Ligand Pharmaceuticals Incorporated (LGND) Earnings Call Transcript & Summary

Simon Latimer and I head Investor Relations at Ligand Pharmaceuticals and webcast. It's great to be back in person. Presenting today for Ligand will be Todd Davis, Chief Executive Officer; Matt Korenberg, President and Chief Operating Officer; Diane Retallack, Senior Vice President of Platform Technologies and Innovation; Andrew Reardon, Chief Legal Officer; Octavio Espinoza, Chief Financial Officer. First, a few housekeeping items. Following the presentation, we will have a Q&A session, and we ask that you hold your questions until that time. Those joining by the webcast will have an opportunity to ask questions as well. We'll be using slides to guide our discussion today. We will also be using non-GAAP financial measures and some of our statements will be forward-looking. Additional information regarding the risk factors and other matters concerning Ligand can be found in our summary press release issued earlier today, the slides associated with this event and our periodic filings with the SEC. Ligand undertakes no obligation to revise or update any statements to reflect the events or circumstances after the date of this event. I'd now like to introduce Todd Davis to kick off this presentation.

Thank you, Simon. Okay. It's really a pleasure to be here today. Thank you for everybody that came in person. And thank you for everybody that's dialed in remotely as well. I've been back in force to New York quite a bit over the last several months, but this is the first time I've been backwards. It seems totally back to normal. The streets are packed. Christmas people are everywhere. And so I was late for my first meeting here today. But it is a pleasure to be here nonetheless. I'm excited to be here at Ligand and to take on this role. I'm going to give you my background here just shortly, but I think that I'm kind of very well suited. I can't imagine doing anything else right now. And so this is, from my perspective, a perfect fit for me. And I think there's a lot we can do here, which I will talk about with the team as we go forward. I'd just like to point out there are a few -- this is definitely a team effort. This is a deal company, and it takes a lot of talent, different functional strengths. No single functional strength is really the most important because it all matters or lots of snipers in the trees. That team includes the Board. We have a few board members here live today. Jason Arie is here. He's a finance professional and the architect of a lot of this going back historically. I think Steve Saba may be here, but I haven't seen him yet, he was planning on being here. He's been on the Board for a decade plus and adds a lot of value. He's a clinician and Dr. John LaMattina, who ran R&D for Pfizer is on our Board. We have an amazing Board that is really thoughtful, highly ethical and part of the team. We integrate them into a lot of what we do. So my background, just to introduce myself real quickly. I spent most of my 20s in the Navy. I got out of the Navy, got a job with Abbott Laboratories in sales and marketing for their diagnostics division, selling diagnostic analyzers as well as the assays and did that for a few years. I was a product manager. I launched the PSA test, which up to that point, that team that I was on that launched that. That was the largest diagnostic launch in history up to that point, about a $200 million diagnostic product. And then sales management roles before I went back to school, got a -- and my next company was Elan Pharmaceuticals. For those of you who remember Elan, that was a drug delivery company. We acquired a therapeutic platform, the year I joined in 1997. And -- so we had 2 divisions, therapeutics and drug delivery. Drug delivery is a licensing business. It's a platform licensing business. And I started out as Head of Global Licensing. Then I ran M&A and then I was the General Manager for the Drug Delivery business, which was about a $400 million business, if I recall. And in subsequently was recruited to Apax Partners, Apax Partners today is a large buyout firm. But back then, they were a growth equity venture and buyout. And it was recruited to basically start a specialty pharmaceutical effort around commercial stage pharma products. We started 3 companies with that team. ESP, SkinMedica, all of those sold to strategics eventually and significant returns. And in 2006, I cofounded health care royalty partners in the royalty business. That's a private equity fund. Some of you might be familiar with and I was a managing partner there through 2018 we went from 0 to about $4 billion under management during that time, and we're focused on commercial stage royalties, where most of the capital in this space is still focused today is in commercial stage royalties which is why there's such an opportunity to do what we're doing here, which is quite different and focused on a different set of target assets and companies. From a business perspective, I think Ligand is unique just from a profile perspective. We are a small cap, but profitable biopharma company. We don't have a gun at our head. We can be highly selective on the deals that we do, and we have lots of dials and controls around how we run our P&L. And that's a luxury, as you know, compared to most of our peers who may have a single development assets and constant need for capital. So it's a good position to be in on a relative basis. We have 2 technology platforms. We have a significant pipeline of late-stage products, and we have a diverse set of commercial stage products that are fueling our current revenue line. We've got about 80 employees. It's a very operating light model, but the operations are very important because the operations expand our networks, they give us insight and they empower the company to execute its steel strategy in a very differentiated way doing deals like CyDex, which we've done historically that we looked at on the private equity side, but you can't do without an operating team. So there's unique opportunities available to this company. because of the way they've positioned themselves and grown -- so the -- so the royalty model, I think, again, we have low-cost operating infrastructure, but it is essential to the strategy, and it really enables the strategy significantly. In this business, you have to have great legal and licensing skills. It's essentially a contracting business. So those skills are very important, and we do have core expertise in that area, which is premier, I believe. And then finally, from a deal sourcing perspective, I think our objective mutually is to hit the afterburners here and really accelerate our sourcing capabilities. We already have substantial sourcing capabilities to bring in unique deals, but the more that you look at, the more selective you can be and the higher your returns are. That's kind of the way the deal business works. And with our unique approach, we can then structure deals around a lot of the risks and be highly selective around our diligence on what we select to put into our portfolio. So it's a great business model. My plan is first to -- I've heard you should aim before you shoot, I definitely believe that. So there's a lot of things that are good here at Ligand. Under the tenure of John Higgins and the team, many good things have happened, which provide us with a platform now, which is profitable, growing with a pipeline of future field growth -- so all of that's good. And the idea here is to build and not break anything. I do think that there are many opportunities here to take this to the next level. One of those is on the expense side, every dollar of expenses we have is less return. So we will be very disciplined on expenses. I think there's opportunity for upside in expense management. And again, we're going to accelerate the deal flow activity and create more opportunities for the company to put additional growth drivers into our portfolio. The investment thesis here, there's a lot of subtleties on this slide. And there's a lot of tricks and traps in the trade here. But basically, we're biopharmaceutical investors, and we have operating platforms, but I think that the key to this is that we have a diverse set of assets, both commercially but also in our pipeline. And we're going to add to that. So that reduces, obviously, the binary risks that you see with many biopharma companies. Having a team that's multifunctional and highly talented allows us to diligence and be highly selective. The fact that we do structured deals, we're not just buying equity. In fact, that's not the business we're in allows us to do unique deals with partners that serve their needs. So we really do have kind of a unique angle on the space and I think the structured finance can also reduce risk, and we have a lot of experience in that arena. But the important thing that's not on here is this is all targeted in a space which is highly inefficient in terms of the capital allocations that occur. So there are literally billions of dollars in commercial royalty space now. The deal pricing is pretty efficient there. On a relative basis, when you look at late-stage clinical assets and programs and the different types of approaches that we use and we'll continue to use, we have a very inefficient target-rich environment that we can invest in. And that's what we're looking to take advantage of going forward. That takes not a lot of people, but it takes highly skilled people. And so we have very good people now. We'll probably add a few folks to this slide here. But Matt Korenberg, significant M&A experience, many years at Goldman and other banks. He's been with the company over 5 years and very talented. Tobo recently promoted a CFO, but has many years of accounting operations work, controller work, et cetera. He'll introduce himself later. Andrew Reardon, over 10 years at Healthcare Royalty Partners. He knows a lot about structuring and legal structuring of royalty deals, private fund management, et cetera. Audrey has been with us for many years. She is a very strong HR professional. It's not just the blocking and tackling of the normal HR, which allows you to attract good people, but she's also developed a lot of expertise in integrating acquisitions, which not all HR people know how to do well. Audrey is great at that. And then, of course, we have here from our operating team, Diane is here today. She will present the Pelican platform but we have a slew of very strong operators that give us scientific insight on the deals we look at and help facilitate diligence, et cetera. So a key component of our success. I'm going to drive Simon crazy here and go out of order. So this is the 2023 outlook on the revenue front. So this is our current growth trajectory. We'll be about $120 million in revenues going forward this year. That's about 20% growth. Notably, about $55 million in cash flow, that's over 50% EPS growth, strong balance sheet and then about $46 million run rate on expenses. I think there's opportunity there, but that's on the existing products, which Matt and the team will go through in significant detail. So a strong operating set of cash flows off of our commercial portfolio. But behind that, on the previous slide here, this is our pipeline, pipeline of growth. The team is going to go through some of these in detail. I'll just pick out a couple of examples. But obviously, there are multiple shots on goal here, which is the strategy. Sparsentan, for example, it's a 9% royalty potentially $1 billion product. So you need multiple shots on goal here because they won't all be successful, of course. But we have so many growth drivers here and just picking another 1 off Palvella. They're going to turn 3 clinical cards in the next 6 or 7 months on Pakinikia Congenita. By the way, their strategy is typically what they call from 0 to 1. I think he stole that from Peter Thiel, but 0 to 1. So he's looking at diseases that currently have no treatments. And so the penetration on those is very high. It makes them much more forecastable. The FDA is much more inclined to work with you aggressively to try to find solutions for these patients, but they'll turn the card on that -- on their lead program, which, if successful, will lead to a registration but also -- they also have 2 cards that are turning on micro lymphatic malformations, currently 0 treatments for those patients, a very severe dermatological disease. So these are the types of things that are in our pipeline that could all be significant revenue generators for us in just the next couple of years. So just to conclude on my portion, I think that -- we have, I believe, significant current financial strength. We have a pipeline behind that, which will continue to grow. But my hope and I think the team's hope here is we're pretty ambitious to add to this and to add significant things into the late-stage driving growth programs to our portfolio. So with that, I'll hand it off to Matt Korenberg. Thank you.

