Ligand Pharmaceuticals Incorporated (NASDAQ:LGND) Q3 2018 Earnings Conference Call November 8, 2018 9:00 AM ET
Todd Pettingill - Director, Corporate Development and Investor Relations
John Higgins - Chief Executive Officer
Matthew Foehr - President and Chief Operating Officer
Matthew Korenberg - Executive Vice President, Finance and Chief Financial Officer
Dana Flanders - Goldman Sachs
Joe Pantginis - H.C. Wainwright
Matt Hewitt - Craig-Hallum Capital Group
Larry Solow - CJS Securities
Scott Henry - ROTH Capital Partners
Good morning, everyone, and welcome to the Ligand Third Quarter Earnings Call. My name is Selene, I will be consolidating the audio portion of the day. All lines have been place on mute to prevent any background noise.
At this time, I would like to turn the show over to Mr. Todd Pettingill. You may begin, sir.
Welcome to Ligand's Third Quarter of 2018 Financial Results and Business Update Conference Call. Speaking today for Ligand are John Higgins, CEO; Matt Foehr, COO; and Matt Korenberg, CFO.
As a reminder, today's call will contain forward-looking statements within the meaning of federal securities laws. These may include, but are not limited to, statements regarding intent, belief or current expectations of the company and its management regarding its internal and partner programs.
These statements involve risks and uncertainties and actual events or results may differ materially from the projections described in today's press release in this conference call. Additional information concerning risk factors and other matters concerning Ligand can be found in Ligand's earnings press release and public periodic filings with the Securities and Exchange Commission, which are available at www.sec.gov.
The information in this conference call related to projections or other forward-looking statements represent the company's best judgment based on information available and reviewed by the company as of today, November 8, 2018, and do not necessarily represent the views of any other party. Ligand undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call.
At this time, I'll turn the call over to John Higgins.
Good morning and thanks for joining our earnings call. Q3 was an outstanding quarter for Ligand. We exceeded our expectations and we are raising financial guidance for the rest of the full year.
Ligand is enjoying significant revenue growth, a very high gross margins, strong returns from investments in our partners, robust cash flows and a strong cash position. 2018 is winding up to be a fantastic year and we have good momentum on all fronts as we move toward 2019. A few comments about Promacta and Kyprolis first.
In our view, both drugs are on track to exceed $1 billion in revenue in 2018 in turn driving higher royalty revenue for Ligand. What is notable about both drugs is that after sales data were posted for this past quarter, there are research analysts who cover Novartis and Amgen with model that now show each product exceeding $2 billion in peak annual revenue in a few years. The analysts that cover the products have a range of projections, some higher, some lower, but given sales trends, this is the first time we have seen both products with estimates of peak sales over $2 billion projecting to remain considerable growth potential for both drugs.
First with Promacta, Novartis report the highest quarterly revenue ever at $295 million, up 30% or $60 million over Q3 2017. The product is one of Novartis' top growth brands in their innovative medicines division. Promacta continues to do well given long term safety data that is building for the product, label expansions and increased utilization in countries around the world. Its performance is particularly impressive given there have been updates from competitive drugs that have had trial results announced for launch for other indications. It has a strong safety and efficacy profile as I mentioned and also more than 10 years of established experience and used by physicians. In addition, Novartis is a world class commercial organization that continues to grow Promacta as a blockbuster based on the product attractive therapeutic profile.
Novartis will be presenting important new data on Promacta at the ASH conference in early December. This is impressive to know that more new data is still coming out even after the drug has been on the market over 10 years.
Now for Kyprolis, Amgen reported $232 million in Q3 sales and Ono reported sales of $11 million for Q3. So combined third quarter sales were $243 million. Q3 sales were up over 10% or $23 million compared with Q3 of last year. Now a note, just last month, Amgen announced that the FDA approved the application to expand the prescribing information for Kyprolis to include a once weekly dosing option in combination with dexamethasone for patients with relapsed or refractory multiple myeloma. We see this as a positive development potentially making the drug more convenient for some patients.
As investors know, we highlight our key pipeline assets and provide continual updates. Over the past couple of months, we've seen major data and regulatory events that are worth calling out. Ligand has a highly valuable pipeline driving our future potential. These assets have strong and diverse IP, potentially address very large markets and are tied to lucrative economics and royalties due to Ligand.
Now Matt Foehr will be talking about more of our assets, but here are updates on two product candidates under license with Ligand. The first is Brexanolone, which uses our cap cell technology in its ID formulation and is in development by Sage Therapeutics for the treatment of postpartum depression or PPD. Brexanolone with the subject of an FDA Advisory Committee last Friday and received a favorable vote, in fact it was a robust 17 to 1 vote in favor of recommending approval for the drug. There was highly supportive commentary by the Advisory Board reviewers and one person remark and I quote this is what hope looks like. It's a promising development as PPD is a major under-served market. Now referred to by Sage by the trade name Zulresso, the drug successfully completed Phase III clinical development for postpartum depression and NDA is under review with the FDA with an action date of December 19th.
