to a new period of significant growth, financial growth and expansion of our portfolio. When we look at Slide 11, this is a simple chart, but the team today is going to walk through the elements of our business that will illustrate why we believe all 3 core segments of our revenue will grow meaningfully over the next several years. We have royalties, of course, Captisol and contracts. Each are very important in all 3, for a variety of reasons, given partner development advancement and our own investments, we expect to grow significantly, driving all-time high annual cash flows. On Slide 12, this is a simple chart that basically acknowledges that we do see strong growth driven by royalty revenue. Royalty revenue is our most important revenue segment. It is 100% gross margin, and it is the ultimate sign of success with our partners. If they are able to get a product developed successfully, approved and on the market and then obtain good market share through commercialization, we share in that success. Royalties are a very important segment, and it's really what we are focusing on in our core business, what analysts and investors should focus on in our core business as a metric of our success. When we look at Slide 13, this is a simple graphic that shows in 2020, we're calling about $33 million of royalties. This is a base we're proud of. And while it's at this level, there are 3 major factors why we see royalties essentially tripling over the next 3 years. The first segment, existing products, products that are already approved, but we're seeing expanded label, new data is coming in showing the drug is either safer or more effective, that's expanding utilization, or new territories are being expanded. We do forecast a second segment of new approvals. We have the largest calendar of products up for approval in the next 2 to 3 years than we've ever had in our corporate history. Perhaps not all products will be approved, but we are confident some of them will, and we believe we've been conservative in our forecasting for the contribution. And then finally, with our acquisition of Pfenex, we believe that we have a substantial addition of royalties that are coming online. They already have some products that are generating royalties today. But we expect new products out of that business will come online next year and continue to grow. This is an impressive outlook that we are excited to see develop over time. And my colleagues today are going to amplify and give more information on this outlook. On Slide 14, the transition. I just want to comment about our pipeline. We are focused on revenue growth and the backbone being royalty, but our pipeline is also vitally important. We have the strongest pipeline in the company's history. When we look at Slide 15, this is a bull's-eye diagram. Again, we have over 130 partners. Each of these white dots represents a fully funded partner program. There are over 200 dots on this bull's eye diagram. The segments illustrate the contribution by technology platform. The Protein Expression, it's a newest addition. It looks like it's a narrow slice, but it's very high-value given the economics we have and the late-stage orientation of those partnered assets. Captisol, it's a broader slice. We've owned this platform for nearly 10 years, and it has been a fantastic backbone and revenue and cash flow driver for the business. OmniAb is the largest segment in terms of number of partners or programs in development. What is interesting is it's a fairly young technology. We are well ahead of our expectation for a number of licensing transactions and partner interest coming to us to access our technology. And as you can see, those white dots, they are moving towards the center. None of these programs were in clinical stage when we acquired it 4 years ago, and now we're seeing a very strong progression. The first couple of products we believe could be approved in 2021. When we look at Slide 16, this is a simple calendar of upcoming catalysts or late-stage events. It is the most substantial calendar we have ever had in our history. Now in any given year, we have well over 100 meaningful partner events. What we're doing here is simplifying this chart to show you 10 that are coming up. At the end of this year, there are 2 pivotal data events from Palvella and Takeda, data readouts that we think are going to be very significant. We're eager to see those trial results. As we flip to 2021, we highlight 8 events, 5 of them relate to product approvals. This is significant. We are looking at potentially 5 label or product approvals for next year that could generate new product launches and significant growth in our revenue outlook. Notably, 2 of these are OmniAb based and 3 of them are related to assets tied to our Pfenex acquisition. When we look at Slide 17, just a comment that we are generating significant cash flows. It's an efficient P&L. There's revenue growth, we have high gross margins and a fairly lean operating structure. Ultimately, what this means is that we're generating good cash flows. And we are investing in our future to drive long-term growth. There are 3 -- or there are 4 channels, internal R&D, of course, identifying our own ideas to invest in science, ultimately to partner, but we're also doing investments. There are 3 areas of acquisitions, technology acquisitions like Captisol or OmniAb, where we're buying brand-new platforms to expand our offerings. Tuck-in M&A. This is where we're finding adjacent technologies that fit very well into our existing technologies. Notably, we've done deals with Ab Initio, Taurus, xCella, smaller deals, but they support our OmniAb business. And finally, transformative M&A. These are larger M&A transactions that not only drive technology and science, but also significant contributions to our P&L. On Slide 18, this is a chart that is a preview for what Matt Korenberg is going to go deeper into, but we have deployed over $2 billion over the last 10 to 12 years. Roughly half of it has gone return of capital to shareholders in the way of special dividends or significant share repurchases. The other half has been to acquire companies in M&A. We are pleased with our record. We are committed to shareholders in returning capital, and we believe we will continue to do that. And at the same time, we believe that we are good investors on the M&A side. We're disciplined on value, and we have good instincts for what fits with our business and what the industry needs to drive our business. On Slide 19, I want to acknowledge our growing responsibility and leadership with environmental, social and governance initiatives. Obviously, this is an important area. More and more companies are thinking about this, but it's not a new concept for Ligand. We have obviously an important role in global health, but specifically, when we look at the environmental and social aspects, we have a team of employees and frankly, in conjunction with our partners where we are looking at environmental factors, conservation in reducing emissions. We're committed to diversity. We're seeing that within our company, our employee base, good diversity and at our Board level. And on the governance side, we're highly committed to good governance, good oversight by our Board, transparency and ensuring that there's independence. When I comment about our Board on Slide 20, here's a picture of our Board of Directors, I'm proud to work with these colleagues. It's a great Board. We are diverse in composition. We're diverse in experience and background. This is a highly engaged Board, active, and they are providing fantastic industrial connections across the globe. Ultimately, I want to acknowledge that this Board is very well suited for our business model and our outlook for our growth prospects. My last slide is a comment about our focus and strategy for the next 3 years. I could comment about the next 5 or 7 or 10 years, but really what matters is, as we get through 2020, as we integrate a major acquisition, as we continue to invest, what am I thinking about? What is our Board thinking about? What is our team thinking about? And at the top, we are committed to innovation. We will continue to pursue quality M&A. And of course, ultimately, we are about financial growth. Underlying all of this though is the foundation, our stakeholders. And there are 4 major segments, all of them are vital. Our team, we are committed to a strong culture. I'm very, very proud of our team. We have legacy employees who've been with us over 25 years, all the way to our newest employees from our Pfenex acquisition that joined just 3 weeks ago. We hire very well. We develop, we motivate the best, we've got a highly productive team. It's a small team, but it's a highly productive team, and I'm very proud of what we produce. Investors. We've got a good roster of investors. We are devoted to being transparent, to sharing our business model. We're sharing as much as we can about updates and to superior execution. We know that business is challenging but making good decisions and executing well and on time is vital to driving value. Our partners, we've got a proud roster of partners, but we are committed to serving them well, superior customer service, but also expanding the partner base. And finally, the community. We do believe we have an important role in helping global health, helping local health. Our technologies are supporting cancer medicines to reduce the death rate for lung cancer, for multiple myeloma. We have drugs that help with depression, with heart attacks. We've got antiviral medicines. It's a broad array of medicines that we are participating in, and we believe we have a valuable role to keep advancing that. But we also have a national footprint, we know we have neighbors, and we are committed to being a leader and carrying our share of our responsibility. Again, thank you for joining us. We have a very ambitious program today. And now I'd like to turn it over to my colleague, Matt Foehr.

Thank you, John. So I'm going to start off today reviewing our 3 primary platform technologies, referencing Slide #24. So Slide 24 highlights 3 primary technology platforms. All of these platforms we see as cutting-edge. They generate royalties and they're making major drugs, global drugs possible. Each of these technologies is going to be highlighted in finer detail today, including the newest addition, which is the Protein Expression Technology that we recently acquired from Pfenex. Now as John was describing, our business model is based on providing drug discovery and development platforms, completing early stage drug development and enabling that and then partnering those technologies. And these technologies really spread across the continuum of key development activities from antibody discovery, on the left, the OmniAb platform, which I'll describe in finer detail. The Captisol formulation technology, which Vince Antle will describe in detail, and then our newest addition, the Pfenex Protein Expression Technology. Slide 25 is a more traditional representation, a partnered pipeline snapshot. And obviously, our technologies form the foundation for this pipeline. You can see the technology listing there, a nice diversity of technologies at various stages of development, with our portfolio of well over 200 fully funded programs with over 130 partners spread throughout the industry. Like I said, I'm going to start off with OmniAb, jumping to Slide 27. The antibody landscape is a critically important one for the pharmaceutical industry. It's a growing area of interest for development in the pharma industry, and that's driven largely because of the higher success rates for antibody medicines that have been shown over time. You see here on the left-hand side of the slide, the historical success rates for antibody drug classes are nearly twice that for small molecules. And what that's led to on the right, you see data that generated very recently by the antibody society, showing that first approvals of therapeutic antibodies in the U.S. and EU have grown substantially over recent years as the investment in antibody medicines increases substantially by our partners in the industry. And Slide 28 highlights our OmniAb technology suite. With the increased focus for antibody medicines, more and more partners are looking for tools that enable them to find the highest quality antibodies at the highest rate at the highest speed and also ones that increase their chances of success. And so the OmniAb technology has continued to be one that is in demand, used widely by our partners and by new parties who are interested in getting access to it. And we're continuing what we consider our best-in-class status with continued innovation by our scientists internally and also expanding the technology offering through tuck-in and bolt-on acquisitions. The OmniAb platform is the only 3-species platform in the world. It's in high demand, not only because of the diversity of species that we offer, but also the fact that we have bispecific platforms, both in a Rat, our OmniFlic platform as well as in a Chicken, what is known as the OmniClic platform. And then at the bottom of Slide 28, you see recent acquisitions have allowed us to continue to expand the OmniAb offering. Starting on the left with Ab Initio, antigen generation technology, which brought a nice partnership with it with Pfizer, but also now have multiple partners who are leveraging the Ab Initio antigen capabilities as they leverage the OmniAb platform. The xCella technology, which is a very exciting technology that we recently acquired that allows ultra high-resolution and high-speed automated antibody selection for antibodies with the qualities that partners are looking for. And then most recently as well, the Taurus acquisition, which brings ultra-long CDR-H3 humanized binding domains, similar to those and really generated out of bovine, out of cow, which we are now branding as OmniTaur. This industry-leading broad offering has allowed us to expand our partnership substantially and the proven success that our partners are generating also increases their use of the platform as they embark on new antibody programs and also attracts new partners. Turning now to Slide 29. Measures of performance of OmniAb. We measure performance in OmniAb in a variety of ways. But one is the use by our partners and the program growth. And Ligand has more than tripled the number of OmniAb agreements since 2012, driving substantial program growth. The program growth not only comes from new partners, but also from partners using the platform more broadly. Also, we're now approaching 40 patent filings by our partners, with patents that are issued by our partners or pursued by our partners that claim an antibody derived from OmniAb as the primary invention. This obviously creates a very long intellectual property tail for the programs with expiries now that span out to 2040. And you can see in the graph in the lower right-hand corner of Slide 29, the growth of novel antibody patents that are filed, claiming an OmniAb antibody as a primary invention. Clinical trial performance on Slide 30 is also an important performance metric for OmniAb and we've seen substantial growth there as well. There are now over 8,500 clinical patients that either have been or plan to be treated in listed clinical trials of OmniAb antibodies. We've seen substantial growth through the year this year and upcoming new clinical starts from partners like Janssen, J&J and Merck. And now based on the partner progression and based on plans, largely in the cancer space towards potential pivotal trials, we see as many as 10 potential OmniAb marketing approvals by 2025. Slide 31 highlights some clinical successes by some of our partners. I want to highlight Immunovant. Their anti-FcRn monoclonal antibody was discovered in OmniRat, and has been one that is getting more and more attention, given positive Phase II results that have been reported in multiple indications and plans towards registration filings in indications that are expected to initiate in the first half of 2021. Janssen also has presented data this year at high-profile medical meetings around Teclistamab, which is also a drug that has an anti-BCMA portion that was discovered in our OmniAb platform. And then continuing on to Slide 32, we see other successes, not only from a clinical perspective, but also from a commercial deal perspective as well. Our partner CStone with Sugemalimab recently announced a partnership with Pfizer, forming a strategic alliance around collaboration for the development of the drug in China, and they are moving towards a filing for approval. And then Zimberelimab, which has been one also that has seen a number of positive data reports recently, was also recently the subject of a commercial deal between Gilead and Arcus Biosciences. So in summary, on OmniAb, now on Slide 33, we see it as a best-in-class technology for antibody discovery that's meeting a growing need within the industry. Our partners continue to have substantial success with antibodies that they've discovered out of OmniAb. And now we expect the first OmniAb derived commercial products to be -- are projected to hit the market in 2021. So I'm going to switch gears now briefly and talk a little bit about our R&D -- internal R&D programs on Slide 34. Slide 35 highlights R&D programs that we are selectively investing in now. One part of our business model is that we very carefully select programs where we invest R&D dollars to drive partnering events with upsized licensing terms. And 3 programs are highlighted again on Slide 35. On the far left, the Captisol-enabled Iohexol program, which we're moving towards initiating a potentially pivotal trial, which will lead us to a $1.5 billion existing U.S. contrast agent market and becoming a participant in that. Our OmniChicken antibody programs and PF810, which is a new program, I'm proud to roll out today that we recently acquired. Slide 36 provides a little bit of background on a potentially pivotal trial that we're planning to initiate in December for Captisol-enabled Iohexol. The trial is designed to demonstrate a reduction in incidence of contrast-induced acute kidney injury, an equivalence of image quality following administration of CE-Iohexol compared to General Electric Health's Omnipaque. It'll be a 540-patient trial. It's projected, as I said, to initiate before the end of the year. We are going to go into an adaptive design. It will be randomized, multicenter, double-blind parallel. And it will be assessing patients with impaired renal function who are undergoing invasive coronary angiography. We also plan for a prespecified interim analysis of the rate of cardiac-induced acute kidney injury, performed for futility after 60% accrual of the patient data. So this, we think, will allow for a potential 505(b)(2) approval filing, but with a label that is differentiated for safety. Slide 37, very briefly highlight some very recent market research that was completed just earlier this month, which provided additional perspectives from hospital payers on key issues associated with acute kidney injury in the hospital setting. And some key findings include that mitigation strategies currently are viewed as being insufficient, especially at the health system level, where the data is aggregated. And that CE-iohexol will be seen as a major innovation and a significant value driver. You see here on the right-hand side, some of the select payer feedback, really highlighting the need for a drug like this. Highlighting no one seems to have good renal function anymore, and almost every patient is seen as high risk, that there is significant cost to the hospitals from acute kidney injury from contrast exposure. So all of these give us even more confidence as we move forward in our pivotal trial. Slide 38. Switching gears now highlighting our OmniChicken antibody programs. We have 5 programs that we see now primed for future partnering events. You see them listed here. Most of these are in the oncology space. And one with inflammation and other broader use, we now have differentiating competitive benchmark data that we've generated and 3 programs are currently under research evaluation with commercial interest by parties who are via nonexclusive agreements. So we have partners who are generating data on our lead antibodies and see these now as primed for future partnering events. And then lastly, on Slide 39, I'm going to highlight the PF810 program. So this is a recently acquired program that we acquired with Pfenex. It's a next-generation peptide therapeutic that's focused around endocrinology, leverages our extensive CMC and clinical know-how. And the team at Pfenex have generated some very impressive proof-of-concept data established in 2 species, including nonhuman primates. We see this as a program with significant near-term value creation opportunity, and now are planning an IND filing that's targeted for 2021, and we look forward to talking more about this program as we progress further into development. And with that, now turning to Slide 40. It's a pleasure to introduce Dr. Vince Antle. Vince is our Senior Vice President of Technical Operations and Quality Assurance and heads our Captisol programs. And now I'll turn it over to Vince to talk a little bit about the Captisol technology.

