Ligand Pharmaceuticals (LGND) Q2 2026 earnings call transcript

Good morning everyone, and welcome to the Lagant 2nd Quarter 2026 earnings call. With me on the call today, our CEO Todd Davis, chief financial officer, Thavu Espinoza, and vice president of Portfolio Strategy and Investments, Lauren Hay. During the call today, we will review the financial results released earlier today and provide commentary on our partner portfolio and business development activity followed by a question and answer session.

Before we get started, I would like to point out we will be discussing non-gap results, which exclude certain items such as stock-based compensation, amortization of intangible assets, amortization or impairment of financial assets, and gains or losses from derivative assets amongst others.

I encourage you to review the reconciliation of these non-gap measures to their most directly comparable gap measures, which can be found in today's release available on our website. We believe these adjusted measures provide valuable insight into our core operating performance, both historically and moving forward. Our earnings release and a link to today's webcast can be found in the Investor Relations section of our website at Lagant. com. This call is being recorded and the audio portion will be archived in the Investor section of our website.

On today's call, we will make forward-looking statements regarding our financial results and other matters related to the company's business.

Please refer to this safe harbor statement related to these forward-looking statements, which are subject to risk and uncertainties. We remind you actual events or results may differ materially from those projected or discussed, and that all forward-looking statements are based upon current available information. Lagant assumes no obligation to update these statements. To better understand the risks and uncertainties that could cause actual results to differ, we refer you to the documents that Lagant files with the Securities and Exchange Commission or SEC that can be found on Lagant's website at Lagant. com, or on the SEC's website at SEC. gov.

And with that, I will now turn the call over to our CEO, Todd Davis.

Thank you, Melanie, and good morning, everyone. We appreciate you joining us today. We continue to execute on the financial transformation of Lagant. In the second quarter, we continue to deliver outstanding financial performance while executing on two initiatives that significantly strengthen and position our long-term growth platform.

First, shortly after the end of the quarter, we close the acquisition of Zoma royalty, the largest transaction in our company's history. Second, we successfully completed a $700 million zero coupon convertible offering. Both of these represent outstanding execution by our team while they simultaneously continue to execute on our core business. During the second quarter, royalty revenue increased 32% year-over-year and adjusted EPS grew 48%, reflecting the continued strength of our business model and diversification of our portfolio.

As Tava will discuss in more detail, our growth continues to be broad-based across multiple products and partners, demonstrating the compounding growth of the royalty aggregation strategy that we have been executing on over the past several years. As we enter the second half of the year, we believe Lagant is stronger, more diversified, and well-positioned for our continued growth.

Before discussing Zoma, I'd like to briefly touch on our financing strategy. Our objective has always been straightforward, maintain the financial capacity to move decisively when compelling opportunities arise.

Our recent convertible offering accomplished exactly that. A financing strengthened or balance sheet provided exceptionally attractive long-term capital and increased our flexibility to execute against a highly active business development pipeline.

Access to low-cost capital is important in a strategic aspect of any investment business. It enables us to act quickly when attractive opportunities arise while maintaining the disciplined capital allocation philosophy that has guided our strategy since 2022. Zoma acquisition officially closed shortly after quarter-end, but it represents the culmination of months of work and marks an important milestone in Lagant's evolution.

The transaction adds more than 120 commercial, clinical, and pre-clinical assets to our portfolio, including several meaningful commercial royalty streams, while nearly doubling our late-stage clinical pipeline.

It also extends the duration of our royalty portfolio, with intellectual property rights that, in many cases, extend beyond the next decade. The acquisition is immediately accretive, and we expect the acquisition to contribute approximately 50 cents of adjusted earnings per share during the second half of 2026, and approximately $1.50 during 2027, with meaningful growth and duration expected beyond that.

Some investors have asked us, isn't the Zoma acquisition a concentrated bet given the size? In reality, it does not concentrate our risk due to the broad Zoma portfolio and further diversifies our risk and accelerates our growth. This means higher growth at lower risk. It also extends the duration of our cash flows, in some cases, through 2040. The Zoma acquisition and our recent financing further demonstrate the effort we've been focused on since 2022. The execution of a differentiated royalty aggregation strategy.

We are building a high-quality, diversified royalty portfolio through disciplined capital deployment and rigorous underwriting led by a lean and highly skilled investment team. We continue to see an exceptionally attractive market for royalty investing. Across biotechnology, companies are increasingly seeking flexible, non-deluded financing to advance innovative therapies while preserving their strategic optionality. At the same time, continued pharmaceutical innovation is expanding the universe of investable royalty assets.

