Ligand Pharmaceuticals Inc

NASDAQ:LGND

Earnings Call Analysis

Ligand's Strong Performance and Growth Outlook

Ligand had a transformative year in 2023, with core Captisol sales exceeding expectations. GAAP net income spiked to $53.6 million thanks to higher operating income and gains from investments. Key revenue drivers included royalty streams from commercial drugs like Kyprolis and FILSPARI. Looking ahead, Ligand anticipates a 10% revenue growth in 2024, with total revenue guidance of $130 to $142 million and adjusted earnings per share between $4.25 to $4.75 .

Ligand's Transformative Year and Financial Performance

Ligand Pharmaceutical's CEO heralds a transformative year, successfully reshaping the company for growth. Key financial achievements include a revenue increase of over 20%, excluding pandemic-related sales, and core adjusted EPS of $4.06—a 66% year-over-year hike. Cost optimizations have led to a significant drop in operating expenses from above $90 million to below $40 million. Besides enhancing the financial profile through spin-offs and technology platform divestments, the headcount has been strategically reduced from over 170 to 35 while onboarding talent to foster a premier investment team. The bolstered team is executing a refined strategy aimed at attracting innovative programs to augment Ligand's royalty portfolio—all while maintaining a confident outlook predicting a royalty revenue CAGR of over 20% and an EPS CAGR exceeding 25% over the next five years.

Strategic Asset Acquisitions and Partner Highlights

The company has expanded its portfolio by acquiring full rights to the FDA-approved ZELSUVMI and ramping up royalty investment in Palvella's PTX-022 program. Interestingly, Ligand capitalized on the increasing value of Viking Therapeutics shares, which strengthened the balance sheet, and plans for reinvestment are in place for future growth[7†source]. Ligand's portfolio diversification is evident with over 85 partnered programs, including commercial heavyweights like Kyprolis which reported revenues exceeding $370 million for Q4 alone and an annual total of $1.4 billion, up 13% from the previous year.

Earnings Per Share Growth and Revenue Calibration

Despite excluding pandemic-driven Captisol sales, Ligand's total annual revenue surged 21%, driven by key contributors like Kyprolis, Rylaze, and VAXNEUVANCE. However, standing at $19 million, contract revenue saw a slight dip compared to the previous year[15†source]. With rigorous cost management, notably the spin-out of Pelican, overall operating expenses decreased by 27%. The growth trajectory is firm, with non-GAAP net income of $71.6 million or $4.06 per diluted share in 2023, marking a sharp rise from $41.9 million or $2.44 per diluted share in 2022. Ligand forecasts a bright 2024 with royalty revenue expected between $90 to $95 million, driving the guidance for total revenue ranging from $130 million to $142 million and adjusted earnings per share to lie between $4.25 and $4.75[15†source].

Future Growth and Operational Strategy

The company is steering towards further growth by reinforcing intentions to spin out or out-license the Novan business, carving a pathway for the much-anticipated launch of ZELSUVMI therapeutics. The tailored approach of incubating new investments like Novan mirrors past successes with Viking Therapeutics, as Ligand exhibits a strategic pattern of fostering and launching new standalone entities like [Pelthos] Therapeutics, emphasizing the cyclical growth from independents[15†source]. Ligand's mix of established products and strategic reinvestment poised to bolster both the near-term outlook and long-term potential, reaffirms its commitment to deliver sustained growth and shareholder value[15†source].

Earnings Call Transcript 2023-Q4

[Operator]

Ladies and gentlemen, thank you for standing by. Welcome, everyone, to the Ligand Fourth Quarter 2023 Earnings Webcast. [Operator Instructions]

I will now hand the call over to Octavio Espinoza, Chief Financial Officer. You may begin your conference.

[Octavio Espinoza, executive]

Hello, everyone, and welcome to our earnings call for the fourth quarter and year-end 2023. During the call today, we will review the financial results we released prior to today's market open and offer commentary on our partner pipeline and business development activity, after which we will host a question-and-answer session. Our earnings release can be found in the Investor Relations section of our website at ligand.com.