Thanks, Matt. It's such a pleasure to be able to provide some of the Captisol updates and highlights for 2020. It certainly will be a year the Captisol team won't forget. On Slide 41, I'd like to talk a little bit about the background for Captisol. It's a modified cyclodextrin that's been used by the pharmaceutical industry to help solubilize and stabilize active pharmaceutical ingredients. Since the early '90s, in the first Captisol-enabled approved product, this excipient has been successfully used by pharmaceutical industries to help enhance their solubility. It's estimated that about 40% of small molecules in development have solubility challenges. And Captisol is one of those technologies used to help in that area. Our extensive safety database combined with our clients' clinical and regulatory successes have dramatically increased Captisol's awareness, visibility and use. The Captisol team continues to focus on 3 areas, these being our product quality; our supply chain reliability; and outstanding customer service. On Slide 42. Some of the key features of Captisol would include our global reach with Captisol-enabled drugs that are marketed in more than 70 countries and greater than 40 active partnered Captisol-enabled products in development. Our manufacturing know-how with more than 20 years of commercial production experience and an extensive patent landscape, containing more than 400 issued patents worldwide. Next is the Drug Master Files in the U.S. We have several. Type 4 chemistries and manufacturing controls Drug Master File and our Type 5 safety toxicology and clinical experience DMF. In addition, in Canada, we have our Type 3. And in the last few years, we've activated other Drug Master Files in Japan and more recently, China. The manufacturing piece, the last piece here, is where I've spent most of my time this year in an effort to dramatically increase the scale and efficiencies of our process. Captisol is still made under the highest quality standards of good manufacturing practices. On Slide 42 (sic) [ Slide 43 ], please. It's been a busy year in many ways, including our new agreements. I've been associated with the technology for more than 15 years and can say I've never seen such a level of interest in years past. The bar chart to the right shows our substantial increase from years past in both our research agreements and our clinical commercial agreements. Next slide. What routes of delivery can Captisol be used? Well, the approved products enabling products are currently only delivered by IV, but that could be changing in the coming years. Ligand continues to invest in the technology and the safety data that will enable broadened use. This year, we've seen some significant interest in use in other routes of administration, such as our oral inhalation and subcutaneous. Some notable non-IV Captisol-enabled partner programs would include Novartis' oral pediatric solutions, remdesivir inhaled solution with Gilead and SQ Innovations subcutaneous Furosemide formulation. On Slide 45, in the past 9 months have brought a lot of changes to Captisol. We and our manufacturing partners have completed a significant amount of work to increase our efficiencies and capacity. There are now 4 manufacturing sites working on Captisol with one of these in the United States. Over this short period of time, there have been some major improvements in our efficiencies of production processing, testing and batch release. We are leveraging our intellectual property and know-how around our Captisol continuous manufacturing process. Hopefully, you'll hear more about this in the coming years. It's an exciting time for all of us on the Captisol team. On Slide 46, Captisol is enabling new life-saving drugs and meeting clients' significant industrial needs. With the improvements we've completed thus far, we're positioned well for future growth. And with that, I'll turn it over to Monica Tijerina at Gilead. Monica?

Thank you. I'm on Slide 48. It's my pleasure to present today on the important partnership between Gilead and Ligand, to broaden access of remdesivir and its final drug product Veklury, to patients for the treatment of COVID-19. So from the beginning of the year, Gilead has worked at risk to expand the supply chain of both remdesivir as well as its final drug product Veklury. To enable this expansion, we had to partner very closely with Ligand as a key partner and a key supplier of Captisol, which is a key ingredient in the manufacture of the Veklury. On the next slide, we show the properties of remdesivir, and remdesivir is a broad spectrum antiviral agent. It's demonstrated antiviral activity both in vitro and in vivo animal models against numerous viral pathogens. The structure of remdesivir is shown in the orange box. It is a nucleotide analog that targets RNA polymerase. Coronaviruses are RNA viruses. And for viral replication, they require RNA polymerase to replicate RNA from an RNA template. This process is unique to RNA viruses, making RNA polymerase an attractive target to inhibit viral replication. Remdesivir is a prodrug of adenosine Triphosphate, or ATP. In the body, it is metabolized to its active form, a triphosphate. And the active form of remdesivir can compete with ATP for incorporation into viral RNA. And when it is incorporated, it terminates the viral replication process. On the table on the right, we see a summary of the EC50 of remdesivir against numerous virus families. The EC50 is defined as the effective concentration required to achieve 50% antiviral activity against a typical virus, and it's a measure of drug potency. Highlighted in the maroon box is the EC50 of remdesivir to 2 coronaviruses and specifically SARS, Severe Acute Respiratory Syndrome. And we see the EC50 for remdesivir is 0.1 micromolar, demonstrating potency. On Slide 50, on the next slide, we see the complexation or the use of Captisol to solubilize remdesivir. So as Vince noted, many drugs are poorly water soluble and use Captisol as a solubilizing agent. As noted, Captisol is a modified cyclodextrin to increase both the solubility and stability of many poorly water-soluble drugs, and this includes remdesivir. So Captisol forms a reversible cyclodextrin drug complex and attracts -- and in the hydrophobic core of Captisol, it attracts hydrophobic drugs such as remdesivir. And this is shown on Slide 50. And in the body, this reversible complex can dissociate and you get free drug that goes to the site of action and the Captisol -- the free Captisol can be eliminated renally. Ligand has done work, and this is Ligand work using molecular dynamics to look at the complexation of remdesivir with cyclodextrin -- with Captisol, excuse me. And what you notice is that remdesivir, similar to the cartoon, is nestled within the hydrophobic core of Captisol. And you see 3 different views of the simulation. The bottom left-hand panel demonstrates the solubilizing power of Captisol. So on the vial on the left and the vial on the right, they both contain 100 milligrams or remdesivir. And on its own, you see that remdesivir forms a milky white suspension. When you add Captisol, at a 30:1 ratio of Captisol to remdesivir, you see it turns into a clear solubilized solution. We currently manufacture remdesivir into 2 products, a liquid concentrate and lyophilized powder. The concentrate for solution for infusion requires cold chain storage. And the powder for concentrate for solution for infusion is ideal for stockpiling. It has room temperature storage and a long shelf life. Both the liquid concentrate and the lyophilized powder are administered via infusion and require a hospital setting for administration. On Slide 51, we see the numerous milestones required -- achieved over the last 6 months to expand access to remdesivir and Veklury to patients. And on May 1, the FDA issued an emergency use authorization, for remdesivir for the treatment of COVID-19 in adults and children hospitalized with severe disease. Severe disease is defined by patients with low blood oxygen levels or needing oxygen therapy. And this action by the FDA was taken due to the evolving data from the NIAID clinical trial showing evidence of reduced recovery time. A few days later, the Japanese Ministry of Health, Labor and Welfare, granted regulatory approval of remdesivir, given the trade name Veklury. It's important not only to supply Veklury to develop countries but to expand access across the globe. And on May 12, Gilead negotiated voluntary licensing agreements with generic manufacturers and this was to expand supply to 127 low to middle income countries. On July 3, the European Commission granted marketing -- conditional marketing authorization, and this makes Veklury the first approved treatment option for COVID-19 in the European Union. Gilead is actively developing formulations of remdesivir with the potential to reach patients earlier in the disease and in alternative care settings outside of hospitals. And to this, we initiated a clinical study with a new investigational inhaled solution of remdesivir, and this was in early July. We're also evaluating remdesivir in specific subpopulations and initiated a pediatric clinical study in late July. A new drug application for Veklury is currently under FDA review. And in late August, the FDA broadened the emergency use authorization to include all hospitalized patients. And this allows physicians to consider a broader range of eligible hospitalized patients to potentially receive Veklury. The supply of Veklury is no longer constrained in the United States and as October 1, the U.S. government allocation process has been discontinued. The U.S. government no longer allocates Veklury. And so Gilead has transitioned to a more traditional commercial distribution system. And about a week later, in early October, on October 8, the European Commission signed a joint procurement agreement that will enable rapid and equitable access to Veklury. The JPA enables participating countries in the EU and the U.K. to purchase Veklury for both real-time demand and stockpiling needs. On the next slide, we see the manufacturing projections for Veklury. And this slide really summarizes the impact of early investments made by both Gilead and Ligand on the ability to manufacture this drug. As I noted, as early as January of this year, Gilead proactively worked to reduce the time to manufacture remdesivir. As the active pharmaceutical ingredient, it has a long complex linear synthesis. In addition, we worked to expand the drug product manufacturing network to manufacture Veklury. These actions were taken at risk and ahead of clinical readout. In parallel, Ligand had to expand the production of Captisol, as I noted, a key ingredient in the manufacturer of Veklury. To this, Ligand had to invest in capital, qualify alternate suppliers at key raw materials and expand its [ free ] drawing capacity. The investments made by both Gilead and Ligand have paid off threefold. We observed an inflection point in manufacturing capacity in third quarter of this year, with Gilead increasing production of Veklury almost 50-fold from January to year-end. Two, Gilead is meeting real high demand for Veklury in the United States, and we expect to meet global supply needs by the end of the month. And last, we're on track to produce more than 2 million treatment courses by year-end. The success of quickly broadening access of patients with COVID-19 to Veklury has been made possible by the close partnership with Gilead and Ligand, resulting in a very important first step in the treatment of COVID-19. Thank you.