At LIGAND, we have scaled the organization, recruited and experienced investment team, grown our base of diversified royalty cash flows, expanded our financial capacity and demonstrated consistent, disciplined investment execution. We believe this gives LIGAND a meaningful and strong position as a preferred partner of choice for companies seeking creative financing solutions.

Our business development pipeline remains exceptionally active. It spans traditional royalty acquisitions, structured financings, project finance opportunities and, importantly, our special situations approach. The ZOMA acquisition broadens our already diversified platform and further strengthens our ability to pursue additional opportunities.

The transformation of LIGAND since 2022 provides clear evidence that our strategy is working. Over the past four years, we have built a more focused, capital-efficient and royalty-driven company. Royalty revenue has increased from $73 million in 2022 to expected 2026 Royalty revenue between $225 million and $250 million. This was accomplished with cash operating expenses of about half the 2022 level. That combination of strong royalty growth and operating discipline has produced significant earnings growth. Adjusted EPS has increased from $2.44 a share in 2022 to our updated 2026 guidance range of $9.50 to $9.50.

Importantly, this transformation has not come from adding organizational complexity. It has come from simplifying the company, focusing our resources on high-quality royalty opportunities and building a platform designed to compound over time. The ZOMA acquisition accelerates that strategy. It adds scale, diversification, and long-duration royalty rights, while fitting squarely within the capital-efficient and operationally lean model we have been executing on since 2022.

The next slide illustrates another important benefit of that strategy. The breadth of clinical and regulatory catalysts now embedded within our portfolio.

Following the ZOMA acquisition, LIGAN is entering one of the most catalyst-rich periods in our history. Over the next 18 months, we expect a steady cadence of potential, FDA approvals, pivotal trial readouts, label expansions, and geographic launches across a broad range of therapeutic areas.

Importantly, our outlook is not dependent on the success of a single product or program. These opportunities span rare disease, oncology, ophthalmology, cardiovascular disease, autoimmune disorders, and neuroscience, and they are being advanced by a diverse group of highly capable and curated partners.

This breadth and diversification are among the defining strengths of our business model. Rather than relying on a small number of binary events, we benefit from a broad portfolio of independent opportunities, each with potential to initiate, expand, or accelerate a future royalty stream. Of course, each of these opportunities carries some level of inherent risk. That's the nature of a broadly diversified portfolio.

Many will succeed, but some will not. The business model is structured to be resilient to that. This is also why we continue to believe the royalty model is so compelling. By partnering with innovators across biotechnology, we gain exposure to important therapeutic advances without assuming the full burden and operational complexity of developing, manufacturing, and commercializing those medicines ourselves.

Furthermore, we do so with great selectivity and access to proprietary information. Together, these advantages provide us with the opportunity to deliver superior risk-adjusted returns.

Our partners fund and lead those activities while I again participate in the long-term value they create through royalties and other contractual rights. As the portfolio grows, each investment adds another potential source of future value and further strengthens the diversification and durability of the business. As we enter the second half of the year, ligand is operating from a position of considerable strength.

We have a larger and more diversified portfolio, a stronger balance sheet, a highly active business development pipeline, and one of the deepest collections of potential catalysts in our history. Our business looks meaningfully different today than it did when we presented our long-term outlook last December.

And at Investor Day this December, we will share an updated five-year outlook that reflects the larger, more diversified, and higher growth business that we have built over the past year.

Our strategy remains unchanged, deploying capital with discipline, partner with innovative and capable biotechnology companies, and continue building a high-quality royalty portfolio designed to deliver significant and durable growth over time.

With that, I'll turn the call on to Tabo for the financial update.

Thank you, Todd. As you've highlighted, we're entering a new chapter for ligand. The business is performing exceptionally well. We've significantly expanded our royalty portfolio through the Zoma acquisition, and we further strengthened an already exceptional balance sheet. I'll begin with our second quarter financial results before discussing the financial implications of the Zoma integration, our recent financing activities, and our updated outlook.

The second quarter was another strong quarter across the business. We generated $64 million of total revenue, an increase of 34% over the prior year. Realty revenue grew 32% to $48 million, driven primarily by continued strength from Dilspari, O2 Bear, and Zell Suvme. Adjusted diluted earnings per share increased 48% to $2.37, reflecting the scalability of our business model and continued operating leverage.