Participating for Ligand today will be our CEO, Todd Davis; our COO, Matt Korenberg; and myself, Tavo Espinoza, CFO. This call is being recorded, and the audio portion will be archived in the Investors section of our website. It is our intent that all forward-looking statements regarding our financial results and commercial activity made during today's call will be protected under the Private Securities Litigation Reform Act of 1995.

Forward-looking statements are subject to risks and uncertainties. Actual events or results may differ materially from those projected or discussed. All forward-looking statements are based upon current available information, and Ligand 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 Ligand has filed with the Securities and Exchange Commission, including our most recent Forms 10-Q and 10-K.

With that, I will now turn the call over to Todd.

[Todd Davis, executive]

Thank you, Tavo, and welcome to everyone on the call. The end of 2023 marks the completion of my first full year as CEO of Ligand. And I'm happy to say that in the last year, we've successfully transformed the company to take Ligand to the next stage of growth.

Slide 3 summarizes our financial and portfolio achievements in 2023, which underscores our strong momentum and the strength of our business model. First, we delivered strong financial performance. We grew revenue by more than 20% when you exclude last year's COVID-related Captisol sales while reducing 2023 cash operating expenses from above $90 million per year to below $40 million per year. This resulted in core adjusted diluted earnings per share of $4.06, which is 66% above the prior year.

Second, we streamlined and improved the financial profile of the business through restructuring efforts. In addition to spinning out the OmniAb business, we also divested our Pelican protein Expression platform via equity merger or spin out to form Primrose Bio. Both of these businesses are valuable technology platforms, but they required additional investment in infrastructure that was inconsistent with our core financial strategy. This enabled a headcount reduction from over 170 to 35 employees. This operational streamlining was completed even while adding significant talent in the investment, portfolio management and diligence functions to create a premier investment team. Accordingly, that team began to execute on our newly refined strategy in the second half of 2023.

Third, we strengthened our royalty portfolio by adding several innovative and exciting new programs, including Sanofi's TZIELD, and Takeda's soticlestat. We also expanded existing partnerships, acquiring full rights to the recently approved ZELSUVMI and expanding a royalty investment in Palvella's PTX-022 program, which is in development for microcystic lymphatic malformations.

Fourth, as shown on Slide 4, at our Investor Day in December, we announced, for the first time, a longer-term outlook where we see royalty revenue CAGR of over 20% and an adjusted EPS CAGR exceeding 25% over the next 5 years. The breadth of our asset portfolio provides us with a lower volatility and much greater predictability than is typical in biotech businesses, which in turn provides us the confidence to share these longer-term projections. The forecast is driven by our current major commercial programs, our existing pipeline and the expected contribution from the new business development efforts.

Tavo will cover our financials in a little more detail, but I'd like to highlight that the increase in Viking Therapeutics stock price in 2023 has bolstered our balance sheet as we generated approximately $80 million in proceeds from the sale of Viking shares and still hold approximately 1.7 million shares. We are reinvesting these proceeds into new investments that will drive additional growth and value creation in the future. Also, there are several exciting developments across our partnered commercial portfolio and clinical pipeline. During late 2023 and early 2024, and there is an opportunity for further value creation through additional important catalyst expected this year.

On January 5, 2024, the FDA approved ZELSUVMI as a first-in-class medication for the treatment of molluscum contagiosum in adults and pediatric patients 1 year of age or older. ZELSUVMI is the first and only prescription medication that can be applied by patients, parents or caregivers at home outside of the physician's office to treat this highly contagious infection. You may recall that we own 100% of ZELSUVMI rights after funding Novan through a restructuring process and acquiring a significant portion of their assets in 2023. Additionally, we have 2 partnered products that have PDUFA dates scheduled during June of 2024.

Verona's ensifentrine and Merck's V116. Ensifentrine, if approved, is expected to be the first novel mechanism available for the maintenance treatment of COPD in more than 10 years. Additionally, the FDA accepted for priority review, Merck's new BLA for V116, an investigational 21-valent pneumococcal conjugate vaccine, specifically designed to help prevent invasive pneumococcal disease and pneumonia in adults. Our royalty rates on ensifentrine and V116 are in the low single-digit royalty range.

