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Ligand Pharmaceuticals Incorporated (LGND) Q2 2019 Earnings Call Transcript

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Ligand Pharmaceuticals Incorporated (NASDAQ: LGND)
Q2 2019 Earnings Call
July 30, 2019, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Todd Pettingill -- Senior Director, Corporate Development

Welcome to Ligand's second quarter of 2019 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 projects described in today's press release and this conference. 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 related to projections or other forward-looking statements represents the company's best judgment based on information available and reviewed by the company as of today, July 30, 2019, 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.

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John Higgins -- Chief Executive Officer

Todd, thank you and welcome to our call. The past few months were defined by progress across many fronts. We signed nine more licensing deals. We closed an acquisition. Partners reported several late-stage positive updates. Sage launched Zulresso, which is the latest commercially approved Captisol-enabled drug. We posted positive phase one top-line results for our iohexol program. Today, we're reporting solid financial performance for Q2. The business is doing well, and we're pleased with our momentum our financial outlook in the calendar of portfolio events coming up.

Ligand's primary current operating business is supporting partners using our antibody discovery technologies. I wanna talk a little bit more about OmniAb. OmniAb is our antibody discovery platform that we built through acquisition and internal investment. Three acquisitions that have cost us about $220 million over the past three and a half years have resulted in what we believe today to be a leading best-in-class technology to discover antibodies. OmniAb is a collection of genetically modified animals, namely rats, mice, and chickens, and an antigen sourcing technology that has helped Ligand assemble a very large portfolio of partnerships with companies of all types -- private, public, small, and large -- to help them do their research.

Now, antibody research is one of the largest areas of R&D investment dollars in the pharma and biotech industries today. Antibodies are proven to be an attractive category through research outcomes and commercial success. Data suggests biologics and antibody drugs receive, on average, higher rates of marketing approval from the FDA than small molecule or chemical-based medicines after a successful phase one trial.

Ligand decided, in late 2015, we wanted to stake a claim in the burgeoning antibody field. We made our first move by acquiring OMT, following by Crystal Bioscience, and, more recently now, Ab Initio. Like any good business operators, we set goals for what we believe the business could produce for Ligand and its shareholders, and we are very pleased with where we are today and how the business is evolving to serve the industry.

Generally, investors and analysts are well-tuned into the potential of the OmniAb platform, but not all of them are. This reminds us of 2011 when we acquired Captisol. Some investors did not understand that business, its potential, or how it fits into Ligand. For a few years following that acquisition, investors needed time to learn more about it and see R&D and commercial success. Some wondered where the value was and poked at the business, like when we were questioned for doing a license agreement with the newly formed Sage Therapeutics. One investor called and said they did a Google search to find Sage was a wellness spa. The search was misguided, but so was the premise that Sage would not amount to anything. Today, less than 10 years later, Sage has a market cap of $8 billion and launched its first approved drug last month for a very important PPD market, and that drug is based on its initial license with Ligand.

Note, our Captisol's highly successful platform acquisition for Ligand, it's an unqualified success. We paid $31 million upfront and about that much more in additional earnouts, over several years, to acquire the underlying business. To date, we have generated over $300 million in revenue from the business, and we expect sales will continue for another 10 years or more with some of the biggest royalty years still ahead of us. The Captisol deal illustrates a strength of our company, how Ligand identified a category, moved in on a not-so-obvious acquisition, and then made it a big winner.

Today, our OmniAb platform is our most valuable long-term platform, and it's defined by great science, strong and expected long-lived IP with a broad portfolio of partners, and promising financial potential. We believe OmniAb could be many-fold higher than what Captisol has delivered and that investors should take note.

Much has been achieved with our OmniAb business since we got into the antibody space about three and a half years ago. At the time of the initial acquisition, we had 16 companies who had signed license agreements. We forecast that we would sign another three to five new deals per year going forward. We gave financial guidance in 2016 that we would do $18 million in the first two years with OmniAb. We did much better, locking in $32 million of revenue for the business for those 2 years, 2016 and 2017. Then, in 2018, we did $57 million in revenue for the business. We expect, by the end of this year, OmniAb will have generated over $114 million of cumulative revenue to the business.