Zulresso was granted breakthrough therapy designation by the FDA in priority medicines or a quote prime designation from the EMA. Evidence of the unmet medical need for the drug which was also very clear from the presentation and discussions at the AD COM meeting last week. If approved and commercialized, Ligand will receive royalties on product sales.
Now the other program I'll highlights with our partners at Viking Therapeutics. They've experienced an active flow of data events and news in recent months announcing positive top line results from a 12 week Phase II study of VK2809 in patients with non-alcoholic fatty liver disease or NASH. That study demonstrated statistically significant reduction in low density lipoprotein cholesterol and statistically significant reductions in liver fat content. Both study results are scheduled to be presented in an oral late-breaker at The Liver Meeting this weekend in San Francisco. Also positive results from a Phase II study of Viking's VK5211 in patients recovering from hip fracture were presented at the American Society for Bone and Mineral Research Meeting.
Viking noted just yesterday on their earnings call that the presentation was awarded the 2018 Most Outstanding Clinical Abstract Award by the conference organizers further confirming the importance and transformative nature of the dataset. Viking is entitled to milestones and royalties on both of these drugs.
Just last month, we closed the acquisition up for Vernalis. Quite simply, this is a great acquisition. The purchase price was $43 million, but after offsetting the substantial net cash they had of $32 million, the transaction only cost like in about $11 million. In the deal, we acquired a world class R&D team focused on structure based drug discovery that will continue to serve existing customers and will be a platform for potential new deals. The company brought Ligand a substantial portfolio of partnered and unpartnered programs. Notably the deal brought to Ligand several high quality shots on goal with partners such as Verona and Corvus with their programs targeting large indications.
This deal is important as it shows our ability to continue to execute on disciplined, deep value M&A that has important strategic benefits to Ligand. We have shown with Captisol and OmniAb an ability to source in close platform acquisitions that can add tremendous value to the company. OmniAb is a platform in the early days of its lifecycle and we expect it will continue to generate significant value for major partnered assets. Now with Vernalis, we have a new research technology, European operations and a high value partners to continue to drive the business.
As we look toward 2019, we anticipate a very big year of development and value drivers for the business. We anticipate hosting an Analyst Day event in early 2019 where we will provide pipeline updates and operational and financial outlooks. We have the largest portfolio and most robust business ever. Next year, we anticipate multiple product approvals and launches major clinical data announced from several of our higher profile portfolio assets, substantial events from our OmniAb and Captisol technology platforms and from Vernalis and continued growth from Promacta and Kyprolis as well as contribution from other products too.
I will now turn the call over to Matt Foehr to provide a more detailed review of our portfolio.
Thanks John. I'll start off this morning with a review of some recent developments for select program from our growing partnership portfolio that's the largest it's ever been now at over 178 shots on goal. I'll also discuss Ligand's technology platforms and highlight some recent upcoming clinical and regulatory events of our partners. And I'll comment on the integration of Vernalis and our internal R&D activities.
Starting now with partner programs, we have done recent developments in progress on many of the programs we've highlighted previously as higher profile assets within our portfolio. Our partner Retrophin recently highlighted sparsentan at the ASN Kidney Week Conference here in San Diego. At the meeting, they presented positive longer term data from the open label extension portion of the Phase II DUET study of sparsentan for the treatment of Focal segmental glomerulosclerosis of FSGS, showing increased achievement of FSGS partial remission of proteinuria and stable EGFR observed out to 84 weeks. As background, Sparsentan has a dual mechanism of action that combines angiotensin receptor blockade with endothelial receptor type A blockade. Retrophin is developing Sparsentan both for the treatment of FSGS as well as for the treatment of IgA Nephropathy which is a rare kidney disorder that also often leads to end stage renal disease.
Sparsentan has been granted orphan designation for the treatment of FSGS both by the FDA and the EMA. Following positive Phase II DUET Study results in FSGS, Retrophin initiated the pivotal Phase III DUPLEX study of Sparsentan for the treatment of FSGS. DUPLEX study includes an interim efficacy endpoint based on proteinuria to serve as the basis of an NDA filing for Subpart H accelerated approval of Sparsentan in the U.S. and conditional marketing authorization consideration in Europe. Additionally, Retrophin expects to initiate the pivotal Phase III protector study evaluating Sparsentan in the treatment of IgA Nephropathy before the end of this year. If approved, Sparsentan could potentially be the first approved pharmacologic treatment for FSGS and IgA Nephropathy.