Thanks, Todd. Great to see everybody. Thanks for coming today. I appreciate the turnout. It's great to be back in person. Today, I'll cover 4 things. First, a quick update on our OmniAb spin-off, then our M&A strategy and I'll go into a bit of a deeper dive on our programs. And then finally, I'll cover our Captisol technology before I turn it over to Diane to cover Pelican. So First, on our spin-off, as everybody knows, likely, we completed our spin-off on November 1. We created 2 separate publicly traded companies both poised for significant success. On the right-hand side of the slide is the OmniAb business. That's our antibody discovery or it was our antibody discovery platform, now an independent company. Very well funded from the spin-off and the capital raise associated with that and targeting a huge market in antibody development and discovery. The left-hand side of the page is what we're here to talk about today, obviously, Ligand, that's the remaining business and the go-forward business. We are focused on being a high-growth company with ties to economics of some of the most important medicines in the world. We're well capitalized today with significant cash flow going forward and cash flow generation going forward. And our focus and investment thesis, as Todd alluded to, is on being a financial growth stock with a portfolio of commercial assets and a significant pipeline of key late-stage assets behind that. So to transition now into our M&A strategy and how we're going to build upon the existing portfolio that I'll talk about. We see the opportunity across the biopharma space is largely categorized into these buckets for us. First is development capital. This is funding late-stage clinical trials in exchange for royalty economics or other economics, principally royalty for us. We'd like to invest after proof of concept. We want to use our internal team to diligence the assets that folks are developing, make sure the trials are being run in ways that we think they should be run and generally making sure that the investment is something we think is going to provide the superior risk-adjusted returns that we're looking for. A couple of our key assets have been acquired that way or brought in the portfolio that way. Novan will talk about in detail. Palvella, Todd mentioned already. The second bucket is our distressed asset screening business or opportunity. Some of our earliest acquisitions, pharmacopea, Metabasis, Neurogen, et cetera, were done on this basis. Today, there's over 200 public companies that are trading below cash. Not all those will be good opportunities, but certainly, in there are some good opportunities, and that's a lot of what the team will be doing is screening through those, making sure we're refining the ones that are able to be turned into diamonds in the rough, if you will. Our operational team internally, unlike some of our competitors in the royalty space. We're able to close down manufacturing facilities, maintain IP, keep technology going, as you'll hear -- all those things allow us to have a much broader opportunity set than some of our royalty fund competitors. The sparsentan asset and serpentine asset as well as the Viking assets that came from Metabasis are all things that we acquired through that process. The platform technology side of the business. Obviously, here, we're looking for scalable technologies. What does that mean for us? That means things that are able to be out licensed broadly with limited infrastructure and infrastructure that doesn't need to grow in order to do new deals. We want those to be things that are applicable to across the industry and as well as sort of drug enabling or antibody enabling so that they're key IP that folks need and generate royalties for us. Obviously, our Capsule and Pelican technologies, we'll talk about today, and OmniAb as a result of that as well. In terms of the team and the activity we see that is going to execute on this model, -- the left-hand side of the page shows largely the internal team represented by the circles or the bubbles. We really have a team internally that screens all these opportunities. We evaluate them across R&D to IP and patents, so you'll hear from Andrew later, operations and manufacturing out of our Captisol and Pelican technologies. All these folks contribute to evaluating all these deals. And then we augment that with external consultants and experts as needed. A typical year for us, we'll screen 300 or 400 deals a year. Obviously, we don't get into the details on all 300 or 400. From that, we get down to 50 to 75 that we screen in detail. And usually, every year, we'll do 1 to 4 transactions. We've been executing on this business model for about 15 years. We've probably done 18 or 19 acquisitions across that or investments across that time period. With Todd on board and the plans he was talking about, we hope to accelerate that a bit and maybe move this 1 to 4 up to 5 to 10 a year and see where we get. Turning now to the portfolio. I'll take a deeper dive here. Obviously, as folks know, we have a portfolio of over 100 partner programs with economics to us, largely royalty, but some have just either milestones or some we just get Captisol revenue. But mostly, we've got royalty economics on close to 150 programs or so. This slide is sort of a traditional look at the pipeline. The top 6 names on here are all commercial assets. The bottom 5 are kind of the key pipeline assets that we have coming up over the next 6 to 12 months in terms of meaningful data or launches. The top 2 Amgen, Kyprolis, Acrotech and CASI EVOMELA these have been workhorses for Ligand for many years. 2022, they'll contribute over $40 million of royalty to us. The next 4, teriparatide, Rylaze, vaxneuvance and Pneumosil, these are all programs we acquired from our Pelican or Phoenix acquisition a couple of years ago. Since the acquisition, they've all launched or been approved and/or launched and ramped significantly. These programs will contribute $20 million to $25 million of royalty this year and are all growing significantly. The bottom 5 are our pipeline assets that I'll touch on 3 of them in detail. And then Palvella, I won't touch in detail, but as Todd mentioned there in the next 6 months, 3 key card flips that probably any 1 of which would contribute to royalty in a meaningful way to Ligand -- all 3, if they were all to work, would turn into 1 of our lead royalty assets. On Sparsentan from Travere as many probably know, but it's a potential new treatment for rare kidney diseases. It's a dual inhibitor of angiotensin endothelin receptors the programs in development for both IgA nephropathy and FSGS. The data on IgA nephropathy is complete. The NDA submission is in. They've got a PDUFA date in February, February 17, and we're looking for an approval from these folks early next year on that basis. The FSGS data, interim data is in of the DUPLEX study. looks fantastic. They're waiting and running the trial to get to full data and expect to file late next year. If the drug is approved, Ligand collects a 9% royalty. In terms of market, as many of our investors know, over time, we really look to third-party research analysts to give us a clue as to how big any 1 of these drugs might be. Here on this slide on the right, you can see that the consensus analyst estimates for Sparsentan show over $1 billion of potential revenue by 2030. And that translates to a royalty of over $100 million to Ligand. Even if we're only to achieve half that, as shown on this slide in about 2026 or 2027, that still would be the largest royalty that Ligand has today despite the fact or addressing a rare disease or 2 rare diseases that technically qualify for orphan designation and rare disease they are relatively larger rare diseases. So the opportunity is pretty significant and you can see it translate opportunity on the right-hand side. We're very excited about this one, obviously. And Ensifentrine I mentioned earlier briefly, but we acquired this program through our acquisition of Vernalis. It was, at the time, partnered with Verona in early-stage development, Phase II at the time. Since then, they've raised significant capital. They've run the Phase III trials. There are 2 Phase III trials. The first is read out. I've shown a great 42% reduction in exacerbations at 24 weeks in COPD patients. Their NDA submission will follow the readout on the second trial, which is expected at the end of this year, early next year and then first half next year FDA and then following a year later about an approval. COPD is in an enormous market, a multibillion-dollar market. And if approved, we get a low single-digit royalty and many -- a good collection of milestones, the first of which is a GBP 5 million milestone upon approval. In terms of market here, I mentioned it's a very large market. Ensifentrine is expect to be complementary to the existing therapies. It will be the first new mechanism of action approved in the class for COPD -- in COPD in many years. 6 million patients in the U.S. that are on chronic therapy, 40% or so remain symptomatic and are poorly treated with the current therapies. So a huge opportunity. You can see on the right-hand side, folks are a little more conservative, though, on the potential here. The consensus analyst show just over $500 million of potential revenue in 2029 and just over $10 million of royalty to Ligand would result from that level of sales. The research population here is a little bit more limited. So this is a small subset, but presumably post launch, and what we'll get a more detailed look at this. The last 1 I'll mention is Berdazimer Gel. This is formerly SB206, developed by Novan brought into Ligand through an investment into Novan, we funded the first of their Phase III trials. They announced positive Phase III results in 2022 in molluscum. They expect to submit their NDA at the end of this year or early next year. It's really something to help benefit and accelerate the treatment of molluscum. It's shown a great benefit in the trials. If it's approved, we get a 7% to 10% royalty and there's $20 million of regulatory and commercial milestones attached to the program. From a market standpoint, I mentioned it's a large market. Again, here, 6 million patients potential in the U.S. It's primarily a pediatric disease, but Novan's put a commercial infrastructure together themselves and has already begun engaging with the docs and the sales force is sort of up and ready, ready for the launch, even a year ahead of time. The commercial opportunity here that we see from the third-party analysts more than $300 million of sales out a few years and more than $30 million of royalty or so about $30 million of royalty. That's it on the portfolio highlights for now. I'll switch and transition to Captisol. As many know, Capsule was brought into Ligand through a platform acquisition in 2011. We acquired a company called Capco addresses a need that continues to endure today in the industry. It's a solution in the formulation side for solubility and stability issues in drug development. or more of small molecule drugs have low solubility. That's a big opportunity set for us. And as you'll see in a couple of slides, we continue to see good interest and good amount of interest in partnering for the partners that look at us, the regulatory success we've seen with our partners, the safety database we have, it's really significantly increased the awareness. And as I'll touch on Captisol is part of remdesivir, which is the key drug for COVID, that really increased the visibility across the industry for capsule and this potential use. Internally, we continue to focus on quality, reliability and customer service. It's not just words on the page, but we hear it all the time from our partners. That's really some of the main reasons why folks come to Ligand and come to side ex for our capsule technology. Some of the key technology features that we see or the attractive things to our partners. First, the global reach. We've got drugs approved and marketed in over 70 countries. Our partners obviously do the marketing and development. But 70 countries is really pretty much every major market in the world. And folks are glad to know that the regulatory bodies in all those countries have blessed the technology as part of drugs. Our IP is very important. Andrew, again, I said we'll touch on that later, but we've got substantial internal know-how that is proprietary, but also patents that issued extended 2033 and then pending go out through 2040 and beyond. So -- our partners know that they'll be protected from a competitive standpoint through some of our IP. Our drug master files around the world are very important to folks as well. The massive amounts of safety and other data, manufacturing, et cetera, that's in these DMFs is really important. So in the U.S., we have a type 4 and type 5 and we have the equivalents across Japan, China, Canada and many other countries. I mentioned earlier, manufacturing quality and scale, but it really is key to why some of our partners come to us. There are competitors out there for Captisol even today. They make different formulations or different types of cyclodextrins, but folks continually come back to us because of the team, the quality of our manufacturing and the scale on which we can manufacture and supply. So it's a key differentiator for us. That's all exemplified by our track record of partnerships here. More than 75 partnerships we've done in the time we've had the technology just over 10 years. It continues to be an important tool in the discovery and development process. You can see here that we average maybe 5 or 10 new deals a year. Between 5 and 10 this year, we've got 6 in-house already. The range of deals this year spans very small companies and very large, and that's consistent across the whole portfolio of Captisol. So we're excited to work with all these partners. The last thing I'll mention is just a reminder. I mentioned it briefly, but Capsule is part of remdesivir for or Becker COVID. This was a product that was highly insoluble without Captisol. It requires Captisol to enable the drug. The pandemic demand that we all saw over the last 3 years required that we scaled up our manufacturing significantly to more than 10x our capabilities. From 2020 through 2022, those 3 years, we sold more than $300 million of Captisol related to COVID. As you'll know and see from the guidance, our 2023 guidance will exclude Captisol for COVID. Our 2022 numbers, we reported separately. The goal is to focus investors on the core business, the core operations, the things that are easy to predict or predictable. The pandemic has been extremely difficult to determine when the spikes in disease will happen when hospitalizations will happen. And hospitalizations are really what drive remdesivir use. So as long as there is continued hospitalizations, there will be continued Captisol use. We -- for remdesivir use which will require Captisol. But you'll see, again, just to reiterate, we won't include it in our guidance. We reported historically as we make sales or have firm orders each quarter as we get through those quarters. So Tom will touch on that more later. With that, I'll wrap up the Captisol section and turn it over to Diane to cover the Pelican technology. Diane?