Today, there are more than 40 companies who have entered into contracts to access OmniAb antibodies. Not all of them have succeeded or advanced, but most have, and we have over 35 active partnerships today. We provided an outlook, when we got into the antibody business in 2016, that we would see the first phase one clinical trial start in 2017. That target was easily met with many more programs in the clinic than initially expected at this time.

Early in our ownership, we looked at the number of animals that had been ordered annually and the number of antibody research campaigns that had been or were projected to be conducted, then tried to extrapolate, over time, how the business would grow with the goal to try to estimate how many antibodies could be on the market in 2030. It's a classic exercise of using any data a company can gather to try to assess the business and help investors make their own conclusions about the potential. The business analytics aren't perfect, but the general and use of the platform are clearly positive and going in the right direction, and they portend a business that is building substantial value.

The trend for animal use for our OmniAb and OmniChicken is up meaningfully. OmniMouse is used less frequently, which is not a surprise because that species is a crowded field. We worked to assess the number of research campaigns. We estimate our 35-plus partners are currently running over 170 discovery campaigns with OmniAb derived antibodies, a significant number, but the quantity of campaigns may not matter as much as the quality of campaigns. Ultimately, we are focused on clinical and regulatory success, a drug approval followed by commercial launch.

Our business is built around sharing in the success of our partners in the form of our royalties on their net sales. This is a lucrative and successful model that has driven a substantial value increase in Ligand share price from the time of acquisition of Captisol several years ago. Given everything we know today about our technology, our IP and partner's investment, we see OmniAb generating substantial annual royalties for Ligand. We strike OmniAb deals with a mix of upfront and annual payments, success-based milestones, and royalties. We have, today, over 900 million of total OmniAb potential milestones under contract, and then, of course, there are the royalties. Most of our contracts have tiered royalties based on sales with a general range we describe as 2-6%. A handful of companies have a right to buy down or buy out the royalty for a large onetime payment, but that is not typical, and most of that structure is a legacy of deals done prior to the Ligand acquisition of OMT. Besides, the addressable market and other factors in the deal negotiations ultimately determine how we settle out on final royalties.

As investors build their models around OmniAb, we believe the fundamental long-term driver should be royalty revenue performance. At our analyst day in March a few months ago, we laid out the basic formula for potential annual royalty revenue. So, the number of approved drugs is the average sales level per antibody and the average royalty rate -- those three factors. In March, we outlined a potential for the estimated number of drugs to be in the market in 2030 as being in the range of, potentially, 25 to 35. In coming to that estimate, we are factoring in the efficiency and development we're seeing with our partners advancing their programs, such as C-Stone and Genmab, and we were factoring in what appears to be above average success rates given data received from partners so far, but we do not have a crystal ball, and we know the inherent uncertainties in drug development. The number of approved antibodies based on Ligand technology could be lower than that in 2030, but we see this as a place to start the dialogue with investors.

As for revenue per drug, we offered $750 million for average annual revenue. The largest drugs in the market today are antibodies with the top drug selling $5 to $10 billion annually, and the biggest drug, Humira, peaked at annual sales of about $20 billion. Most were much smaller drugs with more limited sales and targeting smaller markets. So, it's a broad range that could evolve in the future with my antibodies in development, but one that can center around average revenue expectation per product, just like any industry. We're not dictating what the revenue will be, but laying out the facts and information we have about the market to provide a framework for a dialogue with our investors as we assess the revenue potential for our portfolio over the next decade. Peak revenue per product will vary by year and time of launch, and our information on that will evolve over time.

The other key factor to modeling is average royalty rate, and that is a function of sales and the applicable royalty tiers we have negotiated. But from a high level, we think an average rate in the 3-3.5% range is reasonable. To investors, we can say we are very pleased and proud of the OmniAb business. It is performing better than we expected. I made analogies to Captisol earlier as this feels very similar to those early years when the value and revenue potential of Captisol was not clear to investors. But internally, we felt strongly we were on to something very big with that acquisition, and we did our best to frame it for investors so they could track it over time.