Finally, Travere announced that it received 459 new patient start forms for FILSPARI in the fourth quarter of 2023, and announced net product sales of approximately $15 million for the fourth quarter, which is an increase of over 80% from the prior quarter. We have a 9% royalty on FILSPARI and consensus estimates continue to show $500 million to $1 billion in peak FILSPARI sales. Shortly, Matt will provide more detail around these and other programs.

Now let's turn to our business development efforts. In 2023, one of our key priorities was assembling a strong and experienced investment team to execute on our strategy, and we are pleased with our progress in this regard. Additionally, I can share today that we've recently added Rich Baxter and Dr. Karen Reeves to the team. Rich joins us as SVP of Investment Operations and a member of the Investment Committee. Rich brings significant commercial pharmaceutical industry experience and private equity investment experience. He co-founded the health care group for Drawbridge Special Opportunities Fund at Fortress Investment Group, which invested approximately $1 billion in emerging life science companies. He also served as Co-Head of the health care team at Hayfin Capital Management, which deployed $1.4 billion in capital over 4 years.

Karen is a board-certified physician and joins us as SVP of Clinical Strategy and Investments. She brings more than 20 years of experience in senior roles at top pharmaceutical companies with extensive experience successful Phase I through Phase IV drug development across multiple therapeutic areas. Most recently, she served as President and Chief Medical Officer of AZTherapies, a private late-stage clinical biopharmaceutical company focused on neurology. Prior to AZTherapies, Karen held multiple leadership positions at Pfizer, including VP, Worldwide R&D; VP, Worldwide Safety and Regulatory; and Head of Global Clinical Submissions for Quality.

We welcome both Karen and Rich to the Ligand team. Paul Hadden has been leading our investment origination efforts and was instrumental in increasing our available opportunity set during 2023. Last year, we reviewed over 300 investment opportunities, signed 45 CDAs and closed 5 transactions. We entered 2024 with $130 million in cash plus we expect to generate approximately $80 million in cash from operations this year. Adding to this is our ownership in Viking Therapeutics stock at a $75 million revolving credit facility. With this strong financial position, we feel we are well positioned to have another successful year led by investment activity, providing exciting growth opportunities to Ligand.

As we discussed in December, the team has built a robust pipeline of investment opportunities that span both significant breadth of therapeutic area, but also diversified transaction types. We are in active dialogue with multiple counterparties and are constantly looking for new exciting opportunities in which to invest capital. The team is currently reviewing approximately $1.4 billion in investment opportunities across multiple strategies, including royalty monetization, project finance, M&A and special opportunities. As a reminder about our investment criteria, we are primarily focused on assets that are within a few years of approval in either Phase II or Phase III or highly differentiated, offer significant value to patients, provide favorable market exclusivity and have above-average probability of technical and regulatory success.

Ultimately, the number and size of investments we make will depend on the quality of the opportunities we identify. We believe that we have the right team to execute and excel in this high-margin, high-growth strategy. It's important to note that the majority of our diligence assessment is done under confidentiality agreements, which provides us advantageous insight into our investment decisions. In summary, 2023 was an important year for Ligand in terms of our financial performance, strategic evolution, investment activity and team building efforts. With these accomplishments, we're looking forward to a busy and productive 2024.

Now Matt will cover the portfolio highlights.

[Matthew Korenberg, executive]

Thanks, Todd. 2023 was a transformative year for Ligand. And today, I'll provide investors with an update on key developments from our partners across our commercial programs and our development portfolio. Ligand's portfolio includes more than 85 partnered programs that drive our royalty revenue, our Captisol material sales and our license milestone and contract revenue.

Slide 10 shows our key commercial programs that drive our -- the significant majority of our royalty revenue. Our current commercial portfolio includes over 25 different royalty streams and 30 commercial drivers overall. These 8 programs are expected to contribute over 95% of the royalty revenue in 2024. The team at Ligand is focused on adding additional names to this list. Many of those additions will come organically from our existing partnered pipeline portfolio and some will come through new investments generated out of our now established field team, as Todd mentioned.