Last month, our partners at Sermonix Pharmaceuticals announced the launch of a Phase II trial of oral lasofoxifene for the treatment of metastatic breast cancer. The study is an open-label randomize multi-center trial evaluating the activity of oral lasofoxifene versus intramuscular fulvestrant for the treatment of post-menopausal women with locally advanced metastatic ER positive HER-2 negative breast cancer with an ESR1 mutation.
As background I'll note that previous clinical data have shown a significant reduction in the incidence of ER positive breast cancer in post-menopausal women with osteoporosis who are treated with oral lasofoxifene. And given that previous data, we've been looking forward to the initiation of this trial.
Given that they are privately held, Sermonix may not be a company that many investors are familiar with. We've been able to get to know their expanding executive team of world class individuals with specific experience in the serum space which is an area where Ligand has a rich drug discovery heritage and we continue to be encouraged by the development progress they're making.
The week before last, our partners at Bristol-Myers Squibb highlighted the nitroxyl donor agent Captisol-enabled BMS986231as they discussed the diversification of their R&D portfolio and recent clinical progress. They disclosed that they expect Phase II data next year in patients who are hospitalized with heart failure. And that the data they obtain will inform a potential registrational trial start.
Our partners at Eli Lilly have also reported on progress with Captisol-enabled prexasertib which they have indicated is "priority internal development program."
We currently count 8 oncology trials that are enrolling on clinicaltrials.gov and look forward to data from some trials that have recently completed enrollment.
We're pleased to report that our partners at Metavant are efficiently progressing the development of RVT-15O2 which was formerly known as LGV-1972. It's a novel orally bioavailable small molecule glucagon receptor antagonist or GRA has been successfully tested at Ligand in multiple Phase I and Phase II studies in patients with type 2 diabetes. Metavant recently disclosed that they intend to commence proof of concept studies for RVT-1502 in type 1 diabetes before the end of this year and we're very pleased with this expansion of the therapeutic opportunity for the drug. As a reminder, this is a drug we licensed out earlier this year and we're eligible to receive over a $0.5 billion in milestone payments and potential royalties ranging from low double digit to the mid-teens.
Switching now to our technology platforms and touching on Captisol just briefly. We continue to invest in our type 4 and type 5 Drug Master Files in the U.S., Canada and Japan and also expand our geographic footprint of Drug Master Files and of safety database information. In September, we submitted a DMS in China and received our formal registration number for Captisol there. We did this in coordination with multiple partners who are expecting approvals and launches in that market over the next year or so. We continue to invest in the global intellectual property portfolio for Captisol as represented now by nearly 200 patents that are issued globally for the Captisol technology. Our team has processed more Captisol sample so far this year than in any other full year, which illustrates to us that prospective partners in the industry continue to recognize the potential of Captisol to solve their formulation challenges related to solubility and stability.
I'll briefly mention our Captisol partnership with Verio Health which is focused around cannabinoide-based medication. Since the time of entering the commercial Captisol agreement with them about 3 years ago, our partners at Verio have continued to generate positive data with Captisol to overcome some of the major formulation hurdles that exist for cannabinoide-based medicine. They've done that while they've also been expanding their business and completing significant and transformative financing events and acquisitions. We look forward to discussing the program more in 2019 as Verio continues to progress and development towards trials and potential registration.
Cannabinoide-based medicines have substantial potential in a variety of indications with significant unmet needs, including multiple serious CNS diseases, chronic pain and others.
Our OmniAb antibodies discovery platform continues to build significant momentum, feeding our business for the long term. We're pleased to report that there are now 9 OmniAb derived clinical stage antibodies and we expect that number to continue to grow with more partners preparing to start new clinical trials in the coming months. We monitor the delivery patterns of OmniAb to our partners so that we can - as they can be a general indicator of the breath and the depth of the use of the technology at some partners. Year-to-date, we've seen doubling of animals delivered as we compared with just a couple of years ago. That's driven not only by the use of Omni animals by new partners because of our licensing efforts, but also from increasing use by our existing partners as they have positive experiences with OmniAb and begin using it for additional therapeutic targets.
We continue to be active in licensing OmniAb and recently disclosed an agreement with the Fred Hutchinson Cancer Research Center. We're pleased that an organization like the Hutch which is at the forefront of cancer research and has an established track record in corporate formation is utilizing the technology. We're eligible to receive a share of revenues received by the Hutch some companies that develop in commercialized products incorporating any OmniAb derived antibody.
This year's Antibody Engineering Therapeutics Conference is approaching in about a month's time and it will be held here in San Diego. Ligand and the OmniAb technology will have a significant presence at the meeting as will many of our OmniAb partners.