Great, Monica. I really want to thank Monica for joining our event for a portion of today's event. Needless to say, Monica -- and Monica specifically in Gilead's global supply chain team around the world have been and continue to be fantastic partners to Ligand. So Monica, I want to thank you again for joining for a portion of today's event.

Thank you for the invitation, Matt.

So we're going to continue the program now on Slide 53. I'm going to highlight just briefly Slide 54, which is a very detailed description of therapeutic approaches that are being pursued for COVID-19. Obviously, this is the biggest health crisis in history. So there's a substantial amount of work ongoing in the industry around therapeutic approaches for COVID-19. And those can really be categorized in 3 main buckets, if you will. Immune modulators, which are drugs that primarily alter the immune system to reduce viral spread or reduce what's called the cytokine storm or significant inflammation events. Antibody drugs, obviously, that are designed to block the cellular uptake of viral particles. And there are a number in development there, specific antibodies as well as convalescent plasma. We also have 3 partners who are pursuing OmniAb derived antibodies as potential antibody therapeutics for COVID-19. And then the last are the antivirals, drugs that are designed to inhibit viral replication, like remdesivir, of course. And so a lot of work, obviously, ongoing there, not only preclinically but clinically. And today, we're very fortunate to have Dr. Matt Davis joining us to present COVID-19 treatment guidelines and the current landscape and specifically remdesivir clinical data. As a way of introduction, Dr. Davis obtained his doctorate in pharmacy from the University of Texas at Austin and completed postgraduate training at the University of California Davis Medical Center, specializing in infectious diseases, where he studied Triazole, pharmacokinetics and pharmacodynamics and toxicology. He's currently the infectious diseases clinical pharmacist at the Ronald Reagan UCLA Medical Center in Los Angeles, and serves on the UCLA COVID-19 Treatment Guidance Committee, which is responsible for developing and maintaining therapeutic guidelines for the institution. Additionally, he serves as the lead for the University of California system-wide antimicrobial stewardship collaborative, which is a collaborative effort among 5 academic medical centers in the University of California system. Dr. Davis has lectured about preclinical and clinical data for remdesivir in international conferences and has published and presented reviews in its -- on its current and future roles in infection therapy. And I want to thank him again for joining us today. And with that, I'll turn it over to Dr. Davis.

Hello, and thanks for the introduction, Matt. If you can just advance the slide. I'd just like to start off by saying I have no disclosures related to either Ligand or Gilead. If you could advance 2 slides, I have a brief outline for this talk. So it will be focused both on preclinical data, including the pharmacology of remdesivir, structure activity relationships and then an overview of the in vitro data. Also, I'll be highlighting key clinical data for randomized trials, national organization guideline recommendations and then also remdesivir's place in the COVID-19 therapeutic framework. This is on Slide 57. I'm moving on to Slide 58 now. So mechanistically, remdesivir is a nucleoside analog that exerts antiviral activities through 2 known mechanisms. First, as Monica mentioned, it interferes with viral RNA, dependent RNA polymerase, leading to delayed termination of viral RNA transcription. Additionally, it is preferentially incorporated into the MRNA template strand over endogenous nucleotide bases, which interferes with complementary base pairing for replication. This is on Slide 58. Clinical trials are ongoing for its use in the treatment of COVID-19 and multiple Phase III clinical trials have been completed to date. Notably on May 1, the FDA-approved the emergency use authorization of remdesivir, while simultaneously establishing it as the standard of care for severe COVID-19 therapy, which has far-reaching implications in the study of newer agents, which will most likely be studied for use in addition to remdesivir therapy as opposed to in comparison to remdesivir and is formulated for intravenous use but inhalational formulations are under investigation currently. And for dosing in adults, there's a 200-milligram load on day 1, followed by 100 milligrams daily thereafter for a duration of 5 to 10 days. The dosing used for pediatrics is a 5-milligram per kilogram load, followed by 2.5 milligrams per kilogram daily thereafter. Next slide, please. So briefly expanding on Monica's comments. Remdesivir is a monophosphoramidate 1 prime cyano C-adenosine nucleoside analog. In examining the remdesivir molecular structure, there are 2 key components that I'd like to highlight that impact its antiviral activity and selectivity. First, let's take a look at the monophosphoramidate group. So we're on Slide 60 now. Here are 3 examples of C-adenosine nucleoside analog with various 5 prime carbon substitution circled for you. On the left, we have the hydroxylated form, which in order to be activated, requires phosphorylation by intracellular kinases. The issue here that nucleoside analogs must compete for phosphorylation with endogenous nucleoside pools. And this is a rate-limiting step for antiviral activity. In the middle, we see the monophosphate form, which circumvents the need for initial phosphorylation, but this phosphate group is negatively charged, which impacts its ability to traverse cellular membranes. The phosphoramidate group on remdesivir mitigates both of these concerns. First, the substitution is neutrally charged, so there's no impact on membrane permeability. Additionally, once intracellular, the molecule is cleaved by esterases and converted to the monophosphate form, which circumvents the rate-limiting initial phosphorylation step. Next slide, please. So next, I'd like to focus on the 1 prime cyano modification. Next slide. So when the parent C-adenosine nucleoside analog was tested in vitro without any modification, it demonstrated very poor selectivity and was highly cytotoxic for the cell lines under study. But when the 1 prime position was modified to incorporate a cyano group, it confirmed high selectivity for the viral RNA polymerase active site, which led to significant improvement in the selectivity index values. So moving on to Slide 63 now. For safety information, remdesivir was well tolerated in multiple dose Phase I clinical trials. The most notable adverse event reported is transaminitis with an onset ranging from 5 to 25 days. And resolution occurring 3 to 47 days thereafter, which led to the development of transaminase-based exclusion criteria for ongoing clinical trials. Other adverse events that have been observed include infusion site reactions, gastrointestinal events, including nausea, constipation and dyspepsia and also headache. Moving on to Slide 64. Arguably, the most notable characteristic of remdesivir is its broad and potent antiviral activity across a wide array of RNA viral families. Focusing specifically on coronaviruses, remdesivir possesses sub micromolar EC50 values against human and zoonotic coronaviruses, including MERS CoV, SARS-CoV-1 and SARS-CoV-2 as well. This is partially explained by the exceptionally high homology of the RNA polymerase enzyme across coronavirus genome groups, allowing for preserved antiviral activity across viruses. Slide 65, please. So to orient you to the in vitro activity of remdesivir, I'd like to first define a few key terms. The EC50 value or effective concentration 50, which in this case is the concentration required to produce half maximal inhibition of virus yield and viral replication is the parameter for potency. The CC50 value or cytotoxic concentration 50 is the concentration required to produce 50% cytotoxic activity in the cell lines under study, which correlates to toxicity. And the selectivity index is the ratio of the 2 concentrations with CC50 divided by EC50 with a higher ratio in this case for remdesivir, representing higher selectivity for viral RNA polymerases. We can see that remdesivir has sub micromolar activity across SARS-CoV-2, SARS-CoV-1, MERS and the Ebola virus with relatively high CC50s. This translates to high in vitro potency against these viruses while maintaining high selectivity for viral targets. Next slide, please. So this has been compared to other agents that were assessed for activity against SARS-CoV-2, like the nucleoside analogs Ribavirin, Penciclovir and Favipiravir, which, as you can see, all have relatively high EC50 values. Next slide, please. So we're on 67 now. So why do other nucleoside analogs have seemingly poor in vitro potency? Well, during RNA transcription for coronaviruses, there's a proofreading mechanism that is facilitated by the exoribonuclease enzyme, which examines the newly incorporated RNA basis for appropriate matching. For most nucleoside analog drugs, this leads to them being removed from the RNA transcript, leading to decreased antiviral activity. However, it appears that remdesivir is able to maintain activity despite the exonuclease through 2 properties. First, because the nucleoside base retains the 3 prime hydroxy group, it allows for RNA chain elongation after remdesivir is added, typically 3 additional base pairs prior to termination of the replication. These additional bases provide protection from the exonuclease excision. Secondly, remdesivir is incorporated preferentially over endogenous nucleotide bases. So even if it is removed, it will be more preferentially reincorporated, increasing the probability of it exerting antiviral effects downstream. Next slide, please. So despite these properties, remdesivir's activity is still impacted to some degree by the presence of the exonuclease enzyme. As demonstrated in these 2 graphs, wild-type virus denoted by the black line, required about fourfold higher remdesivir concentrations to produce an equivalent drop in viral titers or in viral inhibition compared to exonuclease knockout viral stream. However, this is a modest impact on activity compared to that seen with other nucleoside drugs. Next slide, please. On Slide 69. So moving on to clinical data. First, we have the Adaptive COVID-19 Treatment Trial Phase I or ACTT-1, which was a randomized, double-blind, placebo-controlled trial conducted by the NIID on 1062 patients with COVID-19 of varying disease severity. The comparator arms in the trial were 10 days of remdesivir versus placebo and concomitant medications were allowed if they were specified in local institutional guidance. Baseline severity of illness was classified by ordinal categories defined by oxygen requirements and the largest subgroup