Turning to our balance sheet, we continue to strengthen our financial position. After successfully completing our convertible note offering and closing the Zoma acquisition shortly after quarter-end, we still have approximately $700 million of deployable capital. At the same time, we're generating strong operating cash flow in excess of $200 million in 2026, growing to an expected $300 million in 2027.

Together, this capital strength and cash flow generation gives us significant flexibility to continue executing our discipline business development strategy going forward.

Turning to Zoma, the integration is progressing extremely well. Before discussing the details, this team deserves real credit for what's been accomplished. Executing a transaction of this complexity required extraordinary collaboration across our business development, legal, finance, accounting, and operations teams. Successfully completing the acquisition while maintaining strong execution across the core business is a significant achievement. From an operating perspective, we're on track to capture virtually all of the anticipated cost energies. Zoma previously operated as a standalone public company with annual operating expenses of approximately $30 million.

Under Ligant's operating model, we expect Zoma's annual operating expenses to decline to less than $5 million, primarily through the elimination of duplicative public company infrastructure, including legal, audit, and SEC reporting costs. The acquisition also brings meaningful tax attributes, including more than $110 million of Section 174 tax credits and net operating losses that we expect to utilize over the next three to five years, resulting in significant U. S. cash tax savings.

Strategically, the transaction more than doubles the size of a royalty portfolio by adding over 120 assets, including seven commercial-stage programs, approximately 14 late-stage clinical programs, and more than 100 additional clinical and pre-clinical programs that provide substantial long-term optionality. In addition to the royalty streams, the acquired portfolio includes approximately $2.3 billion of publicly disclosed potential milestone opportunities, while those milestones are naturally contingent upon further development, regulatory, and commercial success, they represent meaningful and better economic upside over time.

It is important to note that some of these milestone rights are associated with assets accounted for as financial royalty assets. As a result, cash received upon achievement of a milestone may not be recognized entirely as revenue in the period received. A portion may be instead reduced the caring value of the underlying asset. The Zoma acquisition increases the number of financial royalty assets within our portfolio, while the accounting for financial royalty assets differs from intangible royalty assets both represent valuable contractual rights that contribute to ligands long-term economic returns.

We reflect the economics of these assets in our adjusted financial measures through the amortization of financial royalty assets. As they become a larger contributor to our results, we will continue providing additional transparency around both the accounting presentation and the underlying economics.

Finally, I'd like to briefly address the Trampia contingent value right. Under the transaction structure, we're entitled to receive 25% of any net proceeds ultimately received from the Janssen Trampia litigation. Importantly, we have no governance responsibilities, no obligation to fund litigation costs, and no downside financial exposure associated with this asset. It simply provides additional upside for our shareholders.

Turning to our recent financing activities, we took advantage of an exceptionally attractive convertible debt market and successfully completed a $700 million convertible note offering at a 0% coupon. We paired the offering with a call spread transaction that reduces potential shareholder dilution because we intend to settle the principal amount in cash at maturity under the net share settlement feature, the structure protects shareholders from dilution up to approximately $524 per share.

We also repurchased approximately 229,000 shares for roughly $60 million, reflecting our confidence in the intrinsic value of the company while helping offset the market impact from the convertible hedge activity.

Overall, this transaction lowers our long-term cost of capital, strengthens our balance sheet, and gives us additional flexibility to continue executing against what we believe is one of the strongest royalty acquisition pipelines in the company's history.

Turning to our detailed financial results, royalty revenue increased 32%, driven primarily by Thospari O2ver and Zosubmi. Trivia reported second-quarter U. S. Thospari net sales of $141 million, representing 96% year-over-year growth. Merck reported net sales of O2ver of $204 million, representing year-over-year growth of 98%. This was partially offset by Amgen's reported Kipralis net sales of $314 million, a year-over-year decrease of 17%, driven by lower volume, a decline we had anticipated to some degree, and one that remains within our royalty revenue guidance.

Operating expenses increased compared to the prior year, as we continued investing in the growth of the business. Research and development expense included a $12 million one-time charge related to our orchestra bio-investment. As we've discussed previously, depending on the structure, our R&D financing transactions may be required under GAP to be expensed immediately, and even though we view them economically as investments expected to generate future royalty streams.

The orchestra bio-transaction this quarter is an example of that accounting treatment, and accordingly, this one-time charge is excluded from our adjusted earnings.

General and administrative expense increase primarily due to higher stock-based compensation, continued investment in our business development capabilities, and transaction costs associated with completing the ZOMA acquisition.