How will we assess the business going forward? We will keep focusing on annual revenue, new deals signed, attrition, and clinical progress. Again, the trends, generally, are very positive. As mentioned, not all contracts we have signed are still active. We have seen attrition with some contracts terminated or, essentially, inactive right now. The number one factor driving terminations or inactive development is M&A. For example, we had deals with Stemcentrx and ARMO. Both have been acquired, one by AbbVie, the other at Lilly, and, in the process, the OmniAb contract was not renewed. Celgene is enactive now, and, with the recent BMS acquisition, we anticipate that contract will not be renewed either. Other customers have simply moved on due to funding, research constraint, or change in direction, like in [inaudible] and F-star, but it's a small proportion of our total book of partners, and we have been able to keep signing up new partners at a very good clip. Bear in mind, when we report partner numbers, those figures are net of attrition.

Over the last six months, there was an important evolution in our dashboard given the advancement of our portfolio. Now, there are substantial new data points where we are setting new clinical trial starts, number of patients treated in studies, trial data, and considering the time for first products to launch, and the data across all those metrics is promising. There are 29 trials recently completed or ongoing, including 11 phase-2 or phase-3 trials. We estimate over 3,500 patients will be enrolled in this current roster of trials. About 12 trials were weighed out by mid-2020 in just over 1 year. We believe the first Ligand OmniAb antibody could be on the market by the end of 2021 or 2022.

Needless to say, these are exciting times, and we'll continue to provide the metrics and information we can to assist you in your own analysis. All in all, we're pleased with the state of the business. We're confident in our business model and are very pleased with the progress and value we are establishing with our antibody business and other assets of the company.

Now, I'll turn it over to Matt Korenberg to do a review of our Q2 financial performance.

Matthew Korenberg -- Executive Vice President, Finance and Chief Financial Officer

Thanks, John. I'll begin, today, with a review of the financials contained in our earnings release issued earlier this morning. Total revenues for the second quarter of 2019 were $25 million and included $6.6 million of royalty revenue, $8.5 million in material sales, and $9.8 million of milestone and license fee revenue. It was a strong quarter, overall, and exemplifies the diversity in our revenue base. With respect to royalties, Kyprolis is the source of our largest current royalty, and, given that Amgen, the marketer of Kyprolis, has not yet reported their sales for Q2, we've booked the Kyprolis royalty as flat to Q1. Any difference between the actual royalty and the royalty we booked will be captured in the Q3 revenue number consistent with the new revenue recognition rules that we adopted last year. On the milestone license fee line, we saw more than double the revenue we recorded a year ago from the normal course contracted milestones, and material sales also had a strong quarter with nice double-digit growth over the prior-year period.

Total revenue for Q2 of 2018 was $90 million and included $31.4 million of royalty revenue, $7.6 million of material sales, and $51 million of milestone and license fee revenue. Q2 of 2018 included a full quarter of royalty revenue from Promacta, which we sold to Royalty Pharma as of March sixth this year for $827 million. Ligand did not receive any Promacta royalties in the second quarter of 2019 and will not receive any Promacta royalties going forward. Milestone and license fee revenue for Q2 2018 included a $47 million payment from WuXi Biologics to amend its OmniAb platform license agreement.

Regarding gross margin, our Q2 gross margin for Captisol sales was lower versus the prior year. Our mix of commercial and clinical material sales shifts from quarter to quarter and from year to year resulting in changes in gross margin. Our material sales cost translated to an overall corporate gross margin of 90% for Q2 of 2019.

On the expense side, R&D in Q2 was $12.2 million. Excluding stock comp and other non-cash charges, R&D was $6.3 million. For G&A, our Q2 total was $11 million. Excluding stock comp and other non-cash charges, G&A was $6.8 million. Taken together, total cash operating expenses for the quarter was $13.1 million, which was in line with our expectations. GAAP net loss for Q2 of 2019 was $14.4 million or $0.74 per share. In this quarter, the performance of Viking's share price and the amortization of the purchase price from our Palvella and Novan investment contributed to the loss. The unrealized loss related to the movement in Viking's stock price was $12.4 million. With respect to Palvella and Novan and any future product investment transactions we conduct, we're required to expense the upfront cash investment over the period in which the funds are spent by our partners. These acquisitions of product economics, therefore, result in ongoing non-cash R&D expense during the life of the trials that we're funding. In Q2 of 2019, these deals contributed $3.2 million of non-cash R&D expense.