Great. Thanks, Matt. Yes. So I want to take a few minutes to go over the Pelican technology. I joined Ligand about 2 years ago with the acquisition of Phoenix. And just a little bit about the Pelican technology. It is focused on the production of protein therapeutics. Over 30% of all protein therapeutics are manufactured in traditional microbial systems, and the Pelican technology is based on pseudomonas fluorescence, a microbial system, but it offers key advantages over these traditional systems for the production of complex protein drugs. Over the past few years, these drugs have become more and more complex and the demand for more robust manufacturing technologies has been increasing. And some of this technology or some of this complexity really is driven by the fact that proteins need to be folded correctly. They need to be in the right confirmation to be active and do what they're supposed to do. And so these systems are needed to ensure that the proper folding of the protein occurs during manufacturing. So a little bit about the platform. We really do deliver significant competitive advantage to our partners. First of all, with the regulatory and commercial validation of the system, there are now 5 approved products that are produced using the Pelican technology and the technology really is founded on its diverse toolbox. So we have a very extensive collection of tools that we use to generate robust manufacturing strains. This leads to a very high success rate for the production of very difficult proteins. We've seen over 80% success rate and expressing a variety of lead proteins, which have been challenging to make in other systems. And with that, we developed very efficient, high-yielding, high-quality manufacturing systems, which then lead to decreased long-term cost of goods for our partners. A little bit about the organism itself, pseudomonas fluorescence is a gram-negative nonpathogenic organism. So similar to E.coli, but has some very important differences in that it's very metabolically versatile. And this allows it to really generate high titers of active protein for our partners. This system was built on a multi-omics approach. So we use genomic information as well as other protein expression information that we've gathered from the host strain and our expression designs over the past 20 to 30 years to generate this very sophisticated toolbox and we combine that with other very regulatory-friendly processes. So we use all animal origin-free materials and no antibiotics or antibiotic resistance is used in our processes. So this is very favorable for regulatory agencies around the world. And this, combined with our high throughput growth and expression methods and testing methods allows us to very quickly identify systems that enable the production of complex protein drugs. I'm going to take a couple of minutes to review a few of the approved products that have been made using our Pelican technology. The first is Rylaze with our partner, Jazz Pharmaceuticals. In this program, we were able to go from concept to market in under 6 years. Rylaze is a recombinant, Erwinia asparaginase. Erwinia asparaginase is used for the treatment of ALL and LVL patients who exhibit a hypersensitivity to an e-coli derived asparaginase. This population is about 20% of all the ALL patients that do exhibit this hypersensitivity. And when Jazz first came to us, there were, at that time, supply issues that hindered patient access to are winning asparaginase. And what we were able to do in under 6 years is rapidly develop that manufacturing strain and process for Jazz and work with them to ensure that the clinical trials were completed and Riles was then approved in June of 2021. They've since had a very strong launch of the product with $86 million in net sales during the second half of 2021. Following that July launch. And this year, in the first 3 quarters, over $200 million in net sales, which matches the 2016 Erwinia's annual global sales. And this is really due to the unconstrained supply of Erwinia asparaginase's or Rylaze that's made in our system. This has allowed doctors to return to clinical practice switching earlier when there's been a hypersensitivity reaction to the E.coli-derived asparaginase. And Jazz is also focused on continued label expansion with a more convenient dosing schedule on Monday, Wednesday, Friday, which was recently approved just last month. And then they also have an IV dosing alternative that they've submitted earlier this year. So we expect news on that in the coming months. In addition, they filed in the and there's a 2023 potential EU approval. And they continue to advance their program for potential Japan submission as well. The next 2 products are based on our CRM197 carrier protein. So I want to give a little bit of background about CRM197, what a carrier protein is and why that's important. These carrier proteins for vaccines are really immunostimulants. So CRM197 is a mutant of diphtheria toxin, so it's no longer toxic, but it's used in conjugate vaccines to really boost the immune response to weak antigens. And these are things like the sugars on the outside of bacteria that cause infection such as pneumococcal bacteria. CRM197, however, was traditionally produced in the native pathogen that required special containment and it was pretty inefficient and inconsistent. And so what the Pelican team did was to use pseudomonas fluorescence to achieve consistent and a high-yielding process of making CRM197 to support conjugate vaccine development and enable commercial supply. So 2 of our partners, Merck and Serum Institute use CRIM197 and conjugate vaccines. They each have pneumococcal vaccines. For Merck, Vaxneuvance, which is a 15-valent pneumococcal vaccine was first approved last year for adults and earlier this year for the pediatric indication. And it's also now included in the CDC immunization schedule with the EU pediatric approval also happening this year. So we should see a boost in Vaxneuvance use relying on fact that pediatric is about 75% of the pneumococcal vaccine market. Merck is also developing another pneumococcal vaccine, this 1 a 21 valent vaccine called V116. It's specifically designed for the adult population and targets the serotypes that occur and would cover about 85% of invasive disease for adults. Importantly, they are including 8 serotypes that are not present in any other licensed vaccine. So this is very different from the Vaxneuvance product. They were granted breakthrough status by the FDA and initiated a Phase III earlier this year. So we look forward to hearing more from Merck on this development. And then turning to Serum Institute, they developed a vaccine called Pneumosil, which is a 10-valent pneumococcal vaccine. And this vaccine was developed for middle income and the developing world. So it's very high volume. The launch is progressing and our royalties are flowing in from that product. They also are using CRIM197 in the development of a mining conjugate vaccine, which recently gained approval in India. This is a pentavalent meningococcal vaccine, again, the developing world and African countries and their who prequalification is pending as well to further that expansion. And with that, I will turn it over to Andrew for the IP update.