of patients required oxygen supplementation by low flow nasal cannula at baseline, followed by patients requiring mechanical ventilation or ECMO. Patients were well matched between groups. The primary outcome being studied was time to clinical recovery defined as being discharged or dischargeable but barring infection prevention requirements. Remdesivir significantly reduced the time to clinical recovery with a median time of 10 days versus 15 days for the placebo group. Mortality was analyzed as a secondary outcome, and there was not a statistically significant reduction in day 29 mortality, but there was a noticeable trend towards mortality reduction, particularly in the patients on low flow oxygen at baseline. For safety outcomes, the patients in the remdesivir arm had a lower rate of adverse events overall compared to placebo and also lower steady discontinuation due to adverse events. This was primarily driven by respiratory decompensations in the placebo group. Next slide, please. So breaking down the primary outcome further, we can see the graph for the overall cohort on the left, which shows a clean separation between the 2 arms starting at around day 4 of the study period and persisting through the follow-up interval. In the 4 graphs on the right, which are the patient subgroups based on baseline oxygen requirements, we can see the patients in remdesivir, most prominently seen in the low flow group demonstrated benefit on the top right. And that the curves in the high flow group and the mechanical ventilation or ECMO subgroups overlap considerably throughout the study suggesting a lack of significant benefit of therapy in these subgroups. Next slide, please. So Slide 71. This figure is a graphical representation of day 15 clinical status broken down by baseline oxygen category. The categories are represented with a color spectrum with the left most categories in shades of red representing worse outcomes and conversely blue shades on the right representing better outcomes. I think the most meaningful information that can be taken away from this figure is the proportion of patients that worsened from their baseline to their day 15 clinical status. So I've highlighted those rates for you. In the patients on ambient air at baseline, the proportion of patients that worsen was 8.3% for remdesivir versus 15.7% per placebo. A larger separation was seen for the low flow group, 10.4% versus 23.6%. This narrowed slightly with the high flow group with 30.5% versus 36.7% and narrowed further in the mechanically ventilated or ECMO patients with 10.7% versus 13.6% of patients worsening from their baseline clinical status to their day 15 clinical status. Next slide, please. So looking towards mortality outcomes. In the overall population, there was a nonstatistically significant reduction in mortality between remdesivir and placebo with the Kaplan-Meier estimates for mortality being 6.7% versus 11.9% at day 15 and 11.4% versus 15.2% in day 29, respectively. There was a significant protective effect in the low flow oxygen subgroup on the bottom right graph, suggesting a potential mortality benefit in these patients. Next slide, please. So Slide 73. Briefly touching on safety endpoints. As mentioned previously, remdesivir was well tolerated overall and there was no difference in acute kidney injury between arms. Next slide, please. Moving on to Slide 74. The next study I'd like to highlight is the SIMPLE-1 Severe trial, which was a randomized open-label comparative trial conducted by Gilead studying 5 versus 10 days of remdesivir in severe COVID-19 disease. The primary outcome was day 14 clinical status as assessed by 7-point ordinal scale similar to the one used for the ACTT-1 study. After adjusting for some baseline differences in disease severity, no difference was found in the primary outcome suggesting that 5 days provide a similar benefit to 10 days of therapy. There was no significant difference observed in secondary outcomes such as time to clinical recovery and clinical improvement between the 2 arms of remdesivir. And for safety, serious adverse events were observed more frequently in the 10-day arm, which could potentially be explained by either increased exposure to remdesivir or simply that these patients were sicker at baseline and were more susceptible to disease morbidity. Next slide, please, Slide 75. In a post hoc analysis, the authors examined if there was any benefit of 5 additional days of therapy or, in other words, doses 6 through 10, for patients grouped by their oxygen support requirements on day 5. So for patients that are required invasive mechanical ventilation at day 5, 17% of the patients that received 5 additional days of therapy died by day 14, whereas 40% of those that received no additional therapy died by day 14 and suggesting potential benefit from dose 6 through 10. However, an opposite trend was -- in outcomes was observed for patients requiring high flow oxygen support at day 5 with 15% death by day 14 in patients receiving additional 5 days of therapy versus 10% in those who did not receive any additional therapy. This analysis must be considered with several caveats, including that it was conducted in a post hoc fashion with small subgroups of an already small sample and trends were inconsistent, so these results require further study for confirmation. Next slide, please. Moving on to the SIMPLE-2 Moderate trial, which was a randomized, open-label controlled study conducted simultaneously by Gilead in 596 patients with moderate disease comparing 5 and 10 days of remdesivir to local standard of care alone. The primary outcome under study was day 11 clinical status for which 5 days of remdesivir demonstrated a significant improvement over standard of care. This significant improvement was not observed for the 10-day group, which could have potentially been influenced in part by the open-label nature of the study, leading clinicians to potentially delay discharge until therapy was completed. Both remdesivir arms demonstrated significant improvement over standard of care on day 14 and adverse events occurred at similar rates across all 3 groups. Next slide, please, Slide 77. So in this low severity cohort, the prevention of disease progression is one of the most useful pieces of information. This figure depicts changes in clinical status from baseline at various time points with green at the bottom showing improvement, gray in the middle for no change and red at the top for clinical worsening. We can see at day 14 that remdesivir arms had a 6% lower proportion of patients worsening compared to standard of care alone, which narrowed to a 3% to 4% difference by day 28. It is important to consider that because these patients started with such a low severity of illness, the termed worsened here could be something as simple as the initiation of low flow oxygen support with nasal cannula. Overall, there were very low rates of poor outcomes in the study with the 1% to 2% mortality in the remdesivir arms by day 28 versus a 2% in the standard of care arm. Next slide, please, Slide 78. So information, remdesivir significantly reduced time to clinical recovery. This benefit most appear in patients requiring low flow oxygen supplementation, but a modest benefit has been observed in patients with moderate disease on ambient air. There's a clinically meaningful, but not specifically significant reduction in mortality seen in the overall population in ACTT-1, and a significant reduction observed in the low flow oxygen subgroup. These trends will be reassessed when the final results from the Solidarity trial are available. Additionally, in patients who do drive benefit from therapy, it appears that 5 days is equally efficacious to 10 days of therapy of remdesivir. And lastly, serious and nonserious adverse events have been observed at similar or lower rates than placebo in our controlled trials, confirming that remdesivir is well tolerated overall. Next slide, please. So how do organizations that guide therapy view these results? Well, the Infectious Disease Society of America suggest against the use of remdesivir for routine treatment of moderate disease in favor of enrollment in clinical trials but does suggest remdesivir for the treatment of severe disease, defined as having an oxygen saturation of less than or equal to 94% on room air or requiring oxygen support. The recommended treatment duration is 5 days for patients not requiring mechanical ventilation or ECMO and 10 days for those who do. Next slide, please, Slide 80. The National Institute of Health recently updated their guidelines and recommends no specific therapy for moderate disease. However, they do recommend remdesivir plus dexamethasone for patients with severe and critical disease. Next slide, please, Slide 81. Examining this COVID-19 disease framework, remdesivir plays a role in the early infection stage with modest benefit in patients with moderate disease. And then also in later stages in patients who have progressed to severe disease but have not quite progressed to the hyperinflammation phase. As highlighted by the ACTT-1 trial, the largest benefit derived from remdesivir appears to be in patients requiring low flow oxygen supplementation at baseline, but can also confer some benefit in the prevention of disease progression. So looking at the severity spectrum breakdown. And for context, these data are derived from a large epidemiology study in China, predominantly patients from the Hubei province, which found that 81% of cases had mild to moderate disease classified as non-pneumonia or mild pneumonia, 14% had severe disease and 5% had critical disease, which comprised the patients for which remdesivir is recommended for the guideline. Next slide, please. So here's the list of selected ongoing clinical trials. Of note, the ACTT-3 trial is now ongoing with remdesivir plus or minus interferon beta-1 alpha. We have 2 comparative studies in the Solidarity and DisCoVeRy comparing multiple different potential therapeutic agents, the former recently publishing their preliminary results. Additionally, Gilead has -- Slide 83, please. Gilead has initiated an outpatient trial of remdesivir versus placebo study in prevention of hospitalization or death in patients with at least one risk factor for progression and symptoms for 7 days or less. And the NIAD sponsored TICO trial is an adaptive trial, randomized trial that will study the safety and efficacy of investigational therapeutics for COVID-19, with remdesivir serving as the standard of care. Additionally, there is an ongoing Phase IB/IIA study for inhaled remdesivir and a combined Phase II/Phase III single-arm open-label study of remdesivir safety and kinetics in pediatric patients. Next slide, please. So here's my contact information. Please don't hesitate to reach out for any questions, and I'll stick around to the end for additional questions and follow-ups. Thank you.