A few highlights from 2023. Kyprolis, which is an important drug for multiple myeloma, continued its strong performance with another solid quarter in Q4. Kyprolis is marketed by Amgen in the majority of the countries around the world as well as by ONO in Japan and by BeiGene in China. Q4 2023, these companies reported combined quarterly revenue of over $370 million. Year-over-year growth for the product was driven principally by volume growth with 2023 reported sales exceeding $1.4 billion globally. We earn a tiered royalty of 1.5% to 3% on global sales and expect continued growth in 2024.

Our partner, Travere, is marketing FILSPARI in the U.S. in IgA nephropathy. Travere reported revenue of $14.7 million for Q4, which will also continue to disclose the momentum on new patient recruitment. Travere had 459 new patient forms submitted in Q4, bringing the total since launch to 1,452. The continued addition of potential new patients provides good evidence of future revenue potential. It supports the consensus estimates for 2024, turned approximately $110 million of revenue for the year. On the regulatory front, Travere announced that the EMA CHMP has recommended approval for sparsentan for the treatment of adults with primary IgA nephropathy. The company expects the EU approval decision in Q2 2024 and the full U.S. approval decision in Q3 2024. We earn a 9% royalty on net sales, and we expect that this will be a significant driver of our long-term growth for our royalties.

Rylaze is marketed by our partner, Jazz Pharmaceuticals. It is a component of a multi-agent chemotherapeutic regimen for the treatment of children and adults with ALL or LBL. This product continues to do extremely well in a market that was previously constrained by supply issues. At JPMorgan earlier this year, Jazz highlighted Rylaze as one of its 3 key growth drivers. Having received approval for Rylaze in Europe in September 2023, Jazz confirmed the first European country launch occurred before the end of last year and that additional European launches will continue on a rolling basis in 2024.

In Q3 of 2023, Rylaze generated $104.9 million in sales. We look forward to any program updates in the Jazz Q4 sales report coming later this week. VAXNEUVANCE is a pneumococcal vaccine utilizing Ligand's CRM197 vaccine carrier protein produced using our former Pelican Expression Technology platform. Merck is now marketing VAXNEUVANCE in both the adult population and the pediatric population. Merck announced $176 million in VAXNEUVANCE sales in Q4 2023 and full year sales for the product came in at $665 million. Ligand earns a low single-digit royalty on VAXNEUVANCE sales.

Turning to Slide 11. We list a selection of our partnered pipeline products that will have meaningful clinical or regulatory catalysts in the coming year. The first program on the list is ZELSUVMI. Ligand acquired this product through our Novan acquisition in 2023, subsequently received approval for the program on January 5, 2024. ZELSUVMI's approved for the treatment of molluscum contagiosum in adults and pediatric patients 1 year of age or older. ZELSUVMI is the first and only topical prescription medication that can be applied by patients, parents or caregivers at home outside of a physician's office or other medical setting. And it's used to treat this highly contagious viral skin infection. Team is extremely excited about the potential for this program. We're in process of building a new stand-alone company called [ Pelthos ] Therapeutics that will commercialize ZELSUVMI.

Company creation effort is very similar to our prior efforts related to Viking Therapeutics and Primrose Bio. While ZELSUVMI operated fully independent of Ligand, but we expect to own a significant equity stake in the business at inception. While we are having discussions with potential strategic licensing partners, we're also making good progress towards the creation of [ Pelthos ] and the launch of ZELSUVMI. We expect that [ Pelthos ] will launch ZELSUVMI in late 2024 and the program will join our key contributors to Ligand's royalty revenue line.

Verona submitted its NDA to the FDA in June 2023 for approval of ensifentrine for the maintenance treatment of patients with COPD. PDUFA date for the product has been established at June 26, 2024, and Verona is building its commercial infrastructure as we speak. Ligand benefits from a low single-digit royalty on ensifentrine, and we believe the program will be another of our key growth drivers. Ensifentrine is a first-in-class drug candidate using a novel mechanism of action, combining tool inhibition of PDE3 and PDE4. Verona estimates that there are over 8 million COPD patients currently receiving chronic treatment in the U.S. alone, over half of whom are dissatisfied with their current treatment regimen.