Outside of operating results, non-operating income benefited primarily from fair value adjustments within our investment portfolio. GAP diluted earnings per share were $2.22, while adjusted diluted earnings per share increased 48% to $2.37, reflecting the continued earnings power of our royalty-focused business model.

Turning to guidance, we are increasing the low end of our adjusted diluted earnings per share guidance to $9 per share, while maintaining the upper end at $9.50. The increase primarily reflects the incremental earnings contribution from the proceeds of our zero coupon convertible note offering together with the benefit of the share repurchase completed during the year, excuse me, during the quarter.

At the same time, we're reaffirming all of our revenue guidance, including a royalty revenue of, including royalty revenue of $225 million to $250 million. Total revenue of $270 million to $310 million, capital salt revenue of $35 million to $40 million, and contract revenue of $10 to $20 million. For modeling purposes, I also note that within our capital salt guidance, we expect the remaining sales this year to be weighted towards the fourth quarter, approximately 40% in the third quarter and 60% in the fourth quarter, reflecting our current expectations for the timing of customer orders.

Similarly, we expect the majority of remaining contract revenue to be recognized in the fourth quarter, based on the timing of certain anticipated partner milestone events. Overall, we maintain highly confident in our outlook. With Zoma now closed, we believe we're well positioned to deliver another year of strong financial performance, supported by continued growth from our commercial royalty portfolio and the accretive contribution from the acquired assets.

Importantly, the business today is materially different than the one reflected in the long-term framework we introduced last December. As Todd mentioned earlier, we'll update that outlook at Investor Day this December. That original five-year framework didn't contemplate the acquisition of Zoma or several significant positive developments across our existing portfolio. The approval of Phil Spari in FSGS, the positive phase three results for Palvelas, Cutoran Rapamycin, and the acquisition of Zoma have all enhanced the long-term earnings power of the business.

Those positive developments continue to build. In fact, two days ago, Trivia reiterated its confidence that Phil Spari has the potential to achieve peak sales exceeding $3 billion across IGA in a property and FSGS. That further reinforces our confidence in the long-term growth opportunity for one of our largest royalty assets. We're excited to share the details with you at our Investor Day later this year.

With that, I'll turn the call over to Lauren for an update on our royalty portfolio and pipeline.

Thank you, Tabo, and good morning, everyone. Following the acquisition of Zoma royalty, our commercial portfolio now consists of over 40 royalty revenue-generating products with 15 key programs.

The Zoma acquisition adds Rosh's Vibismo, Ojemda, which is marketed by Servier in the U. S. and Ipsin in Europe, and Zevras Mplife. Of these 15 programs, nine stem from royalties tied to new approvals or investments made since 2022, when we pivoted to a lean royalty aggregation model. Together, they span a wide range of therapeutic areas and partners reflecting a highly diversified, durable, and growing royalty revenue stream.

Turning to a snapshot of our key partnered pipeline programs, our portfolio now includes more than 70 clinical stage assets. While this slide highlights what we believe are the most significant late-stage opportunities, it represents a small subset of our broader development stage portfolio. The breadth and depth of these partnered programs provide multiple opportunities for future royalty growth as the assets advanced through clinical development, achieve regulatory approval, and ultimately reach commercialization.

This diversified pipeline further strengthens our long-term growth profile and underscores the value of our royalty aggregation strategy. One asset I would like to highlight is a Genesis Bot Bell. A genus entered into a financing in July, raising $85 million up front with an up to an additional $225 million upon full exercise of purchase warrants.

The financing was led by Commodore Capital with participation from Wigand, among other investors. With this financing, a genus is discontinuing its current Phase III trial in relapsed refractory colon cancer and has reached alignment with the FDA on a new trial in the Neo-Adjavant setting. First patient dosing in this new study is expected in the first quarter of 2027.

Last quarter, we highlighted near-term growth drivers which had positive catalysts in the first half. These included Philspari, which was approved in April in a second indication, FSGS, whereas the first and only FDA-approved treatment. Additionally, Tutor and Rapamycin demonstrated very positive Phase III data in microcystic lymphatic malformations. Both of these products are expected to be significant near-term growth drivers for Ligand.

This quarter, I'd like to turn our focus to a few programs we gain through the recent acquisition of ZOMA that are expected to play meaningful roles in the Ligand portfolio.

First is the multi-billion dollar blockbuster treatment Vibizmo, which is the third best-selling product in Rosh's portfolio. Vibizmo is indicated for patients affected by wet age-related macular degeneration. Diabetic macular edema, and retinal vein occlusion, where treatment was recently approved to extend beyond six months.