Thank you, Dr. Davis. We really appreciate your time. I know given your expertise in infectious disease, it's been a very busy past several months per year as you both analyze the landscape and consult with industry players. So thank you. Appreciate your contributions and perspective here today. All right. We're going to now move back to some company presenters. I'd like to introduce Patrick Lucy. Pat is the Chief Business Officer of our Protein Expression Business. It's been a pleasure meeting and working with him through our M&A process, the last 6 or 7 months. He's joining our team, and we're really excited about this business. We do see this acquisition as a transformative acquisition. Obviously, it was significant in size, but in addition to a leading, highly valuable, in-demand technology with some really top-tier partners, the business is also advanced where we believe it's going to contribute significantly to our financial profile in the next several years. So we're excited about this business. This is new content and slides for our investors, given the timing of our acquisition 3 weeks ago. Pat, of note, was the founder of Pfenex. He has a long history and a proud history. And again, we're pleased to have him join our program. Pat?

Thank you, John, and really pleased to be able to present today on behalf of the platform and the team at Pfenex that is currently being integrated into the Ligand world. You can go to the next slide. So the Pfenex platform, obviously, plays in the protein segment of the pharmaceutical industry, which is vast and significant at $100 billion plus and growing. Given the competitive environment in protein therapeutics, novel drug developers are constantly seeking platforms that can streamline the development of these therapies to create competitive advantage. And in addition, protein therapeutics are much more complex than small molecule drugs. And really, the key to developing or producing protein therapeutics is the ability to produce these proteins in with the proper secondary and tertiary structure to ensure that these proteins are active and usable for their application of choice. And in the Pfenex platform certainly has a significant success rate and the ability to make proteins not only expeditiously, but also in their proper structure to ensure streamlined production and long-term low-cost of goods. You can move to the next slide. Next slide, please. So the Pfenex platform is one of the most comprehensive prokaryotic protein production platforms in the industry. And I think in the subsequent slides, I can convince you of that. We've applied the platform to a broad range of protein types over the past 15 years. And when looking back at that legacy of Protein Expression, we believe the platform is truly differentiated in state-of-the-art binding modalities where the industry is going, where the industry is basically trying to bring immune cells into the vicinity of tumor cells to have a therapeutic effect. And we believe these multivalent nonnatural proteins is where the Pfenex platform is extremely strong. Having approved products that have been produced by the platform is expected to drive further application and expanded use of the platform. We've been able to transfer production processes from the platform to global manufacturers and have had significant success in seamless technology transfer as well as ongoing CGMP production of therapeutic proteins and vaccines at scales north of 4,000 liters. And going forward, we are focused on opportunities where the platform is uniquely enabling to enable a partner to advance their novel therapeutic or vaccine. And we believe being uniquely enabling will drive enhanced deal economics. Next slide, please. So the initial use of the P. fluorescens or Pseudomonas fluorescens organism was by the -- by Mycogen Corporation back in the mid-80s for insecticidal toxins of the thuringiensis toxins. And around 2000, the Dow Chemical Company acquired Mycogen Corporation and began using the P. fluorescens organism for production of industrial enzymes at significant scales north of 100,000 liter scale. When the initial Pfenex team came across this technology, what we noted was not only a platform that could overexpress heterologous proteins at significant titers, but also the ability of the organism to produce properly folded active protein. So having the proper secondary and tertiary structure, which really meant a much more streamlined production process, avoiding certain process steps of really maximizing the overall yield of the production process. Over the subsequent 6 or 7 years, this team delivered a platform that can deliver significant competitive advantage to our partners, including the speed to identifying a viable production strain and hence, protein, so they can rapidly do that next experiment with the protein of interest in order to make a decision to advance or terminate a program, which results in significant opportunity cost avoidance. The success rates certainly minimize the timeline and cost of development and really takes the CNC off of the critical path of a program. The efficient production using this organism ultimately results in long-term cost of goods reduction. And I have to say the team at Pfenex has significant institutional knowledge, having expressed over the last 2 decades, over 175 lead proteins. So that institutional knowledge that the team possesses is leveraged on every platform partnership that we have to date and going forward. On the right-hand side of the slide, you'll see the diversity of proteins that we've had experience with, all the way from antibody fragments to vaccine antigens to enzymes to these novel binding modalities or what we call antibody derivatives. And after having worked on over 175 lead protein programs, the Pfenex platform has maintained a success rate of over 80% in expressing soluble active protein within the first 12 weeks of expressing the protein, which is a significant success rate that has huge value for protein developers. Next slide, please. So in terms of the P. fluorescens organism, it's a gram-negative nonpathogenic organism. It's very similar to E. Coli in a lot of respects, but there are certain metabolic attributes of P. fluorescens that we exploit for the production of heterologous proteins. The team at Pfenex initially sequenced the genome of this organism back in 2001 and subsequently mines that genome for things that were detrimental for protein expression, which became targets for knockout and also things that were beneficial to protein expression and really became targets for enhancement or overexpression. The production process that we developed is completely -- does not use animal origin or antibiotics at all throughout, which makes it extremely regulatory friendly. And then the high-growth -- high throughput growth and test methods enable us to really look at a broad array of production strains for a particular protein of interest very rapidly. The scale-up and fermentation and purification processes for this organism are extremely efficient and predictive, allowing us to rapidly move from process development into CGMP manufacturing quite efficiently. Next slide, please. Okay. In terms of the toolbox. So as a result of sequencing the genome and then doing the mining of that genome, we are able to identify P. fluorescens native components of plasma. Those indicated in the light blue panels to the right of the slide. And each of these elements have been combined in what we call rapid cloning vectors. So we have approximately 100 rapid cloning vectors that are on the shelf in our laboratory, ready to be deployed. The only thing these plasmids are lacking is the synthetic gene that's coding for the protein of interest. In the bottom portion of the graphic in the green panels, what we describe are engineered host drains based upon a single parental strain. Some of these strains are for overexpressing helper proteins that enhance protein production or disulfide bond formation and a large majority of these strains are also deletion strains or where certain proteases or genes coding for proteases in the genome have been deleted to ensure that these proteases can't have a negative impact on the protein that's being expressed. So this toolbox essentially trivializes about 7 years of R&D on the platform by a team within Dow and ultimately, Pfenex. And that R&D continues to continue to expand this platform for use on novel protein structures and therapeutics. And really, the toolbox here enables this high throughput screening of a broad array of tools to find the optimal combination of plasmid and host ring for the protein of choice. Next slide. Now not only do you need an extensive toolbox in order to construct the large amount of strains that we look at, but also you need automation. And the Pfenex team has developed a customized automation platform that allows us to use combinatorial screening to screen thousands of host strain and plasmid combinations for protein expression, all in parallel, all in a matter of weeks. And there's really 2 modes in which we run the platform. The first mode is what we call lead strain engineering. This is when the partner knows what their lead protein is and has indicated that to us. And basically, Pfenex designed an optimized gene that codes for that protein of interest, we subject that gene to the platforms, looking at thousands of host strained plasmid combinations to arrive at the ultimate optimal production strain for that protein of interest. There's also a second mode in which we run the platform. And this is really backward integrating into the discovery space, where we can enable discovery researches to optimize a protein of interest by evaluating or allowing the evaluation of punitive lead proteins or variants of a lead protein, rapidly isolating each protein from each of those variants providing it to the partner, allowing them to do assessment and then select the lead candidate. And at that point, we could subject that gene to the full platform to ultimately arrive at the production strain for clinical and commercial manufacturing. Next slide, please. So in terms of how this works in the lab, quite straightforward in terms of construction of the plasmid for the host strain, so transforming the plasmid into the host strain. So you have your -- basically your miniature factory to make the protein of interest. And then we grow those strains up in a very small volume culture, 0.5 millimeter culture in these deep well plates and increase the cell growth over 24 hours and then induce the production of the protein of interest. We then harvest that protein and do find analytical methods to determine whether the protein is active, what the quality of the protein is and whether or not that protein is active. I note in the bottom right-hand corner of the slide, the optical densities were able to achieve at this half mill culture of 30 to 50 ODs is significant. It's significantly high cell density for this type of volume, which means a lot more protein per unit volume, which allows our team to evaluate protein very rapidly to ensure it's of high-quality and assess the yield of the protein being produced. In the upper right-hand corner of the slide, you see the cube. And this cube really is graphing plasmid selection versus host strain versus tighter. And what we're trying to identify is those strings that are able to produce at those plasmid host train combinations that are able to maximize the tider. You'll see, for example, plasma #9 in the yellow, each one of those plasma and host train combinations really failed to express to target protein. So if you were doing this manually, there'd be a lot of opportunity cost and they're trying to find a strain that works. But the power of numbers here allows us to have 1,000 shots on net to find the optimal production strain in a matter of 10 to 12 weeks. Next slide, please. So in terms of our intellectual property strategy, this really is built on 4 different tiers of IP. We've got 27 issued U.S. patents and these patents are covering protein expression, the tools and screening methods for protein expression, and we also filed an actual property around product-specific processes, whether it be upstream fermentation IP or downstream purification IP. And this IP portfolio begins to expire late in the 2020s and all the way to late 2030. So a robust intellectual property portfolio that we continue to add through via innovation on the platform. Next slide. This slide really gives you a cross-section of case studies of the experiences that we've had with lead protein expression. And it's important to point out that although a lot of expression technologies talk about incredible expression titers that they're able to achieve, it's also important to point out that we're addressing a lot of other challenges with regard to legacy systems, such as quality issues around clipping of the protein or degradation or isoforms forming. And so the Pfenex platform consistently and reliably, not only delivers high titers of protein, but also high-quality and active protein. And I think this is -- what's also important to point out in the left-hand column, is we're talking about antibody fragments, vaccine antigens, enzymes. So the diversity of proteins that this platform is applicable to as vast and really showing performance across all of these protein classes. Next slide. And one case study that I wanted to point out in today's presentation is our relationship with Jazz Pharmaceuticals, which has been a phenomenal relationship. When we initially interacted with Jazz in 2016 time frame, they were having significant challenges of chronic stock-outs of this Erwinaze product that's being manufactured and supplied by the owner, Portan Biopharma. And this has had a long history of challenges of shortages of the product. And with people that were suffering from acute lymphoblastic leukemia and lymphoblastic lymphoma, having shortage of this product is -- could be devastating to the patient. Both Pfenex and Jazz came together and realized that the challenges that Jazz was facing was absolutely a perfect opportunity for the Pfenex platform and team to address. And really it's expression of this Erwinia asparaginase enzyme. The partnership has primarily are initially focused on 2 products, OPF743 or the Jazz named JZP-458, which is a recombinant Erwinia asparaginase. The 745 is the half-life extended Erwinia asparaginase. And we knew in conversations with Jazz prior to doing the deal that our platform was made perfectly to solve this problem with this enzyme of interest. I'm proud to report the results that we've achieved with this partnership over the past 4 years. PF743 or JZP-458 is currently in a pivotal Phase II/III study for ALL and LBL, and Jazz hopes to file their BLA by the end of this year. PF745, which is the next-generation half-life long-acting Erwinia asparaginase was transferred to Jazz GMP manufacturer earlier this year, and undergoing GMP production. Also, I'd like to point out, there's about $162 million in milestones remaining to be collective in this relationship. And also, there would be tiered royalties on net sales for all products commercialized that have come out of this program. Next slide, please. And this time line is really an interesting case study of how this platform can have a huge impact on the progression of therapeutic proteins. As described, we initially signed a deal with Jazz in late 2016 and commenced the program. 2.5 years later, they're into a pivotal Phase II/III study and expect to file a BLA within approximately 4 years of the commencement of the program, which is really impressive for a 351-A program protein-based program and really proud of gas's work here as well as the team at Pfenex working together to make this happen. So we do anticipate Jazz has indicated that they expect to file a BLA prior to the end of the year for the lead product in this relationship. Next slide. Turning to the teriparatide injection product. This was a 505(b)(2) therapeutic equivalent candidate to Forteo that was developed from the beginning by the Pfenex team and was approved in October of 2019 and launched in June of this year. This product is focused on osteoporosis and is targeting a $1.8 billion anabolic market. In June of 2018, we signed a deal with Alvogen to be the lead commercializer of this product, both in the U.S. and ex U.S. markets. And really, right now, Alvogen is focused on marketing initiatives in the U.S. to increase uptake of the product. And also in parallel with those efforts are pursuing therapeutic equivalent designation with the FDA. And if achieved, we would -- that would allow for this product to be automatically substituted for Forteo in many states in the United States. Next slide, please. And going -- turning to other technology partnerships in the platform in this carrier protein, CRM197 is a diphtheria toxoid that's used as a carrier protein in both therapeutic and prophylactic vaccines, a key program for us. Our licensee is Merck with their V114 15-valent pneumococcal vaccine that's currently in approximately 16 Phase III clinical trials. And Merck has indicated that they intend to file a BLA on this product prior to the end of this year. This product, if approved by the FDA, would compete with Prevnar and Pfizer's Prevnar13, which is about a $5.8 billion global market. And actually, as recently at this morning, Merck has disclosed 2 additional successful positive Phase III clinical trials for the V114 program. Additionally, Serum Institute of India has developed a 10-valent pneumococcal vaccine trademark, Pneumosil, which was approved -- which got through WHO prequalification early this year and received their first UNICEF tender in June of 2020. We actually are already experiencing a royalty flow from Serum Institute on that product. Serum is also using the CRM197 produced in the Pfenex platform in a Phase III clinical trial for the pentavalent meningococcal conjugate vaccine that we're anticipating results on. Finally, the Serum Institute relationship also includes an ability of Serum Institute to supply Pfenex or Ligand with preclinical grade and cGMP-grade CRM197, which our team then sells to vaccine developers globally. We have multiple supply -- clinical supply agreements that will supply the CRM197 to these developers and all from a -- in a clinical setting as well as the commercial setting. Next slide. In summary, the Pfenex platform really has had a long history of success over the past 15 to 20 years expressing therapeutic proteins and vaccine antigens, enjoying a success rate of over 80% with complex protein. The toolbox and automation really enable us to advance therapeutic programs very rapidly. And these really do have an impact on opportunity cost towards the development of these programs, allowing scientists access to the protein of interest, so they can very rapidly make an assessment of that protein to either progress or terminate a development program. The productivity of this organism and the efficiency of Pfenex-based processes ultimately result in a significant reduction of long-term cost of goods for manufacturing of therapeutic proteins and vaccines. The platform has also enabled the integration of several modifications via genetic manipulation to enhance protein activity and using some of these technologies described in the slide, these typically have a negative impact on transcription/translation, et cetera, which ultimately results in a lower titers achieved by the production strain. But the Pfenex platform has demonstrated, time and time again, its ability to navigate those changes and ultimately deliver a robust production strain for the therapeutic of interest. And really, the track record of success positions this platform incredibly well for the state-of-the-art types of engineered nonnatural binding proteins that are being developed by the industry today, and we believe we're well positioned to meet the needs of that market going forward. And with that, I can finish up and hand over to Matt Korenberg to provide the financial overview. Thank you.