Thanks, Diane. Good morning -- still morning. My name is Andrew Reardon. I'm until Todd joined, I was the most recent addition to the management team here at Ligand. Prior to Ligand, I spent some time in the Army and working for Gallagher in Manhattan, but the last 11 years at Healthcare Royalty Partners. Wallet Healthcare Royalty Partners, I developed significant experience, deal structuring, IP monetization, fund management. This morning, I'm going to spend a few minutes talking about how we protect our revenue sources and maximize our monetization opportunities and then getting into how we address and intend to address our ESG going forward. So for protection of our revenue sources. Specifically, I'm going to talk about 2 aspects of our legal landscape. The first is our intellectual property, why the strength of our IP is a key business driver. And the second are the protections we use around maximizing our return and managing risks under our contracts. So you've heard Matt and others talk a lot about the strength of our IP, 1,600 patents, significant know-how, trade secrets. Today, I want to talk for a minute or 2 about how we use that IP and how we use it to drive revenue sources. One of the first things that we do is we combine our IP with that of our partners. It allows them to layer the intellectual property together to create new opportunities. The combination increasing their market opportunity. For instance. One of the things that we're able to do with our cyclodextrin formulation IP is incorporated into the -- or allow partners to incorporate it into their patents and then use those new patents to seek our listing, and we've had partners to be able to do that 7 times so far. Second thing is strengthening the platforms themselves. So the intellectual property platforms that we have and the assets we have. So the longer, stronger and more virulent IP that we have makes partners actually seek us that creates opportunities for them to drive business to our door. Increased duration to our intellectual property means that we are able to longer monetize the assets that we do have and also increase the timing of the royalties and revenue streams that we get from that intellectual property once we have the contracts. Finally, when we go out to partner with third parties, we're looking at the strength of their intellectual property because, once again, the strength and maintenance of that intellectual property helps manifest the return on the investment we make with those third parties. Then we start to look at the transactions themselves. We have 2 basic structures to the transactions we use. One is that we will acquire an out-license technology. The second is that we'll partner with others in the development of their intellectual property and their technologies. When we're out-licensing the products that we have, we can do so often on an exclusive basis. One of the things that we get concerned about there is ensuring that the -- that our counterparties are adequately monetizing the product. If we're locking up our intellectual property with them, we want to be sure that they're doing what they need to do with it. So we take a lot -- we spend a lot of time making sure that we have the appropriate rights and the appropriate remedies and circumstances where they're doing that up to and including reversionary rights in the event that the product hasn't manifested or the development hasn't taken place in the way we want it, so that we can go out and utilize it again with, again, that longer IP time frame that we drive ourselves towards. The other structure we use is partnering with other companies in the development of their products. So when we do that, the asset that we're talking about is a contract itself. It's the product -- the royalty license, the revenue stream that we have is their contract. So we're focused on the strength of that contract and the features that, that contract has. We also implement certain features that in the acquisition of those contracts, looking at the maintenance of their intellectual property, alignment with the partners, the structure of the transaction itself and in the unlikely event that something goes south, bankruptcy and insolvency protection. So at this point, we're going to transfer to our ESG circumstance. We've made a lot of good progress. We're at a point where we're going to start looking to the future, and we think it's a good one. Some of the things we've done recently, $2.5 million solar investment at Kansas University in Innovation Park, which is they've broken ground and construction has started. We also modified our Captisol manufacturing process that resulted in the water savings of 1 million liters of water. We save 2.4 million liters of ethanol. We've filtered 9,100 kilograms of carbon all in 1 year. In terms of ESG, we also pride ourselves on the diversity of our workforce. We making numerous charitable contributions, and we have a bunch of initiatives that were undertaken and continue to be undertaken by some committees that we've formed to address this internally. Generally speaking, we're looking at ESG from the standpoint of understanding who we are in the pharma space and in kind of the global space, but also who we are as a public company and how people are addressing ESG and want us to address ESG. So we're paying attention to metrics that we can use to advance our ball going forward, but also so that we can kind of get the credit on the street for the things that we are doing. Some of the things that we're going to be looking to for the future are to apply environmental standards to our suppliers and vendors to evaluate climate risks and opportunities. And just generally, to start to develop more and more robust policies and procedures around some of the things that get measured on a regular basis for ESG up to and including how we use nonconsumable resources, the tax contributions and political advocacy we engage in. And 1 important thing that people have been looking at is making sure the availability of medicines and low-income communities. Those are all initiatives that we're looking at, and we're starting to develop now and reaching into next year and beyond. So with that, I'm actually going to hand it over to Tavo for the piece of the presentation. I think people are more interested than me. I don't know.