First half, 2026 sales were approximately $2.6 billion, and analysts' consensus peak sales are approximately $7 billion, which we represent a peak royalty of approximately $35 million to Ligand. Rosh is currently conducting a large-scale, prospective, non-interventional, observational trial, evaluating the long-term real-world effectiveness and safety of Vibizmo. The trial was initiated in 2022 and aims to track over 6,000 patients.

Interim data has already been presented showing significant functional and anatomical improvements as early as six months into treatment. The trial has the potential to be an incremental growth driver for Vibizmo.

In July, 2026, Rosh announced the Phase III trial, evaluating Vibizmo in myopic Coriatal Neovascularization, or CNV, meant its primary endpoint. A potential catalyst is expected in 2027, as Rosh is expected to file a BLA in CNV. We look forward to following these key developments over the coming months.

Turning to the next slide, Ojemda addresses an area of high unmet medical need in pediatric oncology. Ojemda is currently marketed in the U. S. by Cervier, and recently gained marketing authorization in Europe, and is being marketed by Ipson as its ex-U. S. partner.

Cervier acquired rights to Ojemda through its recent acquisition of day one for $2.5 billion, further validating the commercial potential of this asset.

Ojemda is currently marketed under accelerated approval in relapsed refractory pediatric low-grade glioma, or PLGG, and is the first targeted therapy delivering clinically meaningful tumor shrinkage with durable responses in patients with BRAF fusion or rearrangement and V600 mutated disease. It is also in Phase III for frontline PLGG, with top-line data expected mid-2027. We are entitled to milestones and a tiered, mid-single-digit royalty on worldwide net sales.

Day one previously guided to 2026 sales of between $225 and $250 million, and day one analyst consensus peak sales were estimated to be in excess of $1 billion.

In addition to our mid-single-digit royalty on net sales of Ojemda, we are also entitled to regulatory milestones. Taking a step back to look at our portfolio as a whole, following our acquisition of Zoma, we are entering the most catalyst-rich period in our company's nearly 40-year history. Over the next 18 months, we have as many as seven pivotal trial readouts, alongside potential FDA approvals and geographic expansion opportunities for products already on the market.

Each of these represents a potential royalty revenue stream being initiated, expanding, or accelerating for our shareholders. Of course, biopharmaceutical clinical development carries inherent binary risk, and we do not expect that every one of these pivotal studies will be positive. The strength of Ligand's model is that we have strategically and intentionally positioned our business to be resilient to this risk by creating a highly diversified royalty portfolio.

Let's start with the expected pivotal study readouts. Orchestra Biomed's Avon Therapy, if successful, could represent a significant new royalty in cardiovascular disease. Ojemda's Phase III readout and frontline PLGG could result in a label expansion opportunity.

Leona Bios-Lazifoxifine has the potential to capture significant market share in the metastatic ER-positive HER2-negative breast cancer market. Takeda's Mesogadimab is being developed in both immune thrombocytopenia, or ITP, and I. J. nephropathy, and Takeda has shared the iGAM data could read out as early as late 2027. Ozavantpator has several Phase III readouts expected in major depressive disorder. Resolute announced positive interim data for ER2-TUG in tumor hyperinsulinism in June, with top line results expected in the second half of 2026.

The Phase IIb trial of Volixabat in primary billiary colonigitis is expected to readout in the first quarter of 2027. In addition, they have announced positive Phase IIb data in primary school rosin colonigitis, and will hold additional discussions with the FDA prior to FDA submission.

Volixabat has orphan drug designation and breakthrough therapy designations in both indications. Turning to FDA approvals, Palvela began the process of submitting a rolling NDA for ketorin rapamycin in microcystic lymphatic malformations, which is on track for completion by the end of 2026. Ketorin rapamycin has the potential to be approved in 2027, and if approved, would represent a major growth driver for ligand.

Finally, we're tracking potential geographic expansion for commercial products already generating royalties today. Phil Spari has the potential to be approved in Japan and Eigen, Otivir in China, and Ojemda in Japan, which could significantly drive royalty revenue with potential milestone opportunities as well.

In closing, with the acquisition of Zoma, we have never felt more confident about the potential of our portfolio both in the near term and the long term. With that, I will turn the call back over to Todd for his closing remarks.

Thank you, Lauren. We are incredibly proud of the team at ligand for their outstanding execution in the financing and the acquisition of Zoma royalty. We have significantly scaled our royalty portfolio and accelerated our long term growth profile while adding a highly complimentary and diversified business to our platform. Additionally, we are pleased with the continued progress of our incredible partners and late stage pipeline.