Thanks, Pat. Appreciate that overview and looking forward to working with the protein expression platform going forward. So I'll start today with a quick overview of what I'm going to cover. First, I'll take a look at the Q3 Captisol results. We're past the end of the quarter, so we can report out what we booked for the quarter. I'll then give an update on our 2020 guidance and introduce 2021 guidance. After that, we'll take a look at the 3-year outlook to 2023. On the financial side, after John gave a summary of where we're headed from a philosophical standpoint, I'll give you the results of the numbers. And then I'll wrap up with some comments on our M&A and capital allocation plans. Turning to Slide 102. And in Q3, we booked $23 million of Captisol revenue. And that translates now to full-year guidance of $92 million, that's an increase from $90 million, and then implies another $23 million quarter for Q4 as well. On the royalty side, we're now looking at $33 million of royalty for 2020, that's up from the $32 million in our last guidance. That's based on a stable outlook for the existing portfolio of Ligand products, but the addition of the 2 Pfenex products, teriparatide and Pneumosil that are on the market and generating royalty already. Obviously, we don't have royalty reports in hand yet from our partners. And so the guidance for the rest of the year may change based on the Q3 reports we get. On the contract revenue side, we're now looking at $45 million for the year, up from $43 million previously. This is a result of a few things. We have announced the sale of our Vernalis subsidiary in the U.K. has not closed yet, but assuming that it closes in the middle of Q4, well, that sale will actually reduce the previously guided revenue by about $1 million for the year. And then the legacy Ligand contracts that are underlying the guidance has actually increased by $3 million since the last time we gave guidance. Going forward, we'll also combine the contract and service lines that we broke out over the last couple of quarters back into one quarter -- into one line, given that the Vernalis business contributed the most significant portion of the service line. I mean with that sold, we think it makes sense to combine back into one line. On Slide 103, just looking at the full P&L guidance for the year with $170 million of total revenue. That's about 60% growth over the 2019 number. And then $3.95 of EPS is about 57% growth over the 2019 number. We get there by gross margins in line with where we were previously 80% to 85%, impacted by obviously the mix shift from royalties and contracts into Captisol. And then on the cash operating expense side, we've adjusted our cash operating expense to $73 million to $75 million, which includes partial year contribution from Icagen, Pfenex, Taurus, xCella and those are the acquisitions we've done this year, each contributing different portions of the year. The EPS of $3.95 is -- obviously improved from a revenue standpoint, but offset by the operating expenses that we've taken on from those M&A businesses. Before I turn to the next slide and as I start to go through the numbers for 2021, I did want to remind investors that our focus running Ligand is on our core business, our 3 technology platforms and serving a large portfolio of partners. As for remdesivir, it's driving a significant demand for Captisol this time, which is providing upside revenue and cash flow for the company outside of our core business. We're all working through extraordinary times here as we're living through the pandemic. But for Ligand, our operations have been answering the call to supply a key ingredient for the first treatment to receive FDA certification through its emergency-use authorization. As we give our corporate guidance and outlook, our priority is to focus investors on the growth and opportunity of our core business. And we have provided information in the next few slides to help investors evaluate the business accordingly. However, given the planning and financial contribution for Captisol related to remdesivir, we are also striving to provide as much information on that topic as we can around our views and outlook given what we know at this time. Certainly, the situation will evolve, and we'll provide updates along the way. At this time, we estimate that our Captisol related to remdesivir partners is $155 million for 2021, as you'll see on the coming slides. That's the total amount we currently forecast selling to Gilead and the other consortium companies as they require Captisol to manufacture remdesivir. Including the amounts we expect to sell in 2020, the total we estimate selling to support remdesivir from the start of the pandemic through the end of 2020 and 2021 fiscal year is about $225 million. That's a large number. And to put it in perspective, it's more Captisol revenue than we've booked in total over the 9 years we owned the business prior to the start of this year. As we break the $225 million down, we expect about 1/3 of that will be sold in 2020 and the other 2/3 we forecast to be sold in 2021, just roughly. In 2020, it was a partial year of production and manufacturing as remdesivir was being scaled up. And now there's momentum with Captisol demand. We see that demand continuing into 2021 as companies order the material they'll need to meet their manufacturing needs. Just to be clear, though, the quantities and revenue amounts we're providing could be higher or lower depending on the way the pandemic develops over time. The forecast we're providing are our estimates at this time based on the part -- in part by the binding orders that we see and the info we have from all of our customers and our internal analysis. At this time, we're calling for Q4 2020, total Captisol to be $23 million, as I just mentioned in line with Q3. However, we expect 2021 Q1 sales to increase significantly based on the orders we have in hand and are forecasting Q1 2021 Captisol sales to be nearly double the current quarter in Q3 at $45 million. As orders come in, and shipments are processed, we'll update investors on the timing and amount we estimate over our outlook period. If serving the market with higher orders occurs in Q4, then the total amount sold may be offset and lower in 2021. Alternatively, run rates and need might change based on the need for the pandemic and result in sustained demand at higher levels. Our goal is to be transparent and provide as much info as possible. The core business is very strong and in a growth mode. We see Captisol generating revenue and cash flow well above the plans we had in early 2020 before the pandemic. This is a good opportunity for Ligand as we'll have more capital to invest in other programs and technologies to support our long-term growth well beyond the remdesivir/Captisol surge. And if we want to turn now to Slide 104 and start to look at the 2021 numbers in a little bit more detail, you can see that we've got core revenue of $130 million, broken down into the 3 buckets, $45 million for royalties, $45 million for material sales and $40 million for contract sales. In addition, as just mentioned, we see $155 million of Captisol related to remdesivir. And that brings the total revenue to $285 million for each of the 3 main revenue lines. We show a breakout on the right-hand side here, pie charts that give you a little bit more color and flavor for what's in each revenue line. On the royalty side, our base Kyprolis and EVOMELA royalties are added with teriparatide royalty principally and then the other 3 programs from the Pfenex portfolio that we expect to be commercial next year. And then on the material side, you could see a strong demand, we think, from the existing customers base that we had going into the pandemic, and on the contract side, a rebound of contract payments back to the pre-COVID levels, which is offset by the sale of Vernalis. Slide 105, just starts to look at the P&L in detail. Probably the 2 key components here to mention are the sales of Vernalis, which we estimated at $12 million to $15 million for the past 3 years or 2 or 3 years that we've owned the business. That's obviously reducing the revenue line. But we're adding on the royalties, as I mentioned, from the Pfenex acquisition, plus growth in the existing business and the growth in the contract in Captisol lines. Slide 106. On the margin side, as folks know, royalty and contract margins are 100% gross margins. Captisol is associated with cost of goods. You can see that Captisol is obviously a much more significant portion of the total revenue at $285 million, with about $200 million coming total from Captisol. So that's driving the overall corporate gross margins down but I do want to also mention that because of the significant volumes of Captisol, our actual margins on Captisol itself are lower than in the past, just given some of the supply chain components that we've had to put in place in order to meet the surging demand for this year, 2020 and 2021. Looking at expenses. The -- as mentioned, the full year now of the Pfenex team as well as Icagen, Taurus and xCella are added into the 2021 costs as compared to 2020. Vernalis is removed. And then in addition, in 2021, as Matt covered, we'll plan to run the iohexol trial, which will span 2021 and 2022 with the cost for that trial split relatively evenly across both years, but impacting the extra R&D in 2021. On Slide 108, just translating that down to adjusted EPS, showing $6 of adjusted EPS for 2021, which is over 50% growth over 2020. The share count for these projections and guidance did not assume any share repurchase in 2021. Obviously, any share repurchase done would be additive or beneficial to these numbers. Turning now on Slide 109 to the 3-year outlook. You can see on the left a representation of the 2020 numbers with the $170 million total guidance. If we look at the core business, with an estimate of what was done for remdesivir and what would have been initial demand for Captisol. We then see growing that to 2023. You see over a 3x royalty increase -- or about a 3x royalty increase, a 2x contract revenue increase and over 30% growth in Captisol. The royalty outlook, importantly, does not include any contribution from sparsentan or the teriparatide TE approval that we've talked about. And the 2023 number excludes any contribution at all from remdesivir. The long-term opportunity from remdesivir uncertain, but we'll cover that in a few slides. Turning now to each a little bit of a deeper dive on each of the royal -- revenue lines. First, on royalty on Slide 110. John covered this in his section at a high level. But if you look on the right-hand side, you can see the contribution to each of the 3 buckets, the major contributors to each of the 3 buckets. The 4 programs from the Pfenex transaction, the Merck vaccine, V114, the Serum vaccine, Pneumosil, then teriparatide and the Jazz program. Two of those, commercial already, 2 expected to get approvals in 2021, from a timing standpoint, drive significantly the blue bars growth there. New approvals in the current Ligand portfolio, principally the Palvella PTX-022 program as well as the 2 OmniAb programs on the right-hand side. And then the existing base business of approved products with nice growth from both Kyprolis and EVOMELA as well as some of the other smaller programs. Turning to Slide 111. On the Captisol side, this is, of course, again, excluding remdesivir, but just growth in the commercial products, particularly Kyprolis and Nexterone, as well as growth in the pipeline, the maturity of the pipeline and then new research deals all will contribute to the growth that we outlined on the previous slides. In the box on the right, you see we mentioned that any upside from Captisol use for things like our internal iohexol program is excluded from the numbers we showed here on 2023. Something like iohexol, we said in the past, now that we're all kind of more familiar in metric tons, the program for iohexol on its own could do 15 to 20 metric tons alone of Captisol, if it were to get approved and penetrated, as we expect it might. Slides 112 and 113 cover some of the contract outlook. We've shown this in the past, 112 is an update on the split of the portfolio and the size of the portfolio. You see now it's over $4.5 billion with contributions from each of the technology platforms as well as the proprietary section with the proprietary section being a significant portion of Viking buried in there as well. Slide 113 is a new look at this that we'd like to share with folks. The blue section of the graph is that $4.5 billion laid out as we see it from a timing perspective, assuming every product worked and hit every milestone. Obviously, that is a number that timing will shift over time and will be added to with new license deals or if programs fail, will fall out. The green bar at the bottom though, is our view of the risk-adjusted contract payments over time. As folks all know and Matt covered on one of his slides, many industry groups published success rates for both small molecules and antibodies, and we apply all those standard industry success rates to each of the molecules in our portfolio depending on stage. And if we apply those success rates with the timing of these payments, the green bar is what results. Interestingly and importantly, I think in the orange here, you see that over the past 5 years, we booked over $200 million of contract revenue related to these -- this contract -- this revenue line. And over the next 5 years through 2025, we see over $400 million in risk-adjusted potential contract payments. We think this is a great opportunity for Ligand. Slide 114, just a quick -- really quick hit on what we call the PIM system, our portfolio information management system. You can imagine developing or managing and monitoring this portfolio of milestones might be a significant job and require a lot of manpower. We've automated that internally to keep the costs down and facilitate things like SEC reporting, and in particular, tracking and scientific reviewing and reporting out to folks like you on the phone. It's a fantastic system that we've developed internally. It tracks over 1,500 events. And really facilitates our management of this portfolio. On the next couple of slides, I just want to cover the longer-term Captisol opportunity as it relates to the pandemic. On Slide 115, we show at the bottom, a graphic that really illustrates how we think about it. In the short term, there's an acute need for Captisol. In the medium term, we think, companies and industries and governments will start stockpiling remdesivir and other medicines for potential pandemic extension or worsening. And then over time, you'll see that there should be or maybe a need for supportive care as people continue to get sick over time in smaller numbers. It's hard to imagine or estimate exactly how these will play out over time. But on Slide 116, we outlined one historical case study which was related to Tamiflu and Relenza, 2 flu vaccines that -- or treatments that have been on the market now for many years. Flu obviously existed for many years. And then as Tamiflu and Relenza got approved, initially, they were used for treatment. And then eventually, as the government got more comfortable with it, it was stockpiled. Particularly on Tamiflu, Roche has announced over time that 350 million treatment courses have been stockpiled over the 2004 to 2009 time period. You can see it in the graphs for both Tamiflu and Relenza that usage of the drug, and these are in dollar revenues, has been consistent over time, at least in terms of each year, some is used. And if you translate that to drug courses, it's been somewhere between 1.5 million to just under 9 million treatment courses prescribed each year for flu. So we are not calling what we think is going to happen with Captisol and remdesivir. We just think that it's important to monitor this and keep an eye on it over time, and we'll continue to update investors on our views on these. The last 3 slides I'll cover today, just cover our capital deployment, both our history and then our plans for the future. We're, first and foremost, a company devoted to our science and treating patients and our portfolio. But while we've done that, we've, I think, exhibited a great track record of deploying capital. Over the past 13 years, while we've operated under this business model, we've deployed over $2 billion of capital. About $1 billion of it has been used for M&A and building the portfolio. The other $1 billion has been returned to shareholders through share repurchase and special dividends. We're continuing to evaluate how we'll do that going forward. But Slide 118 shows you that track record that I just was talking about. The gray boxes show the larger events. We've been buying shares almost every year over this period. But the concentration of events in 4 different periods have contributed to about 8 million shares repurchased over the period, which is about 1/3 of the total shares outstanding. And then in 2007 when the company had significant excess capital. We did a $250 million special dividend that returned a portion of the capital to investors at that time. If you look at Slide 119, just to wrap up, we are looking forward really -- our plans are really not significantly different than the last 10 or 12 years. M&A will continue to be our primary focus for deploying capital. But as we've seen on the last couple of pages, the funding cycles and our business model have really made plenty of chances for us to acquire companies and make investments having done over 20 over the period. Share buybacks and bond repurchase have been our primary form of return of capital, that's probably going to continue. But we are, again, evaluating special dividends, in particular, as it relates to any excess cash that comes out of our Captisol business or otherwise over the coming years. With that, we do expect to continue to return about half the capital to investors and use half for M&A. And we'll continue to work on that as we move over the years here. With that, I'll just note that the rest of the slides in our deck, which will be posted on the website or an appendix that has a list of a bunch of pipeline programs that we didn't have time to talk about today, investors can use that as a resource to learn about more of our programs in detail. And before we turn it over to questions, I'll turn it back to John for some closing remarks, and then we'll take your questions.

Yes, Matt, thank you. And again, appreciate everybody joining us today. A good timing for us, given the recent acquisition, and all of the end of the year partnering events that are forming. We have confidence and a clarity on 2020 and really are very excited to see the business transition to 2021. Let's open it up for Q&A. Operator?

[Operator Instructions] Your first question comes from the line of Matt Hewitt.

I guess, first and foremost, I'm trying to work through the math, both for this year and next year a little bit. And obviously, there's some puts and takes with the recent acquisitions and then the divestiture of Vernalis. But to get to the EPS side, it was at $3.85 or $3.95 for this year, and then the $6 for next year, what is implied from an M&A -- some of the onetime-type costs that are associated there? And then I guess, attached to that, the R&D with Vernalis leaving, I would have expected R&D to decline. Are you going to be backfilling some of the heads there? Just help us walk through a little bit of the math.

Yes, sure, Matt. Thanks. So on 2020 and 2021, both are similar stories, but I'll just address each. On 2020, yes, the offsetting -- or the additional expenses from M&A, both the actual operating expenses, we had Icagen for 3 quarters of the year, Taurus and xCella for a quarter of the year and then Pfenex for the last 1/4 of the year as well. Those actual additional expenses -- any operating expenses, we run through the adjusted EPS but any one-off severance costs or transaction costs, those types of things are adjusted out of our adjusted EPS. But the -- just the business of running the M&A business, if you will, so that's part of our ongoing business. Those types of expenses are included in the EPS. So having done 4 transactions this year, you can imagine there's some additional costs in there for that. But really, the primary driver of the difference between our last guidance and now is -- it's really just the additional cost on the operating side from having those businesses in this year. For next year, for 2021, there are a lot of puts and takes, as you alluded to, a full year for all -- each of those businesses, adds some of the expense. Vernalis, the R&D moving out of Vernalis, that -- that's taking about the same -- I mentioned the revenue was $12 million to $15 million. Our expenses have been $12 million to $15 million each year for the last several years as well. So there's about $15 million of costs coming out for that. Pfenex, though, was an operation is about the same size as Vernalis and brings about the same cost on the R&D side, at least. And so there's actually, I think we said publicly that they had about $45 million of costs historically. We expect to run the business with somewhere between $25 million and $30 million of costs going forward. So that's adding a bit to it. We also have the iohexol trial, which I think we said is about $15 million to $20 million in total expense that we expect to spread between 2021 and 2022. So that's adding a chunk of expense to the 2021 number as well. The last part on the expense side is not directly translatable from our historical periods through to 2021 is on the cost of goods side. I mentioned it while going through my slides, but the cost of goods or the gross margin on the Captisol business going forward during these periods of high demand will be a little bit lower than it has been historically. So there's a little bit less translation from the revenue line to the bottom line on the Captisol line than it has been in the past.