Turning now to Vernalis. The integration is going very well. We were happy to welcome new colleagues at the Cambridge England site which will become the sole Vernalis site going forward. And we've been impressed with the focus and dedication of the Vernalis team in the administration office outside of London as we transition activities and facilitate that site's closure in Q1 of next year.
The Vernalis research team is in Cambridge has a rich history of successful structure based drug discovery and a broad pipeline of partners programs. The acquisition has added exciting new shots on goal, existing collaborations with major pharma companies that we look to expand upon and additional assets that present potential out licensing and new corporate formation opportunities.
Now a month in post-acquisition are confident in the ability of the Vernalis team to create additional shots on goal for Ligand to efficiently service and expand current relationships and provide additional internal scientific expertise that can be leveraged as we evaluate future company or technology acquisitions.
In the time since the deal closed, the team at Vernalis are in two success in progression milestones from global collaboration partners for two oncology assets. As I mentioned, the Vernalis deal brought us new shots on goal and I'd like to direct investor attention to two of them, one is Corvus Pharmaceuticals and one at Verona Pharma. CPI-444 is the lead product candidate at Corvus and it's currently being evaluated in clinical trials in patients with various solid tumors as a single agent and in combination with Genentech's Atezolizumab which is an anti-PD-L1 antibody.
CPI-444 is a small molecule oral checkpoint inhibitor designed to disable the tumor's ability to subvert attack by the immune system by blocking the binding of adenosine in the tumor microenvironment to be A2A receptor. Adenosine a metabolite of adenosine triphosphate or ATP is produced within the tumor microenvironment where it may bind to the adenosine A2A receptor present on immune cells and block their activity. In Vitro and preclinical studies have shown that dual blockade of CD-73 and the A2A receptor may be synergistic. And the clinical trials are in progress in renal cancer, renal cell cancer and small non-small cell lung cancer as well.
Vernalis RPL554 is a fist-in-class inhale dual inhibitor of the enzymes phosphodiesterase-3 and 4 that acts as both a bronchodilators and an anti-inflammatory agent. Verona is developing RPL554 for the treatment of chronic obstructive pulmonary disease or COPD for cystic fibrosis and potentially for asthma.
In previous clinical trials. RPL554 has been observed to result in bronchodilator effects when used alone or as add on treatment to other COPD bronchodilators. It has shown clinically meaningful and statistically significant improvements in lung function when administered in addition to frequently used short and long acting bronchodilators such as Spiriva compared with those as a single agent. RPL554 improved FEV1 over 4 weeks in patients with moderate to severe COPD when compared to placebo and improved COPD symptoms and quality of life in a Phase IIb multi-center European study involving over 400 patients. For those that may not be familiar with an FEV1 is the amount of air you can forcefully blow out of your lungs in one second. And it's an important number for people with COPD because it shows lung capacity.
In addition, RPL554 has shown an inflammatory effects in the standard challenge study with COPD like inflammation in human subjects R P L 554 has been well tolerated in these studies with a favorable safety profile and has been administered to more than 700 subjects in a dozen clinical trials.
And I'll wrap up my comments this morning with some brief updates on activities with our internal pipeline, starting with Captisol-enabled iohexol. Our team is rapidly progressing with simultaneous U.S. IMD and Canadian CTA filings as we obtained a broaden pre-clinical dataset and complete the manufacturing of our clinical trial materials. We had a successful and very productive guidance meeting with the FDA recently and agreed to a 505(b)(2) path with a plan for label inclusion of potentially differentiating safety information. We also hosted an advisory board meeting recently that brought together globally recognized key opinion leaders and relevant subject matter experts to review our plans and the market dynamics in the imaging space.
We're viewed some recently completed primary market research for the program that clearly established and confirmed our view of the significant market need for Captisol-enabled iohexol. In that research, we learned that interventional cardiologist see safety as the most important contrasts selection factor and the greatest area for improvement in the contrast imaging space. We look forward to updating you further as we progress the clinic with the plan of having clinical data in 2019.
As disclosed recently, we've also initiated 5 new antibody related programs leveraging the capabilities and expertise of our OmniAb team earlier this year. Those programs are progressing very well and we look forward to talking more about the programs at scientific conferences next year.
And with that I'll turn the call over to Matt Korenberg to discuss the financials.
Thanks Matt. I'm delighted to be reporting strong third quarter financial results this morning, which continue our excellent year-to-date results for Ligand across the board. Before I discuss the specifics of Q3, I'd like to once again remind investors that as of January 1, we began reporting revenue under the new ASC 606 guidelines.
The principal places impacts Ligand is on the royalty revenue line. When discussing royalties, I'll mention the appropriate comparable prior year period that provides investors a roadmap to evaluate the growth of that line item. The tables in our earnings news release contained only the 2017 period, the numbers that were reported at the time. We plan to provide information to describe the differences in 8 investors and their analysis of the business in our 10-Q.