Thanks, Andrew. Thank you, everybody, for being here. It's a pleasure to be up here presenting to you. As Andrew -- similar to Andrew and Todd, I'm new to the management team, named CFO effective November 1 post the spinoff of OmniAb. But I have been with Ligand for almost 7 years overseeing the finance and accounting operations. And that's my background. I've been doing finance and operations leadership roles for the last 20-plus years, started my career with PricewaterhouseCoopers, spent a number of years with Intuit software company and 7 or 8 years with Illumina, genetic sequencing tools company -- and before joining Ligand almost 7 years ago, I was with Receptos, which was -- some of you might know, was acquired by Celgene for $7-point-some-odd billion. So that was quite the deal for that management team. So I'm going to talk to you about a few things, 2022, 2023 guidance. A little bit about balance sheet. And I'll introduce some new GAAP to non-GAAP tables given that we've got a discontinued operation to deal with now. So moving into the first slide here. 2022, largely here, reiterating what we told you post Q3 results, starting there with the royalty revenue line approximating $70 million in royalty revenue. Core Captisol sales will come in at $15 million. Total core revenue approximating $100 million, earnings per share $2.05 to $2.20. I want to highlight that this is what we refer to as core business means we strip out COVID Captisol sales. Those were $85 million -- will be $85 million in 2022, contributing $2.25 to the bottom line. We also exclude any direct revenue and expenses associated with OmniAb. Now framing up 2022 versus 2023 guidance. You may have seen our earnings release earlier or our press release earlier, excuse me. We are guiding a top line growth of 20%, let's call it, $120 million approximate in revenue for 2023 and resulting in 50% earnings per share growth over 2022. If we look at the various components here, just walking down the 2023 column. Again, core revenue, $118 million to $122 million. Cost of goods sold, $7 million; cash operating expenses, $46 million. We're estimating about $3 million in interest income, applying a tax rate of 21% to 22%, gives us $3.10 to $3.30 earnings per share on 17.2 million shares outstanding. Again, this excludes -- it is on apples-to-apples, excludes any sales for COVID Captisol and OmniAb. So just now drilling down a little bit into the revenue line item. On the royalty line there, we do get contribution from commercial products currently, although it is weighted towards Amgen's Kyprolis. That's about 45% of the total. Projected commercial launch of Trever's sparsentan in 2023 is also contributing to the royalty line, but minimally in 2023, we see that growing beyond that. Material sales, Captisol for commercial use makes up the -- most of the material sales of Captisol core Captisol sales expected to return to pre-COVID levels. We are booking -- recording $15 million -- we're guiding $15 million. We're guiding $21 million in '23. We think it grows from there to $25 million to $35 million run rate going forward. In terms of assuming that sparsentan gets approved in Q1 of '23, that will result in a $15 million milestone to Ligand. There is a wide diversity of payments of more than 15 programs contributing to the projected $25 million in contract payments in '23. A little bit on expenses, $53 million in operating expenses, cash operating expenses in 2022. That drops to $46 million in '23. Primarily -- the primary driver there, post OmniAb leaner operating functions or leaner operating support functions, G&A and R&D. We will continue to look closely at this line item. You heard Todd say that he thinks we could do better. I agree, I think we can look to improve there. But $46 billion is what we're guiding to. This next slide frames up our cash position. and layering on the convertible debt element, we have about $150 million to end the year. That excludes the 6.6 million shares that we own in Viking. The outstanding debt is $77 million. That is due in May of 2023. We'll pay that in cash, leaving us approximately $80 million post debt extinguishments. And what this graphic shows is that operating expenses, the blue section there pretty -- we expect it to be pretty flat. And -- but the revenue line will grow. So we get leverage there. And so we'll see that difference drop to the bottom line. And I add to that, sales of Captisol contract revenue, that's just icing on the cake. So that's that slide. And just a quick note here on our tax attributes post OmniAb spin. We do have approximately $85 million and U.S. federal NOLs and $168 million in California NOLs. On top of that, we do have R&D tax credits. These tax attributes will help especially in 2023, we expect to have very, very low cash outflow for our tax obligation. There are some limitations, but those limitations will come in beyond 2023. We do think 2023 will be largely cash tax free, so I can say it that way. And these next few slides, just frame up the GAAP to non-GAAP reconciliation. These are the usual items, nothing unusual or new here that support the tables that follow we show the year ended December 31, '21, and the 9 months ended September 30, '22. We also showed the 4 previous quarters. The as reported column, you've seen these numbers before. The discontinued operations column represents the expenses -- revenues and expenses that are directly attributable to OmniAb. And so then when you do the math, the continuing operations is what -- what the comparables will be going forward. And that concludes our presentation. We will open it up now to Q&A, and I'll ask Matt and Todd to step up.