That's really helpful. And then another question regarding the 2023 outlook, and I realize that's a couple of years down the road, but you went through and you kind of talked a little bit about the Tamiflu and Relenza opportunity with flu, yet when we look at the 2023 guidance, you haven't included any contribution from remdesivir. Is that just out of conservatism, given we don't know how this pandemic is going to shake out over the next couple of years? Or was there something else that kind of drove the decision to kind of keep that number off?

Yes. Yes. Matt, good question. Really, the focus that we have running the business is on the core business, operations and financial performance. And we want to continue to give information around that. Remdesivir in supplying and Gilead consortium is very, very important. Clearly, it is a substantial quantum revenue and cash flow. But in terms of forecasting and what we want to do is really help investors understand the core business today is solid. It's -- despite the pandemic and challenges operationally that the industry has faced this year, our business, the core is doing very well. And the growth outlook without remdesivir, we think, is very compelling. And that is what we want to focus investors on. You make a good question though, about will there be or could there be a contribution from remdesivir? Our belief is yes. But we are not quantifying that now. We simply don't have enough information to give estimates or quantification. And secondly, we really don't want that to distract or detract from what we think is a very solid and compelling core growth story.

That's great. And I guess one last one for me and then I'll hop back into queue. It's obviously been a very busy year, both -- as you look at M&A, both on the acquisition side and most recently with the divestiture of Vernalis. But as you look at the pipeline over the next 6 to 12 months, are you still seeing a lot of opportunities? And how should we be thinking about -- are you going to take -- maybe take a little bit of time here to digest some of these recent transactions and kind of get everything aligned before you jump back into the pool?

Yes...

Yes. I'll comment, and then Matt Korenberg can add some color as well. This year, it's been amazing and I made a remark, I'm proud of our team and what we've achieved. This is the busiest year for M&A in our corporate history, 4 transactions, one being the largest. We've done the most licensing deals in our history. And coming with that, of course, is serving and supporting our partners. And we really can't understate what it's required of our organization to answer the call to support the Captisol scale-up. It's really, frankly, very impressive. So to do that, to do that book of business, the most M&A, the most substantial year of licensing and then the significant operational execution on Captisol, to do all that layered in with a difficult work environment with pandemic is something that, frankly, we are proud of at the company, and we're pleased to be able to deliver that performance to investors. The M&A, we do want to digest a bit. Antibody OmniAb business has built out very nicely. It's a suite of new tools and technologies that are just rolling into our catalog, so to speak, of offerings. So we're going to mine that over the next several quarters, I expect, before we really do other tuck-in acquisitions on OmniAb, and same thing for big M&A. We are still looking at a whole variety of opportunities, we're value-focused. So their dislocation in pricing or value of companies, that may be an opportunity, but we're integrating a lot right now. So I expect that we are a little bit more in a digest mode the next couple of quarters. Matt Korenberg?

Yes. Thanks, John. Obviously, all those statements are exactly on point. And I'd say the only thing I'd add is we are always in the fortunate position of not having to do M&A. But if we find attractive M&A, we can execute on it. And that doesn't really change, as far as we're concerned. We've shared the nice growth story with you today. And what we think is if we can find things that improve that story, we'll do them. We still think we have plenty of firepower to execute on our M&A agenda in the near term and long term. But if we find attractive things, we'll keep doing it. These things always take a while to process. So I don't expect that we'll need -- be announcing anything tomorrow as we kind of work through the integration of Pfenex and spend time and bandwidth on that, but we're still mining the shopping list, so to speak, to keep looking for great ideas.

Your next question comes from the line of Joe Pantginis.

A couple of questions, if you don't mind. First, wanted to go off of your earlier discussions that we've just been having regarding remdesivir and go to the boots on the ground. So my question is for Dr. Davis, I believe he said he was going to be on the line still and maybe Monica from Gilead, if she's still on. And my question really is to them is, how do they view the need for remdesivir having a direct antiviral and the staying power of remdesivir through COVID with the coming advent of the vaccines and other therapeutics?

Yes, Joe, I'll turn that over to Dr. Davis. Monica, obviously just joined for a portion of the call. So Dr. Davis is best to address that.

Absolutely. That's a great question. I think even in the context of having a safe and effective vaccine, there's still obviously, a role for antivirals in patients who do develop this disease and then progress to the need for hospitalization and have more severe forms of the disease. So we see this in, I think, the closest cousin would be influenza, where you have an effective vaccine. Patients obviously receive the vaccine, but there is some proportion of the population that still develop severe disease requiring hospitalization in those patients or even in the outpatients, we still require the antiviral therapeutics that are safe and effective. I think that there's clearly a role for remdesivir in shortening time to clinical recovery. Patients who are sick enough to be hospitalized, and require low flow oxygen supplementation for hypoxia, I think that, that's really going to be the subgroup of patients where we focus the most on, as far as providing remdesivir for those patients. But yes, I think antivirals, in general, specifically remdesivir, do have a role even in the context of a safe and effective vaccine for COVID.

That's very helpful. And then my next question is, when we look to the future financial projections, you mentioned a couple of things now, which are going to be supported by core growth beyond Kyprolis. And so you brought up an asset today that we really haven't heard about or focused on in quite some time coming from the company, and that's Nexterone. So I was just curious, why it's included on the list simplistically and what you view as the impetus to growth for Nexterone?

Yes, Joe, this is Matt Foehr and Matt Korenberg may comment as well. But Nexterone is a product, it's a Captisol-enabled product, amiodarone in a ready-to-use large volume bag in hospital settings and uses Captisol to not only stabilize the active ingredient, amiodarone, but also to solubilize it. And it's actually a pretty substantial Captisol user. It uses a substantial amount of Captisol. We also get a royalty on the product. And with more activity and more hospitalizations, it is actually a product we see growing as well. As I said, it contributes a good amount of Captisol volume and royalties as well. So that's part of the reason you're seeing it in there today.

And then my last question, if you don't mind. So just curious, and we addressed this previously, but now that CE-iohexol is gaining increasing visibility, just wanted to get a reminder with regard to your potential commercial plan/partnering plans around the asset?

Yes. Thanks, Joe. I'll comment on that. Yes, we're gearing up to start the potential pivotal trial later this year, planning to start it in December. It's going to be a trial where we compare it to GE's Omnipaque product. Importantly, this is a $1.5 billion existing U.S. market, in the contrast agent market and the goal for iohexol is to prove its improved safety profile, which is a real need and important in -- both from a physician perspective as well as from a payer perspective. So we plan to run the trial. We think with -- we've had some experience running pivotal trials and then pursuing partnering events, actually our largest royalty, EVOMELA, which is a 20% royalty globally, partnered with Acrotech and CASI Pharmaceuticals is an example of the Captisol-enabled product, where we took it into the pivotal trial before partnering it. So our goal here is to get some key answers from the clinical trial and then leverage that into a deal with increased economics.

Your next question comes from the line of Dana Flanders.

I have a couple of questions that I'll just ask upfront, if it's okay. And my first is on the divestiture of Vernalis. Maybe you can just elaborate a little bit on kind of the reasoning for divesting. I know it was something you acquired a couple of years ago. So just some color on that would be helpful. Number two, on the Pfenex acquisition, when the deal closed, I believe you had guided to $30 million in revenue in 2021 and $60 million in 2023. It looks like it's a bit lower now, but not sure if that's the case, just based on the way it was presented. So are those revenue targets for Pfenex still holding? And then maybe you can also comment on the opportunity to accelerate the number of partners there. I know you've had a lot of success with OmniAb. Maybe talk about that opportunity. And then lastly, Matt, maybe you can just comment on expected CapEx for the second half of this year and 2021.

Yes, Dana, thanks. It's John. I'll comment on the Vernalis transaction that's pending, and then Matt Korenberg can comment on the Pfenex revenue targets. The Vernalis deal, so we acquired the company end of 2018, and it wound up being -- while the deal hasn't closed, of course, it's still pending, presumably it does, I mean, we're really pleased with how this deal came together. It was unexpected. We have a category of acquisition targets, what we call busted biotechs, where it's quality science, good people, good science, good IP. And a classic hallmark is often these busted biotechs also have good contracts, good partnered contracts with good economics. But they're companies that fell into a difficult time, either they had some negative data around a lead asset and sort of stock price sold off or they just got caught in a cap structure where their costs were too high and they couldn't finance out of it, if you will. We are good at doing this. It's good at identifying, it's knowing the science, knowing the value, but also having a team that can restructure the business, that can clean up the laboratories and manage the patent state, et cetera. So this is something we've done very well. We've got examples, 4 or 5 biotechs we've done this with. But Vernalis, while we wanted to run the direct discovery business out of Europe, the priority for us was actually getting access to their existing contracts. They've got a whole file of contracts, but specifically one with Verona. It's a good royalty on a Phase III asset for COPD. They've got contract rights with Corvus and some others. That is actually why we were most interested in Vernalis. Now we've run them successfully. We built the business. We've done more licensing deals and have harvested more revenues. HitGen that's acquired came to us, a Chinese company, very interested in buying a U.K.-based operation. They've got growth and expansion plans. They went public about a year ago. They made us, frankly, a very attractive offer. It's a lucrative cash out of our purchase price, and we're going to retain all of those contracts. So it was never a strategic driver of the business, but we're pleased that this deal has come together. We think it's a good transaction for HitGen. It's a very good deal for Ligand. And frankly, it comes at a good time as we're consolidating the Pfenex business as we're expanding our OmniAb business. The U.S. operations are expanding. So for our focus and investment, we think there's much more value to leverage out of our U.S. operations. Matt, you can comment on the Pfenex question.

Yes. Thanks, John. So Dana, you're right, the Pfenex guidance given at the time of the closing was the $30 million in 2021 and $60 million in 2023. Nothing's changed there. We still expect good contribution from the Pfenex team. Looking at the 2023 number, just to look at it, we said in the slides today that the royalties would be about $33 million in 2023. There's also some significant milestones and contract-type payments that will come out in the 2023 time period. So everything is still in line there. On the partnerships there. Yes, there -- the 4 main partnerships are the most advanced but there are a whole host of other partnerships that are earlier stage and in the works behind the scenes, some of which are public, some of which are not. And we've already seen some nice new deal activity and leads coming out of the platform. So we really do think there's a nice opportunity there. On the CapEx side, obviously, the biggest component of CapEx recently has been the CapEx related to scale-up of Captisol for remdesivir. We said publicly that we spent about $60 million, 6-0 million, to scale up manufacturing. Folks who are familiar with supply chains will know that a significant portion of that is really kind of prepaying for line time and materials and things like that. But a good 1/4 to a 1/3 of it was true CapEx where we're spending money on machines. That portion of it will run through the P&L with depreciation over the next few years. And that's part of what was hitting the COGS line that I was talking about, in terms of increased COGS expenses going forward. In addition, just sort of run rate CapEx, Vernalis was actually a reasonably higher CapEx business relative to the rest of Ligand, just given the labs, Pfenex is similar. So Pfenex will probably swap in and maybe increase a little bit the CapEx. But other than the Captisol CapEx, it's relatively minimal, just a few million a year. We'll give more specifics on that going forward.

Yes. And Dana, this is Matt Foehr. I think you added another question about driving new deals around the protein expression technology platform. So I'll just make a comment that really -- one thing that really attracted us to Pfenex, not only the science team and what they've built, but also you really can't underestimate the importance of recent and first approvals, marketing approvals for a technology like this as well as late-stage clinical successes and just general clinical success of partners. That really, we found over time with platform technologies like this really begins more partnering, that gets more inbound interest and really broadly validates the technology to the industry. And that's one thing that we really are excited about. And I think Pat Lucy did a great job of kind of describing in detail in his portion.