If approved, ensifentrine could offer an effective and highly safe and tolerable add-on or alternative treatment to address both symptoms and exacerbations. Market is developing V116 as part of its pneumococcal vaccine franchise. V116 is targeted specifically at adults has shown benefits over the existing standard of care. After reporting positive Phase III data last year in June and filing a BLA in November, there's now a PDUFA date of June 17, 2024. With successful approval, we believe V116 will continue to drive the Merck franchise growth, benefit Ligand through our low single-digit royalty. Merck received breakthrough therapy designation for V116 and if approved, V116 would be the first pneumococcal conjugate vaccine specifically designed to address the serotypes that cause most adult invasive pneumococcal disease.

Takeda is developing soticlestat, which is a first-in-class novel compound with the potential to reduce seizure susceptibility. Takeda is currently running 2 Phase III trials and expect data in its fiscal year 2024. Ligand earns a tiered royalty of up to 22.6% on this drug, if successfully commercialized as well as up to 86 million of milestones. There remains high unmet need in rare pediatric epilepsies and soticlestat is uniquely positioned to deliver value to patients and caregivers through its demonstrated seizure reduction capability as well as its strong safety profile and ability to be combined with a broad range of antiepileptic treatments.

Finally, during the second quarter of 2023, Viking announced positive top line results from the Phase IIb VOYAGE study evaluating VK2809 in patients with biopsy-confirmed NASH. The company expects to report data from the secondary and exploratory objectives of the VOYAGE study, including the evaluation of histologic changes assessed by hepatic biopsy over 52 weeks of treatment in the first half of 2024. We expect that following these results, Viking would move forward into Phase III with this important program. Viking earns a 3.5% to 7.5% royalty on potential sales of VK2809 as well as significant clinical, regulatory and commercial milestones. NASH is a very large potential market, and if Viking is successful in their development, products in this category are estimated to be multibillion-dollar opportunities.

On Slide 10, I'll provide -- sorry, excuse me, on Slide 12, I'll provide an update on our Captisol business. Core Captisol sales for 2023 outperformed our expectation for the year. Customer demand remains strong for both clinical and commercial Captisol as partners continue to find benefit from our technology platform. 2023 saw 6 new partner agreements, and we've already signed a few more in 2024. Last month, we saw Eisai announce the approval of their IV formulation of their drug, Fycompa. That marks the 16th approved Captisol-enabled drug around the world, and we see the potential for another 4 approvals in 2024. Traction on this business is exemplified by the number and pace of approvals as well as the volume of material that we've sold since acquiring the business.

In addition to highlighting the names of all 16 approved drugs along with their timing of approval, the chart on the right shows vertical bars annually that represent the cumulative volume of Captisol that we've sold and demonstrates the continued momentum of the business. We report our Captisol sales on a separate line from our royalties, this business is another of our major drivers of revenue, cash flow and profitability. Gross profit from Captisol in 2023 equated to about $17 million, which exceeded our largest current single royalty other than Kyprolis. That concludes my summary of portfolio highlights, and I'll turn the call back over to Tavo for a financial update. Tavo?

[Octavio Espinoza, executive]

Thanks, Matt. First, I want to highlight that I will be discussing non-GAAP results, which exclude certain items including stock-based compensation, amortization of intangible assets, unrealized gains from short-term investments, our share of losses absorbed from accounting or our investment in Primrose Bio under the equity method, expenses incurred to incubate the recently acquired Novan business, amongst others. In addition, to help investors discern the performance of our core business results, we subtract Captisol sales related to COVID-19 and realized gains from the sale of Viking Therapeutics stock. I encourage you to review the GAAP reconciliation of these non-GAAP measures, which can be found in today's release available on our website.