For the quarter, we reported adjusted net income of $13.9 million, or $0.68 per diluted share. It compares with adjusted net income of $60.6 million, or $2.59 per diluted share, for the same period last year. Again, last year's Q2 numbers were higher due to the inclusion of Promacta royalties and the large payment from WuXi Biologics to amend their platform license agreement.

In Q2 of 2019, we used $61.1 million in operating cash, which was largely driven by a $69.7 million tax payment, which was principally related to the Promacta sale, and $12 million paid for the Novan transaction. Net of these amounts, or operating cash flow, for the quarter was $20.6 million.

With respect to taxes, a reminder that we, now, have utilized all of our federal NOLs and tax assets as a result of the sale of Promacta. Our earnings and adjusted earnings are already reported as if they were fully taxed and will continue to do so. We estimate our tax rate, going forward, will be 21-23%. On the balance sheet, we finished the quarter with $1.3 billion of cash, cash equivalents, and short-term investments after having spent approximately $105 million on share repurchase and taxes, again, principally associated with the taxes related to the $827 million-sale of Promacta.

As we discussed in the past, we intend to use the cash on the balance sheet and the future cash flow from operations for a combination of executing our strategic agenda and returning cash to shareholders. On a strategic front, we're focused on product investments for economic rights and company acquisitions. On the return of capital side, we focused primarily share repurchases in the past and, generally, plan to continue that policy into the future. However, we're also continually evaluating other uses of capital, such as dividends, convertible bond retirement, and more.

Our strategic M&A agenda remains focused on identifying acquisitions across areas of interest, including platform technology acquisitions, acquisitions that bring us portfolios of partner biotech assets, and acquisitions of economic rights to development and commercial-stage assets. Matt Foehr will provide some updates on our acquisitions of economic rights from our Palvella and Novan transactions. Our acquisition of Ab Initio last week is an example of a smaller technology built on that we expect will further augment licensing interest in our OmniAb technologies.

With respect to share repurchases, we've been actively buying back stock under our $350 million share repurchase authorization. As of today, we've spent $273 million under the plan to acquire 2.1 million shares. We began actively purchasing shares in November of 2018, and, in the past 9 months, we've repurchased over 10% of our outstanding shares. We continue to believe our stock is undervalued at current prices and plan to continue our repurchases.

Turning, now, to financial guidance. We're reiterating our full-year 2019 guidance. For the year, we expect total revenues of approximately $118 million, and, at a $118 million of revenue, we expected adjusted diluted EPS of $3.20. In reaffirming our full-year guidance, we're implying about $49 million of revenue for the 2nd half of 2019. We expect, in Q3, we'll realize about 40-45% of the remaining revenue and earnings based on our current outlook for milestone timing and Captisol sales.

Finally, just a reminder that our adjusted diluted EPS guidance excludes stock-based compensation expense, non-cash debt-related costs, changes in contingent liabilities, including our CBRs, transaction-related amortization, expenses in onetime costs, unrealized gains or losses related to our holdings in public company's common stock, market to market adjustments for amounts owed to licensures, the excess convert shares covered by the bond hedge, and certain other one-time nonrecurring [inaudible].

With that, I'll turn the call over to Matt Foehr who will provide some updates on our major commercial and development-stage programs. Matt?

Matthew Foehr -- President and Chief Operating Officer

Thanks, Matt. I'll start off with our OmniAb technology platform. We've noted the increase in clinical investment by our partners who are pursuing development stage OmniAb-derived antibodies. As John described, there are now 29 clinical trials evaluating an OmniAb-derived antibody that either have been recently completed or in progress. For active trials, there are a total of 16 phase-1's, 8 phase-2's, and 3 phase-3's. Ten novel antibodies are being used in active studies, some of which are being pursued by multiple partners in different therapeutic formats or for different indications or geographies. We see this growth in a number of trials as a representation of the commitment of the partners. As a point of reference, on our last earnings call, we referenced about 15 clinical trials related to OmniAb, so this has been a pretty recent increase in clinical work by our partners.