Turning now to some of the financial highlights. Total revenues for the quarter ended September 30, 2018 were $45.7 million, up from $33.4 million a year ago. Royalty revenue in Q3 2018 was $36.1 million, which was a 28% increase compared with the royalty revenue of $28.3 million in Q4 2017, which is the appropriate comparable period. The growth in royalty revenue largely reflected higher Promacta in Kyprolis royalties. Q3 2017 royalty revenue as reported was $21.9 million, but as I mentioned this is not the appropriate comparable number to the Q3 2018 period.
Milestone and license revenues were $2.5 million in Q3 2018 versus $3.8 million for the year ago period. Material sales in Q3 2018 were $7 million compared with $7.7 million in Q3 2017. For both of these line items, any differences between this quarter and the year ago period are simply due to fluctuations in timing of milestone license fee achievement, customer ordering patterns and the general variable pattern that we see in each of these two line items.
Gross margin on material sales was higher in Q3 2018 in the year ago period due to the sales mix that favored higher margin clinical sales and our material sales cost translated to an overall corporate gross margin of 97%.
On the expense side, R&D and G&A cash operating expenses were in line with our expectations for Q3. The core business remains on track for our previous guidance of $36 million to $38 million of cash operating expenses for the full year.
However, given the addition of Vernalis operating business to Ligand and the associated increases in R&D and G&A costs which are largely offset by Vernalis revenue, I thought would be useful to investors if we began discussing these two line items independently and with a little bit more detail.
First on the R&D line. Excluding non-cash charges principally the stock based comp, we expect this line to be between $20 million and $22 million for the year. This number includes a $2 million charge for the acquisition of Biro Pharmaceuticals in Q1 2018 and R&D expense in Q3 on that basis excluding stock comp and other non-cash charges was approximately $3.1 million. In Q4 2018, this number will most likely increase based on some one time increase project spend and a large portion of the costs associated with the analysis [ph] team. More specifically, we expect R&D excluding stock comp and non-cash charges in Q4 to be $7 million to $9 million.
On the G&A line, excluding stock based comp and other non-cash charges, we expect this line to be $21 million to $23 million for the year. For Q3 2018, G&A excluding stock comp and other non-cash charges was approximately $6.3 million and for Q4 2018, we expect this number to remain relatively stable and to be about $6 million.
Turning to GAAP net income. For Q3 2018, GAAP net income was $67.4 million or $2.80 a share. Similar to Q2 2018, in Q3, there was a significant non-cash gain related to the positive performance of the Viking Therapeutic share price.
As mentioned last quarter, due to the change in accounting for financial instruments prescribed by ASU 2016-01, beginning January 1st, 2018, we accounted for the value of our ownership in common stock which is Viking and Retrophin by making the value - marking the value of our shares at current market prices, with the resulting unrealized gain or loss running through the P&L each quarter rather than at the time of selling the stock.
Prior to the new accounting standards, the changes in value would impact the balance sheet but not the P&L. We don't believe these fluctuations in value whether they are positive or negative are reflective of our core operating business. And as such these gains and losses will be excluded from our adjusted earnings calculations.
For the quarter, we reported adjusted net income of $31.7 million or $1.32 per share, and this can compares with $15.3 million or $0.69 per share for the same period last year. And a quick reminder investors, our adjusted net income is reported on an after tax basis although we continue to utilize our NOLs and tax assets which results in a cash tax rate of less than 1%.
With respect to cash flow in Q3, we generated $27.1 cash flow from operations. And then on the balance sheet, we finished the quarter with cash, cash equivalents in short term investments of approximately $1 billion. As will be detailed in our 10-Q, just after the end of the quarter we settled just under $200 million of our 2019 convertible bonds, we currently have approximately $27 million of remaining bonds outstanding from our 2019 convertible notes. As of today, we have cash, cash equivalents and short term investments of just under $800 million in addition to our $105 million of Viking stock and warrants.
Turning now to guidance, as outlined in today's press release raising our full-year 2018 financial guidance. Realty and milestone performance continues to outperform our expectations and we're now seeing material sales exceeding our expectations as well. Therefore for the year, we now expect royalty revenue of about $122 million, which is up from $120 million previously, Captisol sales of $25 million, which is up from $23 million previously and milestones and licensees of about $93 million, up from $89 million previously.
In addition, we currently see upside potential of up to an additional $5 million from milestones and license fees.
These components translate to expected full-year 2018 revenues of $240 million, up from $232 million previously, and expected adjusted earnings per diluted share of $6.52 which is up from prior guidance of $6.30 per diluted share. This guidance now fully incorporates our best estimates for the newly acquired Vernalis business.