We delivered strong results in 2023 that met or exceeded the high end of our guidance range with total revenue of $131 million and core adjusted earnings per share of $4.06. We ended the year with $170 million in cash and investments and no debt on the balance sheet. Slide 14 frames up our financial results in more detail for both the fourth quarter and the full year. I'll focus my discussion first on the full year results. Excluding last year's contribution from COVID Captisol sales, total 2023 revenue grew 21% versus 2022. Royalty revenue increased 16% to $83.9 million from $72.5 million a year ago with the growth driven by strength in Amgen's Kyprolis, Jazz's Rylaze and Merck's VAXNEUVANCE. The increase in royalty revenue was offset by a decrease in teriparatide. We have been anticipating generic competition to enter the market, and it appears that may be beginning to materialize.

Amgen reported total 2023 Kyprolis sales of $1.4 billion, which was 13% above the prior year, and they attributed most of the increase to volume growth. Merck announced total sales of $665 million for VAXNEUVANCE, which is an almost 300% increase over 2022. We believe these products, along with Rylaze and FILSPARI will continue to drive royalty revenue growth in the future. Captisol sales were $28.4 million in 2023 versus core Captisol sales of $16.4 million in 2022, with the increase due to timing of customer orders. Total Captisol sales in 2022 were $104.5 million with $88.1 million of that related to COVID-19. We did not have any COVID-19-related Captisol sales this year. Contract revenue this year was $19 million versus $19.2 million in 2022.

Total R&D and G&A operating expenses decreased by 27% in 2023 due primarily to lower headcount-related expenses associated with the spin out of Pelican. The decrease in operating expenses was offset by investments made to build up our investment team in Boston as well as the increase in expenses associated with incubating the Novan business. G&A and R&D expenses were $52.8 million and $24.5 million in 2023 versus $70.1 million and $36.1 million in 2022, respectively. GAAP net income in 2023 was $53.6 million or $3.02 per diluted share versus a GAAP net loss of $5.2 million or $0.31 per share in 2022. The increase in GAAP net income is due largely to the increase in operating income and gains from short-term investments due to the increase in value on our holdings of Viking stock.

Excluding the impact of gains from sales of Viking stock and COVID-19 Captisol sales, core adjusted net income was $71.6 million or $4.06 per diluted share in 2023 versus $41.9 million or $2.44 per diluted share in 2022. Adjusted net income for 2023 was $107.3 million or $6.08 per diluted share compared with $82.2 million or $4.79 per diluted share in 2022. Now focusing on the quarter. Total revenue for the quarter increased about 5%, excluding COVID-19 Captisol sales in Q4 2022. Royalty revenue overall increased slightly driven by Kyprolis, Rylaze, VAXNEUVANCE and FILSPARI, offset by a decrease in teriparatide. Total operating expenses are lower compared to the prior year quarter, large part due to the spin-out of Pelican, offset by investments made and building up our investment team in Boston as well as costs associated with the Novan business.

As mentioned on our third quarter earnings call, expect to incur incremental operating costs associated with incubating the Novan business. Our intent is to spin out and/or out-license the Novan business and, therefore, we are adjusting out these expenses for purposes of reporting adjusted non-GAAP earnings. GAAP net income for the fourth quarter of 2023 was $18 million or $1.02 per diluted share versus a GAAP net loss of $14.5 million or $0.86 per share in the fourth quarter of 2022. The increase in GAAP net income is due largely to gains from short-term investments as a result of the increase in value on our holdings of Viking stock as well as lower operating expense. Excluding the impact of gains from Viking stock and COVID-19 Captisol sales, core adjusted net income was $18.5 million or $1.05 per share and Q4 '23 versus $13 million or $0.75 per share in Q4 '22. Adjusted net income for the fourth quarter of 2023 was $24.3 million or $1.38 per share compared with $23.5 million or $1.36 per share in the prior year quarter.

Turning to the balance sheet. As of December 31, 2023, net cash and short-term investments of $170 million, which includes $32 million of our holdings in Viking common stock. We expect that current cash plus annual cash flow generation will be sufficient to fund the investment activity to anticipate over the foreseeable future.