Looking at the targeted patient enrollment numbers for the trials, that are posted to clintrials.gov, can also give an idea of the scope of clinical investment by our OmniAb partners. Adding up the targeted enrollment figures, you get a number in excess of 3,500 subjects with more than 1,800 subjects estimated for enrollment in phase-1 trials, more than 500 estimated in phase-2's, and more than 1,300 estimated in phase-3's. Phase three trials are all related to C-Stone CS1001 program, which, according to C-Stone, could be China's first fully human and full-length anti-PD-L1 monoclonal antibody.

The vast majority of the trials under way are in oncology, and it's worth mentioning, again, that, at the time we closed the OMT acquisition, there were no clinical trials of an OmniAb-derived antibody in progress. We continued to invest in the OmniAb platform to keep it on the cutting edge of antibody discovery technologies and to expand our offering for current and future potential partners. At the PEGS Meeting in April, our scientists launched our newest transgenic chicken platform known as OmniClic, which is designed to facilitate the development of bispecific antibodies. OmniClic received substantial attention at PEGS and is already being used in some new partnered programs.

Last week's announcement of the Ab Initio acquisition also adds to the technology capabilities adjacent to the OmniAb platform, adding important antigen generation technology to our expertise. We're transferring the Ab Initio operations from South San Francisco to our Emeryville site next month, generating quality antigens is a key precursor step to antibody discovery, and we expect that OmniAb partners will see the value of our newly acquired technology and potentially expand existing partnerships or create new ones based on this capability. With Ab Initio, we've picked up an existing agreement with Pfizer that brings over $100 million in potential milestones and tiered mid-single digit royalties on potential sales.

Overall, with OmniAb, we continue to add new partners and expand existing relationships. The number of partners with access to OmniAb technology or pursuing an OmniAb-derived antibody has increased substantially since the OMT acquisition three and a half years ago.

Switching, now, to a few pipeline programs, as we discussed in our last earnings call, Metavant has been working with FDA to determine a path forward for the glucagon receptor antagonist, or GRA program, now known as RVT-1502, in diabetes. Ligand believes that continued development of RVT-1502 for diabetes in the U.S. is highly unlikely based on preclinical and clinical trials now required by FDA for any drug in the GRA class intended for long-term use. Metavant may choose to explore certain other indications or geographies for RVT-1502 and expects to make a decision later this year.

As Matt Korenberg briefly mentioned, in May, we announced a transaction with Novan through which we acquired milestone and royalty rights to SB-206, which is a topical antiviral gel for the treatment of skin infections, and it's now well into a phase-three trial for molluscum contagiosum. Molluscum is a common contagious skin infection affecting about six million people a year in the U.S., with the greatest incidents in children. There are no FDA-approved therapies for molluscum, and there's significant unmet need for treatments. Ligand has a tiered royalty of 7-10% on the SB-206 asset, as well as up to $20 million in regulatory and commercial milestones. We've been pleased with Novan's focus and progress on the phase-three trial and note that, earlier this month, they reported that more than half of the patients are enrolled in the phase-three, and Novan has indicated that top-line results from the phase-three are expected no later than early in the first quarter of 2020.

Our partner, Palvella's work on the VALO phase 2/3 study of PTX-022 remains on track with enrollment ongoing at 6 leading sites in the U.S. PTX-022 is addressing an orphan disease called pachyonychia congenita, or PC. PC is a rare, chronically debilitating, and lifelong monogenic disease in which mutations of genes responsible for keratin production lead to dysregulated keratinocyte proliferation, increase skin fragility, and impaired skin barrier function on the bottoms of the feet. As a result, affected individuals experience difficulty with walking, which frequently necessitates the use of either ambulatory aids or alternative forms of mobility, such as crawling. We're pleased to see Palvella's focus and progress on the trial. Palvella reports to us that full enrollment of 60 patients remains on track to be achieved later this year, and we note, based on clintrials.gov disclosures, the primary results from the study are now expected in Q2 of 2020.