As a reminder to investors, as a result of the ASC 606 and our tiered royalty structures, our royalty revenue recognition pattern will be changed from previous years, such that we now expect royalty revenue to increase in each successive quarter throughout the year with Q1 being the lowest quarter and Q4 being the highest quarter in each year.
And lastly, please recall that our adjusted diluted EPS guidance excludes stock-based compensation expense, non-cash debt related costs, amortization related acquisition, changes in contingent liabilities and CVRs, non-cash unrealized gains and losses associated with our investment in Viking Therapeutics, mark-to-market adjustments for amounts owed to licensors, excess tax benefit from stock-based compensation and the excess convert shares covered by the bond hedge and certain other onetime nonrecurring items.
With that, I'll turn the call back over to the operator and open it up for questions. Operator?
[Operator Instructions] Your first question from the line of Dana Flanders. Your line is open.
Hi. Thanks for the questions and congratulations on the good quarter. And my first one here and appreciate this is not your product, but can you just speak on the Sage asset potentially launching soon and just, how you're thinking about the commercial opportunity for the IV, recognizing it's a long infusion but also just high unmet need? And then how you think that will of all assuming the oral gets to market and what you think the ultimate split there could be? And then I have a quick follow-up?
Yes, thanks Dana. This is Matt Kor. Obviously, we were encouraged and really pleased with the outcome of the AD COM on Friday, one of the things that really comes out of that as you're listening to the not only the physicians but the patients who have the courage to kind of present their experience with the diseases, really just substantial unmet medical need and how urgent the need is for something that can treat these patients. What they just been doing as we see it is really quite transformational in the CNS space really treating a disease in a way where you can kind of treat it in a onetime setting rather than in a chronic way. So we were pleased with the outcome of it.
In terms of how they'll position it obviously they see a significant opportunity in the IV. We've been pleased with the work they've done over the last few years, they are developing a different drug that has an oral form that I think is awaiting some clinical data early next year. But they have in general terms kind of described how they position. We obviously directed them on kind of exactly how they're going to market and position the drug, but we're very pleased with the work they've done, and all of their preparations for commercialization as well, I think they commented that they've got a sales organization now over 180, who'll be focused on the rest, so we're pleased to hear that too.
Okay. And then my follow-up is just I know you have about a $1 billion of cash on the balance sheet and I know some of that's kind of coming out next year for the convert. But can you just talk about the priorities for M&A, and I know it's been a few years since LNP, how should we just think about another large kind of platform technology deal being on the table heading into next year? Thanks.
Dana thanks. It's John and Matt Korenberg can add some color too. Generally, our outlook today it's frankly is the most exciting M&A outlook we've had in the last few years, partly based on it's the largest cash balance we've had ever and substantially higher than it was even 5 months ago.
Secondly, obviously we're aware that markets, the BTK, the biotech and pharma industries have pulled back a bit, many ways we think Ligand is a recession proof stock. We don't rely on the stock market to finance our business. We've got very good payers. We've got very well-funded partnered assets. And so we really can use our cash to focus on opportunistic M&A. We are very disciplined team, as I use the word deep value in my prepared remarks. We look at a lot of ideas. Things about Ligand is that we have our own drug discovery capabilities and platform technologies which you will licensing, and we've shown over the last 10 years, we have a very, very strong track record of perpetually continually doing new licenses at a rate faster than programs failed or terminated. So we are constantly building our portfolio even without M&A. So we have the benefit of that internal growth engine to drive our portfolio. But now with we think a more attractive investment environment for M&A and a very large balance sheet, we have opportunities. But again we will stay focused on our discipline and on strategic acquisitions that could expand the business.
I'd Echo everything John just said but. I think in particular, as I say to investors frequently with our 178 shots on goal today and the very attractive profile of that portfolio and the ability to add to that portfolio without any M&A, we always have the luxury of being extremely selective, when we're doing these acquisitions. So despite having extremely attractive shopping list so to speak as we look at it today, we continue to be selective and really find one that is of good fit perfectly with Ligand.
All right. Thank you.
Your next question comes from the line of Joe Pantginis. Your line is open.
Hey, guys, good morning. Thanks taking a question. Maybe two questions for Matt Korenberg. Just curious if you have any color right now about the existing buyback? And then second wanted to see if you could provide any color for long term or say let's just call it the next couple years with regard to your milestone revenue line and is it in any way analogous to the choppiness of the Captisol line? Thanks.