Turning now to guidance on Slide 15. We are reaffirming the 2024 financial guidance we introduced at Investor Day in December. We expect 2024 royalty revenue will be in the range of $90 million to $95 million, sales of -- Captisol sales in the range of $25 million to $27 million and contract revenue in the range of $15 million to $20 million. These revenue components result in total revenue guidance of $130 million to $142 million and adjusted earnings per diluted share of $4.25 to $4.75. And as Todd mentioned, we also introduced in December for the first time, and we reiterate today a longer-term outlook where we see royalty revenue growing at a compound annual growth rate above 20% from 2022 to 2028, and adjusted core EPS growing even faster at a compound annual growth rate above 25%.

As a reminder, we exclude Captisol for COVID-19-related sales from guidance and will update investors as orders are received and shipped each quarter. Finally, I'd like to direct listeners to our fourth quarter earnings press release issued earlier today, which is available on our website for a reconciliation of our adjusted financial results to the GAAP results I talked about today. I'll now turn the call over to Todd for closing comments.

[Todd Davis, executive]

Thank you, Tavo. In summary, we are very pleased with our 2023 financial results as well as the progress we've made over the last year, improving our investment capabilities and growing our asset portfolio. Our diversified portfolio, including our major commercial royalty generating programs in late-stage pipeline form the foundation for compounding growth. This portfolio provides us with substantial cash flow to reinvest in new high value enhancing royalty opportunities. We are well positioned to execute against our goals in 2024 and deliver attractive growth and shareholder returns over the long term. .

Thank you, everyone, for joining us for today's earnings call, and we will now pass it back to the operator and open it up for questions.

[Operator]

[Operator Instructions] Our first question comes from the line of Matt Hewitt from Craig-Hallum Capital Group.

[Matthew Hewitt, analyst]

Congratulations on the strong finish to the year. I guess, several different topics. Maybe the first one regarding the [ Pelthos ] opportunity. How should we be thinking about timing and potential structure of partnership or your intentions with that operating asset?

[Matthew Korenberg, executive]

Thanks, Matt. Yes. So as very similar to the way we've done in the past, creating Primrose Bio recently and back in 2014, '15, creating Viking and then eventually spinning out Viking as a stand-alone company in 2015 with the IPO. One of the things that we're pursuing with the Novan assets is creating this company called [ Pelthos ] Therapeutics that is just getting started, that will create as a stand-alone independent company and we will seek external capital to fund at least a portion of.

And then Ligand would license these assets the same way we licensed Viking 4, 5 assets and set it up as a stand-alone company and that company will be prepared to commercialize and launch the product later this year when the product is ready to be launched. So it's one avenue that we're exploring. And right now, it's the one that we think is pretty high probability, but we're exploring all alternatives, including a license to the asset to a strategic.

[Matthew Hewitt, analyst]

Got it. That's helpful. And then regarding your contract and milestone guidance for this year, $15 million to $20 million, with 2 PDUFA dates in Q2, should -- would it make sense to be factoring in a little bit more heavy weighting, if you will, in that quarter? Maybe kind of assuming one of the 2 has a positive outcome? Or how should we be thinking about the cadence for the contract revenues?

[Matthew Korenberg, executive]

Yes. Todd is taking a look just to make sure we have the numbers correct. But as we've talked about, there's an approval milestone for the ensifentrine asset that is about USD 5 million that will hit if it's approved in June as expected. So other than that one big milestone, I don't think there's anything else. Tavo, any other...

[Octavio Espinoza, executive]

Yes. There's the Travere European approval and a number of other milestones that we probability risk adjust. And so that's -- we do take the PDUFA dates into consideration at arriving at a range there.

[Matthew Hewitt, analyst]

Okay. Got it. And then maybe one last one for me as far as -- and you touched on this a little bit. Obviously, you've built out a really strong team to evaluate potential investment opportunities. You've got a nice backlog there funnel, if you will. As far as timing is concerned, is it really just about when the deals come together versus are you targeting, "Hey, we'd like to have 2 this quarter, 2 next quarter?" How should we be thinking about the timing on those?

[Todd Davis, executive]

Yes. The timing on these have to be flexible because you want to make sure you get all the way through diligence and you don't have a deal done until you clear diligence and final terms. So there is -- as there is any investment business, there'll be periods where there's a lack of activity seemingly in terms of closes and then there'll be periods where there's significant activity in terms of closes.