Yes. Thanks, Tavo. So we'll take questions in the room first, and then there is a -- for those on the webcast, there's an ability to ask questions on the webcast by chat, and we'll read those out. So if we have time for questions on the chat, we'll do that afterwards. But -- and I see you've already got the mic there. So Joe, go ahead.

Joe Pantginis, H.C. Wainright. And welcome to the position, Todd. So I'll start with Captisol and then I'll link it to 1 of Todd's earlier comments about looking forward. So -- right now, you have -- or how would you define your current capacity? You had to significantly increase capacity like you said for remdesivir where does that capacity stand now? And any unused capacity, how does that impact your overall expenses or carrying costs around that capacity?

Yes. Thanks, Joe. So as I referenced earlier, we significantly built out the manufacturing capacity during the pandemic. We did that in 2 principal ways. One was sort of fixed, call it, machines and capacity that you'd think of as built out capacity. The other way we did it was by bringing a few extra vendors into the supply chain. As we've made our way through the pandemic and volumes have come down, -- the extra vendors are no longer needed, but the excess capacity that we built at the sort of core operating facility where we manufacture most of the Captisol still is in place. So we've significantly increased the capacity we had, but it's not still 500 metric tons a year, just as an example. The expense for that will continue to flow through the P&L. And so margins will be a little bit lower than they were just on average relative to where they might have been going forward as some of that cost runs through the P&L.

Got it. And then linking to Todd's earlier comments, you've been with the company, obviously, for a while now. So it's not like you're coming in and have to really assess everything. You've known what's going on. So I want to ask you, have you identified any early gaps. You said you wanted to look at key gaps in the business and where that might link to key expenses that you're looking at potentially curtailing? And then also secondly, from the ongoing discussions for M&A, which is core to your business model. Obviously, the depressed valuations over the last 18 months or so has been very good for your shopping list. I'm wondering, has there been any pushback from potential deals by companies saying no way we're going to sell at these or do a partnership at these valuations?