All right. Operator, are there any other questions?

[Operator Instructions] Next question comes from the line of Scott Henry.

I do have a couple of questions. I wanted to start with Pfenex. And subjectively, could you give us some color when you think about that acquisition, how much of the value should we attribute to that near-term pipeline, those kind of 2 or 3 big products versus the long-term pipeline? What kind of thought process went into that with the deal?

Yes. Thanks, Scott. Yes. So I think with any of these transactions that we've done, we're always looking to find some core bits of value to really base a transaction on. We want to know that we're getting good value for things that are very tangible. So if you take the 4 main programs, again, the Jazz program, the Merck vaccine, Serum Institute vaccine, and the teriparatide program, and then you take cash on hand. I think between those 5 items, it was really somewhere between 2/3 to 80% of the value that we saw in the business. And then the platform, future deal making, other tax assets and other things, the people, all that stuff was probably the balance of the acquisition. It's really, we think, a great fit for Ligand and that these 4 main assets really do drive significant growth over the near term. And then it provides ample runway to let the technology and other partnerships mature into true real value generators.

Okay. And then when we dig in on the teriparatide injection product, particularly with the therapeutic equivalents, can you speak to what events we should watch for to determine how that process is moving along? And can you sort of handicap the odds on that coming through as well as how should we think about peak sales for that product with or without that TE indication?

Yes, Scott, good question. Matt Foehr can add some color more on the regulatory process and so on. The way we're viewing that is, as you know, when we announced the deal, the -- there is a CVR, a milestone payment to the selling shareholders. In the event that the therapeutic equivalence is granted, so Matt Foehr will walk through that process. But the idea is, in our process, it's a great asset. It's on the market. It's generating revenues and cash flows. But obviously, there are some regulatory questions on timing and outcome. And we told the sellers, we were not going to pay for that until we got success. And so for our modeling, I think it's important for investors to understand that we actually are coming in with a fairly conservative view of revenue expectation. Our internal view and what we're including in our guidance is considerably lower than what analysts were assuming for Pfenex, the analysts who are covering Pfenex as a public company. They just assume that TE would happen, and we're giving the company nearly full credit for that. So that's fine. We don't disagree with that outlook. But in terms of our planning and forecasting, we're rolling numbers through, assuming that, that doesn't materialize. If that does come along our numbers, we will change our numbers, we'll increase our numbers. And the contribution could be 2 to 3x higher from a run rate perspective. But we're going to wait until we get those answers. Matt, maybe you can comment on the process the next few quarters?

Yes, Scott. So the trial that's needed is actually a fairly standard one. It's called human factors, human-use factor study. And it's basically designed just to show that patients who have used the FORTEO pen device can also use the teriparatide injection pen device as well. Now when Alvogen developed the product originally for the basis of the original approval, there were patients in there who had used the FORTEO device, who used the teriparatide injection device, all of those used it successfully, but the FDA essentially requested that a trial be done just looking at the human factors use. And as I said, these are pretty standard and it's a trial that will be run in patients who are previous FORTEO users, simply showing that they know how to use the pen device. So Alvogen's working with the FDA gearing up to start-up that trial now, and I'd expect we'll be able to provide updates as that progresses.

Okay. Great. And a couple of modeling questions. First, when you go out to 2023, do you expect any patent expirations over that time period? And second question. When we think about remdesivir, just out to 2021, do you think that's a pretty stable outlook? What I mean by that is are the orders already in place such that this surprises, either positive or negative, will be more likely to happen beyond 2021?

Yes. Maybe on...

To the comment -- yes, Matt -- but just want to comment about the patents.

Yes, exactly. Yes. So Scott, the projections we gave today are assuming no patent expiries, but there's also no potential patent expiries really in this window. The main products, Kyprolis, EVOMELA have patent life well through beyond this period. As folks know, the Kyprolis patent situation is relatively clear now with the late 2027 expiry and EVOMELA similarly out through the middle of the decade, 2026 or so. The new products are all launching and contributing revenue to the growth in that period. So no patent expiries in this window.

Okay. Great. And then with regards to remdesivir in 2021?

Yes. So for the 2021 remdesivir number, as I kind of covered in my slides, we're currently seeing about $155 million for next year related to remdesivir. It is justified in our minds and estimated in our minds by a number of different factors, but not the least of which is what we see as orders in hand already for Q1 that put the run rate right around $45 million or so. As I mentioned, the split between Q4 of 2020 and Q1 of 2021 is a little harder for us to judge right now, just given what exactly folks will need and where they'll need it. So much like a milestone payment where we see if someone completes a trial or files a BLA on December 28, versus January 5, that swings $4 million or $5 million of revenue, one way or the other. Similarly here now that we're shipping Captisol in such large amounts to these partners, a shipment could go out in the last week of the year versus the first week of next year, and swing the numbers $5 million or $10 million one direction or the other. But we feel very good about our Q4 number. We feel very good about the Q1 number. And we think the demand for the rest of 2021 should be in line with our expectations. But if the disease takes a dramatic turn for the worse and patients are needing significantly more remdesivir then there could definitely be upside from there. If somehow the need and demand goes dramatically lower, we don't think there's too much difference in the demand but certainly, for the back half of 2021, there could be a little bit lower demand than expected right now.

We have one -- more time for a question. So Mr. Larry Solow, please go ahead.

Just a few questions. You spoke about on the existing products, sort of the outlook there. It looks like it's about 10% or so growth in the next 3 years. And I imagined and as you outlined, mostly Kyprolis and EVOMELA, can you maybe just quickly discuss how the approval with Kyprolis in combination of DARZALEX and second-line sort of helps the outlook there? And then I guess on EVOMELA, most of the growth is going to be coming from ramp in China?

Yes, Larry, this is Matt Foehr. I can comment on Kyprolis. Yes, the approval in combo with DARZALEX really came earlier than we expected. And I think earlier than Amgen and J& J had both communicated. So that approval is -- again, in combo with DARZALEX in both once and twice-weekly dosing regimens for patients with relapse/refractory multiple myeloma, and it does expand the label. And DARZALEX, obviously is a major player and from really the beginning and its onset. We've always felt and the science has bore this out that these would be drugs that would be used in combination. And so that's certainly the case. And generally, in the fullness of time, what we found is that it really is label events that drive increased adoption and growth. Sometimes folks like to think that once clinical data is presented, does that affect adoption, but really -- and we hear this from the partners as well. It's really with that label and the rollout of that label. So again, they got the approval months earlier than we had expected. Now that's rolling out. And obviously, we'll expect to hear updates from Amgen and Ono shortly. But yes, that's been a nice development for Kyprolis.

Okay. And just switching gears on the new approvals, you've outlined sort of -- I think we kind of know the Palvella, the market size for the drug there. But could you maybe just give us a little more color on the market size and what you are sort of assuming for Takeda? And I guess, multi dysplastic syndrome. And then more importantly, the CStone and the Gloria products, obviously, in various cancers, but can you give us some idea of maybe a target market of what you're assuming for those in the long term?

Yes. I'll touch on Takeda's pevonedistat a little bit, Larry, and then give some technical color on Palvella, and then Matt Korenberg may want to comment on some of the market dynamics there. But Takeda's pevonedistat, obviously, a late-stage program. Takeda's communicated they plan on filing an NDA in 2021. It uses Captisol, it's a novel mechanism for treating MDS. It's a NEDD8-activating enzyme inhibitor given IV. Takeda has reported what they and we see as very promising clinical activity in combo with azacitidine in Phase II trials in higher-risk MDS, and they've got a number of other trials running in leukemias. The Phase III with PANTHER trial is now well underway, and we expect to read out from that before the end of this year. On Palvella, which is an asset, we're increasingly excited about their asset, PTX-022. It's a novel formulation for a rare skin disease called pachyonychia congenita that currently has no treatment option, it's very serious and highly debilitating disease. They've got a pivotal trial underway now with expected top line readout before the end of this year. And Matt Korenberg may want to comment a little bit on kind of Palvella and some of their corporate events and market elements.

Yes, yes. Larry, I do think on Palvella, you're aware, but just for the benefit of everybody that the market there in pachyonychia congenita is about a 10,000 patient market in the U.S. It's a really debilitating disease, as Matt covered. And so it really does significantly improve the quality of life for folks. So they know there's a very good patient registry and advocacy group. So they know kind of where all the patients are. And we expect that many, if not all patients, or at least many patients will get treated very soon after approval, just given they've interacted with the company or the trials already. So that could be a market of several hundred million dollars at least. And our 5% to 10% royalty is -- could be pretty meaningful for Ligand. And then on the 2 programs for the OmniAb programs, both from Gloria and Arcus and then from CStone that we've got in there, both of those are ones where we're not really in the business of projecting revenue. We can't really figure that out. But CStone, at least, has some really nice research coverage from Morgan Stanley, Goldman Sachs, a couple of other banks that took them public that show multiple hundred millions of dollars at peak upwards of $1 billion for some of them. A lot of those assume multiple indications and multiple approvals over time. So we're not even out that far in these projections, but over time, that's sort of the peak opportunity that the market sees out there for those drugs.

Okay. And then just switching gears real fast on Pfenex, and you sort of outlined it seems like they're currently at a run rate of about $5 million in annual royalties, maybe a little bit less than that, just from the 2 early ramps. Obviously, that's the very beginning, and you sort of highlight a little over $30 million by 2023. Can you maybe discuss this, I assume that's a back-end loaded number, but sort of the cadence to get there? And then second follow-up question is, what is the -- you guys used to bucket sort of the potential of each product on a royalty basis. Maybe you could either outline each product or any some, what you think the total potential royalties from a high level could be from these products?

Yes. So each of the 2 programs that are contributing royalty revenue already, teriparatide as well as the Serum Institute's vaccine, Pneumosil, both of those were launched in the middle of 2020. So just recently launched and just recently ramping up. So you're right, we added about $1 million -- a little bit more than $1 million of royalty, I guess, for Q4 in terms of our expectations. That's really -- early in the launch, is hard to know exactly where it will come in, but we'll kind of update 2021 as we learn more there. But also in 2021, we said today that both Merck with their vaccine and Jazz with that program, both of those have said they will file BLAs at the end of this year. Jazz's program should have an accelerated review, Merck's is in more traditional timeline. So sometime in the second half of next year, presumably, each could see approvals. And so they're contributing just a minor bit to the 2021 numbers. But by 2023, they're also up and running and will have been for a couple of years at that point. So those are definitely the 4 main contributors over that period.

Okay. And then just this last question, a quick follow-up. Just on iohexol. Any thoughts on potential timeline? I know I think you're starting in a couple of months and you did highlight that there's an interim analysis, I guess, after 60% of the patients of the 540, so about 300 patients. But is there any thoughts on potential timeline there? Or is that too early to discuss?

Yes, Larry, thanks. Yes. So the trial itself, as I said, we're targeting to start the trial before the end of this year, comparative trial, CE-iohexol compared to GE's Omnipaque. There is, as you called out, a prespecified interim analysis that we built into the protocol after about 60% accrual. Tough to say exactly when that will be, and we'll likely give -- we'll give more updates as the trial starts. But perhaps the end of next year, it would be a general time. But again, in order to put any firmness around that, once we get the trial up and running, we'll give more updates.

Thank you. Well, we appreciate the turnout and questions. That's the end of our roster of people in queue to ask questions. We are pleased to share our views of the business today and thank you for your time. As we wrap up 2020, we're looking at 2 pivotal trial readouts, some major events coming down the next 4 to 8 weeks. As we step into 2021, our eye is on 5 approvals. We're excited to watch this calendar of events develop. And if some or all of those approvals come in line, it should be the basis for new product launches. And finally, the financial growth. This year, we're pleased to finish the year with nearly $4 in earnings per share. As Matt Korenberg described, our outlook today is $3.95. And next year, we're looking at over 50% earnings growth above that. We're looking at $6 in earnings per share in 2021. Again, thanks for joining us, and we'll give you updates as the business evolves. Goodbye.

Thanks to all the participants for joining us today. We hope you found this webcast presentation informative. This concludes our webcast, and you may now disconnect. Have a great day.