While we are driving growth for our shareholders, it is very satisfying that we get to do so by helping our partners as they develop life-saving treatments and improve the lives of patients. Thank you for joining us today. And I will now turn the call back over to the operator for questions.

Yeah, a good question, Matt. I'll have Lauren way in here, but I think yes. There have been a number of developments in the portfolio that are positive. That would just set Lauren up by saying that, you know, when you're acquiring a royalty portfolio of this size, you value the entire portfolio on a subset of assets.

And you value the rest of the assets at zero. It's kind of a triage approach to valuation. And we've had several positive developments on assets that we had originally valued at zero in that process. So go ahead, Lauren.

Yeah, thanks Todd. I think yeah, Todd's exactly right. We did focus our underwriting process on some of the later stage pipeline assets. And since the acquisition closed, we've been connecting with each of the partners in our new portfolio and finding some really interesting new investment opportunities, both within the kind of the mid stage pipeline, as well as some earlier opportunities.

So I think, you know, related to our ongoing portfolio management strategy that we implemented this year, there's a tremendous amount of opportunity for us to provide further investment into some of those early to mid stage pipeline assets. And we have a lot of conviction around some of those that we're starting to learn more about since the acquisition close. So thanks for the question, Matt.

Thanks, Matt. I think, I think, Matt, you're referring to the zombie strategy where they were acquiring essentially companies that had become distressed. And one of the main motives there was acquiring the tax assets and net cash from companies that were looking for basically liquidity. And we certainly have looked at that strategy. I think part of each Zoma's royalties and our strategy are driven by certain circumstances, scale, access to capital, et cetera.

And I don't think that we would look at the very small deals where you're netting, you know, a couple million in a diminished amount of assets. But Zoma did a very good job of rolling up a number of these, which, cumulatively, we're benefiting from those now in terms of the tax assets that Tavel mentioned. But we are looking at a number of companies that do provide some tax benefits right now in our active pipeline. But our main focus is on the quality of the asset and the ability to monetize that in terms of loyalty cash flows downstream.

Yeah. It actually, you know, while we've scaled the portfolio and accelerated the growth, the size of the market, the total available market that we're investing in the sub $100 million market is very, very significant in size relative to the amount of capital worth. And we've kind of done some analysis around the required level of investment for us to continue really perpetuity levels of growth.

And it's around 100 to $125 million per year at the yields we expect to generate off of those investments. But we're able to invest really very consistently in this market at the $200 million plus or minus level with this team on an annual basis. So I do think that we expect to continue to execute on the exact same type of deals. That we do with partners. And in some cases, special situations, which can on average be a little bit larger, but are typically also pretty deep value opportunities. So I would say expect to see more of the same.

You know, we have. And because you'll financially we just were a little bit more mature than Zoma and have more scale, more access to capital. It allows us to play the portfolio with a lot more optionality. And there are some, you know, I think pretty interesting assets in the portfolio that I'd say we're on the cusp of proving their value. So for very small levels of investment, in some cases, a couple to $3 million, you can validate some of these earlier stage assets in the clinic and make them very licenseable. So we're pursuing a number of ideas like that. It's a little bit early to say, you know, which ones seem most promising and which ones we will actually make final decisions around follow on investments in.

But it's such a large target rich portfolio that I think there will inevitably be a few of those coming out of it. And I would just ask Lauren if she has anything to add to that response.

Yeah, I think I would reiterate Todd's points and just add that, you know, the opportunities that we're focused on in the earlier stage portfolio are still very well aligned with our investment criteria, which include, you know, ability to address high and medical need evidence of efficacy and safety strong alignment with our partners. We're looking to invest with great teams. So we're definitely finding opportunities in the earlier stage, the portfolio that while they may be a little bit earlier than we would historically look at, you know, the assets themselves and the teams themselves are completely aligned with our overall strategy in terms of the types of assets that we're looking at. So hopefully more to share publicly a little bit later on this year, but we're busy and excited about what we're seeing.

Yeah, happy. Good question, you go. And I'll just, you know, I'll hand this one off to Lauren, but just by stating and leading in that a strategic part of our organizational changes over the last couple of years has been to put in place a sophisticated portfolio management opportunity or opportunity system, which allowed us to absorb the Zoma assets with a de minimis amount of absorption of their existing infrastructure.

So Lauren is overseeing that she heads our portfolio management system and is engaged, you know, in detail on the late stage assets, the analysis of those and additional follow on activities where it makes sense.