So I think a couple of things there. But on the deal front -- on the deal front, yes, there's always kind of lingering resistance around the valuations from a few months back. That's kind of human nature. And so I think that it is a target-rich environment, though. And that those opportunities will avail themselves and already are pretty apparent. You look at the markets, you look at people's cash balances, there are a lot of -- part of the opportunity here is there are a lot of good assets in this industry that are trapped inside of undercapitalized or otherwise troubled companies. And so that's what we can do. We don't just go by equity, right, but we can target assets that we think are high potential and undervalued because of other circumstances. So that is, in this kind of market, this is a time to be active for sure. So I think that we will be. On the expense front, I have a lot of ideas and thoughts, but I would defer Joe, for now because I've been here 2 days. I think these guys know a lot more than I do. So I want to make sure that we're doing the right things.

Larry Solow, CJS. Just a question on the royalties, maybe 2 questions there. So first, not much included before '23. Is that a fair statement?

Go ahead.

That's right. We're assuming sparsentan has approved the commercial launches middle to late next year, 9% royalty rate. So we're not going to give about the number, but it's marginal. It's a small number to the overall total for next year.

Got you. And you mentioned Kyprolis, I think 45% of that number. Just trying to figure out the 72% to 76% or the low end of that number pretty flattish versus this year, if you come in at the higher end. So just trying to bracket it seems like it's somewhat muted expectations in my opinion.

Yes. I mean we still don't know how Amgen is going to end the year, right? So we'll take that input, and that will inform ultimately if we issue new guidance. Sparsentan is a little bit of a wildcard. The teriparatide is doing well. There is some competition coming into that space. So we are hedging there a bit. So we'll see.

Yes, my follow-up. So the teriparatide you are building, I know you had a nice little bump this year. There is a questions on generics and whatnot. Is that you start assuming that flat or even down as next year, it feels like a.

It's a conservative assumption. We are assuming that the competition comes in and takes up some of that market share. Go ahead.

Maybe just to add to that. So for who don't know teriparatide is approved as a biosimilar to or an alternative to Forteo. They're in process of trying to get a therapeutic equivalence rating to Forte, which would make it switchable, generically switchable at the dispensing point. The competition that Telo's referring to and that we're talking about -- there are 2 additional potential competitors that have filed for approval for a competitive version of teriparatide. We don't have any indication of whether or not they will receive approval or not -- our models and our forecasting generally assume each year that they will get an approval. There are many scenarios and a range of scenarios that could happen. We could also get our generically -- genetically generically switchable approval at the same time that they get an approval or they could get approval we couldn't. So given all that uncertainty, we just factor in a little bit of conservatism on that product each year.

Fair enough. Just lastly on the tax rate, you said 0 cash payments. Are you actually assuming a 0 tax rate in your non-GAAP EPS or -- do you want to.

The non-GAAP earnings per share is a non-GAAP tax rate. We may have an 18%, 19% non-GAAP tax rate and still pay 0 because we're using the tax attributes, right?

Scott Henry, ROTH Capital. A few questions I guess from a bigger picture outlook, how has higher interest rates change the competitive environment? I know you don't have a lot of debt, but competitors do royalty companies, interest rates -- it seems like there would be some interaction there. I'm curious that outlook.

Yes. I mean I can -- I haven't done the analysis on that, but I can tell you having managed a royalty fund. If you're leveraging and your cost of capital goes up, you're looking to maintain your spreads. That's in the commercial space. Obviously, on the development space, for those few folks that are doing development-stage royalties like we are -- they're typically not using leverage. So that primarily affects the commercial royalty markets and that's a highly competitive space with billions of dollars of capital in it. But I suspect they'll be looking to kind of cover their cost of debt and keep the same returns to equity.

Another kind of bigger picture question. Following the OmniAb spin out new CEO, what are your thoughts -- and it's more of having 2 separate companies -- has it changed with regards to share buybacks or possibly dividends? How do you think about those?

Yes. I think just as a matter of general corporate hygiene. It's good to have a share buyback program in place. I believe that I also think, though, that we need to prioritize our use of cash between shares and what is likely to be a period of time here over the next many months, maybe a year or so, with a prolific set of opportunities to deploy capital. So we have to think about the smartest use of the cash that we have, and that's going to be considered in a share buyback program as well.

Okay. Great. And then just a couple product-specific questions. I guess, first, and hopefully, I will pronounce it correct in Ensifentrine the COPD product. Do you have any thoughts on the go-to-market strategy there? I mean when I think COPD, I think Pfizer, large-cap pharma, it's not an easy market to sell into for small companies.

Yes. Good question. And yes, you got it right. Ensifentrine. It is currently being developed by a small company called Verona. The expectation all along has been that they would find a partner for commercialization, whether it was internal -- an actual out-license or an acquisition of the company. We haven't talked to them about that. We see them only their public info essentially. So we don't have any window into it otherwise, but logically, it makes sense that they would find a big partner. They are gearing up to commercialize internally and raising funds to do that if they need to or want to. But our general assumption is the same as yours, that it's a big competitive market. So -- that could be some of the explanation for why the research estimates for that product are still a little bit lower than you might think for a $6 billion or $10 billion type market.

Okay. And then on Rylaze, I'm just getting my arms around this product myself, it's newly acquired. It sounds like the hypersensitivity switching is a key factor there. It also sounds like there may be some supply issues. I guess the question is, how do you think about that long term? I mean 5 years from now, should it be 75% of the market? Or should it be 25% of the market if you hold it out for switching patients? Just trying to get a sense of -- is this a career year? Or is this a growth year?

Good question. So as folks know and Diane referenced in her comments, Riles replaced a very similar product from -- that was marketed by Jazz in the U.S. ahead of that. That previous product was the 1 that had manufacturing and supply constraints. And on that basis, with restricted supply, they did about $175 million to $200 million a year in annual sales. The current product, Rylaze is approved in the U.S. for a subset of the total indications that the previous product was approved for and is not yet approved outside the U.S. So the $175 million to $200 million number for the previous product was a global number. Today, already inside the U.S., they're doing close to $250 million to $300 million this year. We'll see where the fourth quarter comes out, but $200 million through the first 3 quarters. The assumption there or -- our understanding and what Jazz has talked about is that comes from just more significant dosing, reaching more patients, the ability to dose appropriately given that there's not a shortage of the product. In addition to that market that they've already attacked, they are expanding geographies or attempting to expand geographies to Europe, Japan and elsewhere. They also are in theory, downstream looking to expand indications. Between all those things, you'd expect the market to be much bigger than it is currently. So this is, I think, a great launch, a great switch. So the new product is basically 100% of the old in terms of sales. But in terms of penetration, both into that and as well as new indications and better dosing new geographies, we'd expect it to continue to grow.