Thank Joe. So yeah first on share buyback, I think as most investors know, we've had a $200 million share repurchase plan in place to be used opportunistically for several years now. There was a plan it was put in place in 2015 and then again replaced in September of this year and so we've got a repurchase plan in place, we bought back shares pretty aggressively at a couple different points in time over the last 5 or 6 years in 2014 and again in 2018, this year - earlier this year. As people are probably aware, the recent pullback in our stock has all occurred post blackout window where our closed window period so we were not able to buy back any shares since October 1st. And so, we're certainly evaluating that internally and we'll continue to think about how to best of our cash as we see fit under the share repurchase plan.
On the milestone side, very good question I think most investors know but we have over $3 billion of potential milestones that are owed to us under the 178 shots on goal today, not all those will be realized but many will, as we look at that line and model it out overtime, we see that we'll realize those milestones on average $30 million to $40 million a year, for the next 10 to 15 years at least. And so when we model of internally long term we do it on that basis but each year as investors know I've given guidance the last two years a core amount of milestones and then and potential upside from that, this year it is the start of the year guidance was $25 million plus potential for $20 million upside, our current guidance now implies that we'll receive about $30 million out of that bucket, $25 million plus about 5 the upside.
Obviously, when we give our guidance for the beginning of each year, it excludes any new deals, we only talk about 178 products and potential milestones coming out of that. So this year, there were two new deals on a licensing of our glucagon receptor antagonist diabetes program, Metavant and then OmniAb partner that wanted to amend their deal and it is large milestone to do so. And so, there will always be those sort of upsides and in that sense there will always be the potential for lumpy realization. But even within that 178 shots on goal and $3 billion milestones and $30 million to $40 million on average per year.
I also - I'm always careful to say that some years that number might be $15 million and some years it might be $60 million or $70 million or could be sort of all over the map just depending on timing of clinical trials, timing of approvals, commercial success of the partners programs and so, will each year give very specific guidance and forward looking basis and then in the long term I think the way to think about it is as I just went through so.
I know that's very helpful. Thanks for that color. And then one of the see if I could get just sort of a broader view on the OmniAb platform, I guess I want to approach it from this angle sort of how many deals have you been looking at say per year, the number of imbalance you kind of get and versus the actual number that you might sign?
Yeah, thanks, Joe. It's Matt Foehr. Anyone time we're in multiple - I'll say multiple term sheet negotiations with partners, the visibility around OmniAb, we've noticed a continued increase with the addition of crystal bioscience and the Omni chickens that increase the value proposition for partners substantially where we now have three species with fully human immune systems producing fully human antibodies. So we continue to see the kind of growing interest of partners understand the value of the technology, it helps a lot that many of our partners present at these antibodies discovery conferences, that now there are 9 clinical stage antibodies we have a couple in Phase II, so multiple progressing with partners and many of those partners are ones that smaller emerging players in the industry really look up to, for their kind of the example they set and the tools that they use. So hope that gives you more color.
No, Absolutely. Thanks a lot, guys.
Our next question comes from the line of Matt Hewitt. Your line is open.
Good morning. Congratulations on the progress. First of all, the material sales and you spoke about this in your prepared remarks a little bit but you're seeing strong demand from both sample requests as well as the incremental orders from existing customers. Do you have a split on that or you could you provide us with a little bit of a sense on what the breakdown was for that line item?
Hey, Matt. Thanks for the question. Annually, we give a split in our 10-K, that breaks out the clinical from commercial orders. And typically in quarterly we haven't given the split. On an annual basis, it tends to be 60-40 on the clinical side versus sorry commercial side versus clinical in the last year or two. And then this quarter is a little bit heavier on the clinical side as you saw from the margin side, so the higher the margins usually the higher the clinical mix but we don't sort of give quarterly specific guidance on that.
Understand. Okay. And then I wanted to - I guess dig in on the iohexol opportunity a little bit and thank you for providing the update. As we think about some of the discussions and meetings that you've recently had I think you mentioned may be getting into the clinic in 2019. How is that timeline likely to shake out I guess in relation to like Jerry and how should be thinking about potential partnerships and those types of opportunities?
Yeah, thanks Matt. It is Matt Foehr. Obviously the team's been working doing some great work around campus on able to excel, and a key part of our business model and as you and others know is that we do focused R&D investment with the sole intent of answering a couple key questions and then partnering, right, using that data to then drive better partnering event or larger partnering events that was the case with TRA as a reference and iohexol a different space obviously the imaging space which has some significant needs but we're following that similar path.
So the team's been doing great work will be filing both IND and the Canadian CTA simultaneously, expect to have clinical data in 2019 and then from there would look at a partnering process. We've done some very encouraging primary market research that we're excited about and really validated and kind of further broadened our understanding of the needs within this area and obviously mapped out the development path with the FDA. Those are obviously value driving events but then expect to have clinical data on 2019 and pursue partnering.
Okay. Great. I think that's it for me for now. Thank you.
Our next question comes from the line of Larry Solow. Your line is open.