Yeah, sure. Thanks for the question, Eagle. I think we've talked about what we're uncovering in some of the earlier stage pipeline. So I think I'd respond by saying, you know, what we're most excited about in the near term are probably some of the assets that we highlighted in our prepared remarks related to upcoming pivotal study readouts. So we're looking at agenda in frontline pediatric low grade glioma. And then we have data expected for mesogata map, ocevampator, volixabat in PVC, as well as her soda tug. So there's a number of shots on goal here. And when you look at just the late stage portfolio. So, you know, as we shared in the prepared remarks, we don't expect all of these to be positive.

But I think when you think about the volume of callus that we have in the next 18 months in the late stage, zoma portfolio relative to say what we had this year. We had one major data readout with palbellas, ketorin, rapamycin and microcystic lymphatic malformations, which really delivered exceptional results. When you think about that compared to, you know, up to seven potential pivotal study readouts in the next 18 months across both the zoma and ligand. It really is going to be a busy, exciting time for us. And so we're most focused at the moment on some of those later stage assets. So thanks for the question, Eagle.

Yeah, you call. That's a great question. Our strategy in our underwriting criteria, as well as target returns remain unchanged. Lower cost of capital just allows us to deliver greater alpha and a spread for our investors. So, and the deal sizes will remain in the same ballpark as well, because we're really focused on the market that needs this type of capital the most. And we think this sub $100 million deal size, which is our typical range that we're in, at least that's our limit, say per asset, is quite target rich. There's lots of small cap companies, late stage private companies, even some mid cap companies, where this is a very good fit.

And we're focused on really serving that market. So this is really where we've focused the engine that we've built is in that market.

Go ahead, Tom. Hi, Jackie. Thanks for the question. The, the, the contribution from the Zoma acquisition is entirely reflected in increasing guidance that we announced a couple of months ago upon the announcement of the Zoma, the Zoma deal. It does include the top line contribution, as well as cost energies that we expect. And, and, and, and obviously that, that all takes effect in starting in the third quarter. And, and then obviously the, the full year contribution in 2027. So yeah, that, that dollar 50 is 100% tied to the top line contribution from Zoma, plus the significant synergies that I referenced in my prepared remarks.

Thanks for the question.

Yeah, I think, you know, in general, in terms of the, the landscape, the competitive landscape, our ability to execute within the markets. The, you know, the overall amount of royalty capital involved in financing pharmaceutical companies, bio pharmaceutical companies is less than 9%. On the development side, and now this is my own estimate. So this is rough, but it's, it's less than 5%. And I would say, well less than 5%. And, you know, there's only a few players that really do this consistently, and they all, they all have their different approaches.

So it's a very early stage market, and it's pretty low competition in terms of providing. You know, non dilutive capital in the form of royalty finance. That is exactly why we proactively and initially focused on the market that we focused on, which is development stage sub $100 million deals, mostly small cap companies, but late stage private and some mid cap as well. And there's a very, very high demand and low supply of capital in the space in general.

But even the players that do it consistently as part of their core business have very different approaches. So we haven't really been head to head on any, on any royalty financings. We do invest in very capable partners. They have to have good management teams so that we don't have to manage it. That allows us to achieve very high operating leverage. So they usually almost always have alternatives. Those alternatives are, there are other options in the equity markets, access to debt, et cetera. So, you know, that keeps everybody honest and it keeps the market pretty level.

But it is a, it's a very good market and there's a high demand for what we do.

Yeah. I think, thanks for the call. Thanks for the question. We then, yeah. So the, the section 174 R&D tax credits that came about from the big, beautiful bill, the, the sponsor, the holder of the asset has the option of either taking 100% right off against their taxable income or deferring it over five years. The, the, the, the vast majority of the sponsors that generated these assets under the ZOMA.

These are, these are assets that came over from ZOMA. Obviously they elected to defer them over, over five years. So we will, we will continue with that. That cadence, if you will, and the, the, the, the, the volus of the value will be absorbed or realized over the next call it to three to, you know, two to four, three to five years, given our taxable income profile on the NOLs, which is a significant.

Smaller portion of the overall asset. Those are limited to the general rule there is, is three percent of the acquisition price per year. But it does, it does inform our cash generation, meaningfully. You heard me say on a, in my prepared remarks that we expect to generate approaching $300 million in 2027. And some of that is informed by this tax tax, tax, tax asset, this tax attribute that, that comes over from, from the ZOMA acquisition.