Turning, now, to internal R&D, earlier this month, we announced positive top-line results from our phase-one clinical trial of Captisol-enabled iohexol. Our R&D team here did an excellent job running the trial for this contrast imaging agent on budget and ahead of schedule. We're confident that the data support further development, and we will explore potential commercial partnerships for the program as we prepare for the next phase of clinical development in 2020. We expect to present CE-Iohexol data in detail at medical meetings later this year.

With that, I'll pass the call back over to the operator for questions. Operator?

Questions and Answers:

Operator

Thank you. At this time, I would like to remind everyone, if you do have a question or comment, please press *1 on your telephone keypad. Again, that is *, then the number 1. Your first question comes from the line of Joe Pantginis with H.C. Wainwright.

Joseph Pantginis -- H.C. Wainwright & Co. -- Analyst

Hey, guys. Good morning. Thanks for taking the question, and thanks for the added details today. First, if you don't mind, I wanna get a little extra clarity for the GRA program or RVT-1502. The nuance I'm getting is that Metavant is trying to see if bringing it forward or they're looking to bring it forward, but you're saying, "Okay, maybe we're not gonna see development in the U.S." So, I just wanna get some clarity as to where you think it might or might not be going. Thanks a lot.

Matthew Foehr -- President and Chief Operating Officer

Yeah, Joe, thanks. This is Matt Foehr. Yeah, Metavant's working with the FDA, now, on a path for -- generally, when you have dialogue with the FDA like this, you try to get meetings, try to discuss it with the FDA. We've, obviously, said our view. In the U.S., we see it as highly unlikely based on the preclinical and clinical trials that they're going down, that we see it as chronic use is out for the drug. They've told us they expect to make a decision later this year.

Joseph Pantginis -- H.C. Wainwright & Co. -- Analyst

Okay, I understand. Thanks. And then two more questions, if you don't mind. Maybe one for the other Matt. Seeing a boost in R&D, obviously, and I wanna know if this should be considered a baseline going forward, obviously, because of your acquisitions and integrating different businesses at this point.

Matthew Korenberg -- Executive Vice President, Finance and Chief Financial Officer

Yeah, thanks, Joe. We continue to see our cash expenses, for the year, around that $50-$52 million range that we provided earlier this year. You will see some added non-cash R&D expenses running through as we amortize the upfront purchase prices of the investments we made in the Palvella program and Novan program. As I mentioned, this quarter, they added about $3 million to the GAAP number. That will be a bit inflated. But otherwise, R&D budget and cash expenses are still on track.

Joseph Pantginis -- H.C. Wainwright & Co. -- Analyst

Great. Thanks. And then a couple other little ones and one forward-looking, if you don't mind, and thanks for indulging me. So, wanna talk about, maybe, a little forward-looking with regard to the Captisol franchise and its longevity. I'll give a specific example, and we've actually been getting some questions on this. So, recently, I guess, several months ago, the paragraph IV filings have started for Kyprolis, ANDAs, and, obviously, with regard to litigation, we'd expect it would take a few years, unless you disagree with that, to maybe get some clarity on any potential generics coming forward. But with regard to the longevity of Kyprolis, is it safe to assume that whoever were to file a potential generic for Kyprolis would still need Captisol, and do you have precedent, thus far, to show something along those lines?

Matthew Foehr -- President and Chief Operating Officer

Yeah, Joe, I can comment on that. Generally, we've seen -- it's not new to see a generic challenger to one of our Captisol partners. We saw this with a Merck drug a few years ago, and we, obviously -- in that instance, Merck was negotiating -- there was, apparently, a settlement. Subsequent to that settlement, we received permission from the partner to enter into a Captisol supply contract with the other party that Merck had settled with. Again, we don't comment on specific litigation, but we feel we've got, obviously, a great intellectual property portfolio. Partners really do see the value in our drug master file. There's been a lot of investment, millions and millions of dollars over many years, a lot of patient data, a lot of tox data within our drug master file, and partners see a lot of value in that, and we continue to enter into new Captisol deals. As disclosed in our announcement this morning, new deals with Millennium, Takeda, Becton Biomedical, Valin Bio -- a couple of other small players. So, we continue to add on new Captisol partnerships.