Okay. Great. And then I'll just finish up with 1 question for Tavo. More for a clarification. I know you've said -- and this is -- you said adjusted diluted EPS for 2022. But some of the historical numbers, you pulled Captisol out of that. I think what would be helpful -- could you tell me what your expectations are for fourth quarter '22 adjusted EPS, just to think of it on an apples-to-apples basis. .

Yes, I don't have the number in front of me, but we've got the 9 months in the footnotes. And we're telling you what '22 is going to be. So just the math.

It is. But I know -- I guess it's been different some of the historicals, but perhaps at some point, just to make sure because I know the historical they pull things out and aren't pulled out. It's going to change. Q1, particularly, but perhaps just down the road. We can talk about the quarter. .

Yes, just to be clear, the 9 months discontinued operations, table, takes out OmniAb and down below, it takes out the Captisol sales. And so we can talk about it.

Matt Hewitt from Craig Hallum. Maybe just a couple. As you look at the M&A strategy going forward, maybe this year, it's a little bit different given the balance sheet. But -- as you look at the M&A strategy, is it your intention to be more size and quality versus quantity and quality, like for Tavo and the team, in different -- you're going to have a lot of work to do, whether it's a $5 million acquisition or investment versus a $50 million or $100 million. But is your preference, especially given your track record to be more focused on larger deals.

Yes. I think the priority there is certainly quality, whether small or large is a very -- with a very significant lead is the priority. I think in terms of size, we really have to observe our amount of investable capital because we're trying to build the portfolio. So if you look at our available end of year cash here is going to be $150 million. We have to think about that relative to how quickly the cash is coming in from existing assets as we size the portfolio. So I don't see a massive step-up on deal sizes, like in project finance arena, is probably 10 to 30-ish on the M&A front. It can be larger than that on M&A. But in terms of deploying cash, I think we really have to balance how we're deploying our resources carefully so that we create a diverse portfolio. That's part of the -- a very important part of the strategy.

Understood. And then over the last couple of years, because of COVID, because of the spin-off of OmniAb, other distractions and other things that were coming into the mix, there were some internal pipeline candidates that you had been working on that were essentially shelved because of other priorities. Iohexol comes to mind. As you look at the portfolio today, are there some opportunities for some programs that were maybe kind of pushed off to the side, given other priorities, but that you look at now point, maybe now is a good time to bring those back into the fold.

There probably are. Again, I would ask for a little bit of time to really -- what's important, I think, in this strategy are the specifics in the particulars. So my sense is probably yes, but I would still rather -- if it's really a valuable asset, I would rather partner that and let a specific team with specific deep therapeutic expertise to develop that asset than do it ourselves. That would just be my preference. And yet in this model, you're going to end up with assets especially if you do M&A, you don't just get a specific asset you're going after, you get some other things as well. So we'll consider that. It's really about what's the highest return for every dollar invested. That's -- that's the only lens we look through. We're going to deploy capital into an internal program. And then we have to ask ourselves, are we the best team to develop this again, specific deep expertise in therapeutic areas or scientific formulation approaches, whatever the challenge is scientifically, that's the team you want developing it, people with the most expertise in that area. And so we'd have to kind of think about that. If it's a solubilization issue that creates a significant new opportunity, we could probably do that. We have a lot of expertise in that area. But I think we've got -- we have to be very disciplined about developing assets internally with the team that we have. Plus that always has the risk of snowballing into larger operating expenses, et cetera. as you try to get the right team around it. So we'll think carefully about that before we do any internal programs.

All right. We'll take a couple of questions from the webcast. The first 1 is asking for an update on the Viking program. .

Okay. So this probably in relation to Vikings NASH program, the TR beta program. We obviously have 4 or 5 different assets partnered with Viking. The most advanced though is their TR beta program for NASH. As folks probably know, they are running a Phase IIb trial now. The data is expected early next year and post that, they'd be running a Phase III program. All signs are good so far. Obviously, there's a competitor in the space that is supposed to report data any day now and we'll have some window into what the trial may result for Viking. People are focused on that. But if the program is approved, it's 1 of our more exciting pipeline assets. We get a 3.5% to 7.5% royalty. There's a significant milestone package, the first or next of which is a $10 million milestone on Phase III initiation. So with positive Phase IIb data and a start of the Phase III trial next year, we'd be in line for a $10 million milestone that obviously is not in our guidance currently.

And 1 more question from the webcast. Please describe the effort required as well as the plausibility and time frame for turning Captisol to $30 million of annual revenue level. And has remdesivir helped in the marketing around the Captisol platform more generally? .

Yes, thanks. Good question. So there are a number of things driving the Captisol business over time. In general, the portfolio of partners that I talked about in the slides, we have over 70 partners now. Some are commercial and some are still in development, but as those programs get commercially more successful and in development move further into trials, the base -- the core base of Captisol grows as a result, maybe more Captisol to run bigger trials and then commercialization as patient penetration grows, they need more Captisol. That business generally had grown to somewhere between $20 million and $30 million a year historically. There's -- a big chunk of that was tied to Kyprolis and Amgen's use of KYPROLIS in clinical trials. As that program wraps up its clinical profile, there's a bit of that comes out of the business. So if that was $3 million to $5 million a year, what we've talked about and what Tavo mentioned is a $20 million to $25 million a year Captisol business going forward. During the pandemic, the team was very focused on serving the pandemic. And so if you look at the few years of core Captisol during the pandemic, it was closer to the high teens or low 20s rather than the mid-20s. That's largely a result of serving the partners and the need on the Captisol for COVID side. when we're trying to get $10 million and $15 million orders out the door to folks around the world, it's less important to track the next new customer for that year for that sale. So -- we've renewed our focus now, and we're focused on growth there this year and next and beyond. You saw that we'll report somewhere around $15 million this year. We're guiding to '21 in 2023, and we expect growth from there. So with that, thank you, everybody. Appreciate your time, and that's all the time we have for questions today. But Please, for those in the room, stay for lunch and happy to talk live.