But there's always this underlying deal activity going on where you're originating deals, evaluating, screening, taking a certain number of those that pass the screen into deeper diligence. And then without perfect predictability, a certain amount of those get to a close. So there's just a natural process to this. And we don't want to commit to closing a certain number of deals or certain timing within a year because you really want the flexibility to maintain investment discipline around that process.

[Operator]

Our next question comes from the line of Lawrence Solow from CJS Securities.

[Lawrence Solow, analyst]

Larry works. Just a couple of questions. I guess, first question, just on the -- and you guys called it out on the royalties a little bit down versus Q3 and usually the tiering up. So -- and you called out teriparatide as the driver behind that. Just curious, as you look out to '24, a few moving parts here. Does the teriparatide number in that guidance, does that -- is that lower now? Is there an offset to that? Have you kind of expected that, I guess, it was only a couple of months ago? And then I guess just on the royalty outlook, I guess you kind of mentioned the FILSPARI consensus is like $110 million. So I guess are you guys kind of assuming that number in your guidance. Maybe you can just give us a little color on those couple of moving parts?

[Matthew Korenberg, executive]

Yes. Thanks, Larry. So we're reiterating what we said in December. We've learned a little bit more since including the new consensus number for FILSPARI, there's a little bit of upside there. We think that the drivers will continue to be Kyprolis, VAXNEUVANCE, Rylaze. And we have been prudent on teriparatide, and we continue to be prudent going into the year. So we've -- we are seeing competition come in. We haven't received the full report yet from Alvogen, so there's still more to be learned, but we have been conservative in our assumptions.

[Lawrence Solow, analyst]

Got it. And you're not assuming anything for ZELSUVMI this year, correct?

[Matthew Korenberg, executive]

No.

[Lawrence Solow, analyst]

Okay. And then just thoughts of Verona. Obviously, the product [indiscernible] is in their hands. But you mentioned, I think, that they've gotten some financing. The current belief today is that they're going to -- they expect to launch that themselves, obviously, COPD, a huge market, a lot of marketing expense and big pharma in there, dominated by big pharma. Is that something they're going to try and go up against or are they actively looking for a partner?

[Todd Davis, executive]

Yes. We have no, obviously, specific knowledge on their plans, but they have a strong team and have over the last couple of years built that up so that they have the ability to launch this themselves. And that is our assumption in terms of our forecast and guidance around the product. But obviously, there's, we think, significant upside around a potential larger acquisition, and this is a product within a category where we certainly think some of the larger folks should be interested in this asset because it's the first significant innovation in the maintenance of COPD in a long time.

[Lawrence Solow, analyst]

Absolutely. That makes sense. And then just lastly, could you just remind us how many shares of VKTX you guys have currently?

[Todd Davis, executive]

We still hold about 1.7 million shares of Viking Therapeutics.

[Operator]

[Operator Instructions]

Our next question comes from the line of Balaji Prasad of Barclays.

[Unknown Analyst]

This is [ Shaun ] for Balaji. Just a quick one on Rylaze. Could you add a little bit more color on your comments with regard to the supply constraints? And could you also share your view on the short-term and long-term revenue ramp-up of these assets and the implications for Ligand's portfolio?

[Matthew Korenberg, executive]

Thanks. As folks know, Rylaze is marketed by Jazz, our marketing partner. The supply constraints we were referring to in my prepared comments were really related to the predecessor product. Jazz and Pelican or Phoenix, our prior technology platform, collaborated to develop Rylaze to solve those manufacturing problems historically. And so those are all resolved now, and the new product is fully available as much as needed from a manufacturing standpoint. .

In terms of projections for the product or comments on the product's potential, we only can report what our partners report and Jazz did not provide guidance for Rylaze. I'd point folks to the publicly reported consensus estimates for the product. But last year, the product did about $400 million, a little bit less, I think, for the year, and we hope to see growth given that Jazz highlighted that as one of its 3 key growth drivers.

[Operator]

There are no further questions at this time. Thank you, ladies and gentlemen. We will conclude today's conference call. We thank you for participating. You may now disconnect.