Great. Thanks. Great quarter, great outlook. Thanks, thanks again. Just a few follow-ups, most of my questions have been answered. On the Vernalis, good opportunistic acquisition there, could you just walk through the effects or is it the dilutive or nearly breakeven in the first quarter or remainder of 2019, obviously require 70% now R&D teams are in the some expenses there?
Yeah, thanks, Larry. A lot to give details 2019 guidance later next year earlier next year. And then on 2018, the guidance they gave already fully incorporates everything from Vernalis. But specifically what we said at the time of the deal was that - it would be largely neutral, other revenue the team generates from service revenue service, fee for service revenue is offset by the expense of maintaining the team. We still see that being the case and that's largely what we expect from both Q4 of 2018 as well as of all of 2019, annually, approximately $8 million or so of revenue $8 million to $10 million and $8 million to $10 million of cost, so it's on that order of magnitude.
Got it. And the service from your assume that that's going to at least for 2018, is that going into the license that's going to license roll revenue I guess on your line and is that part of the reason why you bumped up your numbers a little bit on that?
Correct. Yes. So it will lend in a milestone licenses another revenue line, is the same place that are crystal OmniAb revenue hits from - for the same sort of work. And then it was a portion of the bump on the milestones side was related to that.
Got it. Could you give us any update on progress on LTP technology, I have heard too much about that last two quarters?
Yeah Larry, thanks. This is Matt Foehr. We have a couple of partnerships centered around LTP highlight want to a company called Nucorion and that's generated some positive data that was presented at one of the Liver Health Meetings earlier this year showing better targeting of cancer drugs using the LTP technology. Our team also has continued to do work internally around LTP enabling some of the large lipid lowering agents where increased liver targeting would be thought to help the certain patients who right now can't tolerate lipid lowering agents or certain lipid lowering agents tolerate them. Some of that data has been presented as meeting but we do expect to present more data in 2019. So yeah, it's an exciting platform, smaller number of partnerships than we have for our larger platforms but it's definitely progressing well and generating positive data for us.
Great. Thanks, guys. Appreciate it.
[Operator Instructions] We have another question here coming from the line of Scott Henry. Your line is open.
Thank you and good morning. Most of my questions have been asked but just to a couple. First, with regards to Zulresso and Brexanolone, I would assume there would be a small milestone upon FDA approval. I guess the question is, is that a reasonable assumption and if so would that be upside to your milestone forecast?
Thanks, Scott. Yeah, if you scan through this Sage public disclosure, you'll see that they disclose clinical milestones associated with the program about $800,000 and regulatory milestones associated with the program of $3.8 million, which you can imagine would be split between a filing and an approval milestone. And so the bulk of that is probably on the approval and yeah that would be part of some of the upside.
Okay. Great. Thank you for that clarity. And then just the other question with regards to LGD-6972 the Roivant partner product. Do you have any color on what's next for that compound and how we should think about upcoming visibility?
Yeah, thanks, Scott. It's Matt Foehr. Yeah, so what we used to call LGD-6972, obviously during the period where Ligand was doing the Phase I studies and the Phase II study, Roivant our first two as RVT-1502 is the deal with them earlier this year. And one of the things that we liked about how Metavant I should say Metavant was thinking about the asset was that they saw opportunity not only in Type II diabetes but in Type I diabetes as well. They've disclosed they're going to start a trial in Type I diabetes before the end of this year. So we're obviously keeping an eye out for that. And we think Type I is a really exciting expansion beyond Type II of the therapeutic potential for the drug, obviously there are 1.5 million adults in the U.S. with Type I diabetes and really there are only approved drugs are - have limitations really, the therapies, they're really unmet need for therapies to improve glycemic control without increasing risk of hypoglycemia or diabetic ketoacidosis. And therapies that would allow reduction in insulin requirements could and also prevent weight gain and curb hypoglycemic risk could really see a nice spot eventually in the market.
So we're excited with the progress they're making. They've been moving very efficiently, not only with the large scale up activities but also other activities to support their disclosed plan of starting the Type I diabetes trial this year.
Okay. And I don't know if you have this color but that Type I trial, when would we expect to see data and I guess is that a proof of concept or is that a Phase II trial just trying think about that?
Yeah, I have to direct you on data and the details of the trial, I want to direct you to Metavant team to comment there?
Okay. Great. Thank you for taking the questions.
Thanks, Scoot. So that concludes our call. We appreciate your tooting in, and clearly a very busy year, a very successful year. And our outlook in the 2019 is building with good momentum across all fronts. Thank you. We will be on the road with a number of conference events that will be announcing, invitations that we've received and again we're looking forward to an Analyst Day event in the early part of 2019. Thank you very much.
This concludes today's conference call. You may now disconnect. Thank you for your participation.