Nothing that I can really talk to Joe. I think in terms of how we monetize assets, and I'll use this great question as a platform to make, I think, an important point. A lot of, and what we valued the ZOMA company on were partnered assets and was a subset of the total number of assets. There are many assets. In fact, the significant majority of the assets that we either did not have enough information about, or they were just very early, so we valued those at zero. So again, it took kind of a triage approach. Now, Lauren, through the system that she's set up to manage these, is going through the full portfolio. There are also un-partnered assets.

And so when we look at these opportunities to create upside beyond our original underwriting, we're looking at certain technologies and assets that may be very promising, but require really a tremendous amount of investment to establish proof of concept, which would then make them very licenseable or partnerable. So that is a whole other area that is pretty target rich for us. And I can't name anything specifically yet, because it is early in our analysis in that regard, but I'd be surprised if we don't get a couple or several opportunities like that that are pretty compelling. And so we can continue to farm basically some of the un-partnered assets that come along with the portfolio. In terms of the already partnered assets, just as we do with our existing portfolio, we basically will participate, as Lauren mentioned earlier, as she re-established the laser-phoxifene opportunity within a new company platform in a new financing, we'll participate in those financeings, as we did with the Agenas financing as well, to support those companies and facilitate the robust nature of the programs to make sure they're properly capitalized.

So you need to stay engaged with these assets from a partnership management perspective and support the companies. So in many cases, like with Palvela, I think we have followed on in every equity financing they've done to give them basically strength from the insiders as they've gone out for additional equity rounds. And that's a sign of confidence, of course, in the team and the asset, but we will do that to support our companies on the equity side. Even though we're not equity investors as a core business, we will use that as a tool to make sure that our partners have financial strength, which ultimately leverages the value of our royalty asset.

So that's how we think about managing these things, and we're constantly reassessing, reprioritizing the portfolio as news, as data rolls out.

Yeah, thanks for the question, Joe. So we continue to have a lot of conviction in DeFi. We think that 5GVEC has been a great introduction for the dev community because historically there were no FDA approved treatments and it's been a great first step. There are some limitations with that product that we think DeFi can address.

Those include the body surface area that you're able to treat, the types of wounds. So, you know, can we be looking with an injectable treatment and addressing some of the chronic wounds that patients have or different locations of the body. So we think the unmet need here still remains. We think there's a great opportunity for combination therapy as well.

Now that we have a second product in the market with Avione, but we think that these are nice complimentary. Programs that really that the dev community has been waiting for for quite some time. When you think about, especially the our dev patients and some of the. The more severe folks, you know, they have extensive body surface area coverage with wounds. So we continue to have a lot of conviction in this program. You know, Zoma did as well. So our royalty rate increases a little bit and we will look to see additional developments in the coming months.

Saheel, thank you for the question. Yeah, frankly, very excited about the potential upset here from the magnitude of milestones that we have contractual rights to. It's 2.3 billion. You're right. As you said, that have been disclosed.

You could see that you could see that figure in Zoma's previous filings. We are still digesting the various contracts and getting our head wrapped around. The timing of the potential, the probability of success.

The stage of these milestones ranges from, as you would imagine, preclinical to early development stage. And yes, even some that we see coming through potentially as early as later this year. We're not prepared to give further visibility to the quantum or the partners that these are attributable to. But we do plan to provide more visibility and greater detail when we discuss this more broadly and investor day in December.

Yeah, sure. I'm happy to take that question. So we were certainly disappointed to see that news last night. We continue to have a tremendous amount of conviction in this asset, both in PSC as well as PBC. I think, you know, with regards to PSC, you know, our partner executed the largest randomized study to date in this indication and there are no FDA approved treatments. The company remarked that they thought it was potentially due to a new review team, not data deficiencies. And then interestingly, they got breakthrough therapy designation after the meeting. So there's a little bit of, you know, mixed signals, if you will. So, you know, it pushes it out a little bit in terms of the potential approval date.

You know, they're now targeting iterative discussions with the FDA that they get through the breakthrough therapy designation. And then a submission in the first half of next year, as opposed to the last half of this year or so moves things out a little bit. We think this is, you know, an indication that the company continues to believe strongly that they'll get approval here without another phase three study being required. And then they also continue to believe that the 2B that they're completing the vantage study in PBC remains on track. So, you know, disappointing news for sure. We've seen this delay earlier this year with Phil Spari in January when there was a major amendment pushed out the approval to April.

No major changes in terms of our projections and we'll hope for good news here as they continue to engage with the FDA. And hopefully clear up some of the miscommunication.