John Higgins -- Chief Executive Officer

Yeah, and, Joe, I'll just add, with the business -- I think what you're getting at is, as products naturally and expectedly come off patent, if there's a generic field, will those other generic entrants require Captisol? We can't say, across the board, every generic will use Captisol. Perhaps, they could source from elsewhere. But today, we are seeing that we are the best in class beta cyclodextrin. The quantity we can supply, the quality we can supply, and the consistency for pharmaceutical-grade products is a requirement. We are, unquestionably, the best in the world in meeting that customer need. This analogy that Matt referenced, Merck's product, Noxafil, when a generic entered, they entered a supply agreement with us. We're selling not only Captisol but, also, are getting a royalty on sale to a generic participant. So, it's an illustration that, while Matt is correct -- we're signing new customers, new IP, new products. There's a myriad of ways new Captisol-based products can be patent-protected well beyond the IP of Captisol. But beyond that, we are seeing, as markets become genericized over the next 5-10 years, there is a model that suggests that generic participants will also be customers of Ligand as well.

Joseph Pantginis -- H.C. Wainwright & Co. -- Analyst

That's very helpful, John. Thank you. And my last one, if you don't mind, since you talked about the iohexol program -- and congrats on the recent data -- what is the mix, right now, that you can share with us? Because, Matt, you said you're exploring partnerships for the potential next phase in 2020. But again, similar to the GRA program, you have the financial leverage to hold on to it a little longer to, maybe, garner better economics. So, I was just curious how you're looking to strike that balance.

Matthew Foehr -- President and Chief Operating Officer

Yeah, yeah, Joe, you're correct. We do. Our team is working toward what the next clinical steps would be in 2020, like a trial that would start in the second half of 2020. This is a program that's getting attention. People know about it. We expect we'll present data in the last part of this year. At upcoming medical meetings, we'll present the phase-one data. So, as we did with what was the melphalan program that became Evomela, with the GRA program, and with other programs where we've done targeted investment -- Sparsentan and others -- we'll continue to make those targeted investments while we assess the partnering landscape, and that's what we're doing here.

Joseph Pantginis -- H.C. Wainwright & Co. -- Analyst

Got it. Thanks a lot, guys.

Matthew Korenberg -- Executive Vice President, Finance and Chief Financial Officer

Thanks, Joe.

Operator

Your next question is from the line of Matt Hewitt with Craig-Hallum Capital.

Matt Hewitt -- Craig-Hallum Capital Group, Analyst

Good morning. Thank you for taking the questions. First one, given the launch of Zulresso in the quarter, did you factor any revenues or contribution from that in the quarter, and how should we be thinking about that ramping in the second half of the year?

Matthew Korenberg -- Executive Vice President, Finance and Chief Financial Officer

Yeah, thanks, Matt. It actually launched in the last couple days of the quarter, so there was almost zero revenue that we would have been owed. So, very, very little was booked in this quarter.

Matt Hewitt -- Craig-Hallum Capital Group -- Analyst

How should we be thinking about that for the back half of the year? Is there a range that you'd recommend we incorporate into our models?

Matthew Korenberg -- Executive Vice President, Finance and Chief Financial Officer

Yeah, so, we typically look to the consensus research reports from analysts. There's a bit of a range, but the consensus that we see is in the low double digits, $10-$20 million or so for the year, and that's what we're factoring in.

Matt Hewitt -- Craig-Hallum Capital Group -- Analyst

Okay, great. Thank you. One of the items that, I guess, you didn't touch on here but you did at the analyst event, so you have six internal OmniChicken programs that you've worked on. Is it still your expectation to out-license those yet this year? How are those early discussions going so far?

Matthew Foehr -- President and Chief Operating Officer

Yeah, thanks, Matt. This is Matt Foehr. Yeah, those programs have bee progressing well, and we have binders and packages that are forming for all of them. We have had initial discussions and will continue those the second half of this year and into next year.

Matt Hewitt -- Craig-Hallum Capital Group -- Analyst

Okay, great. Thanks. The last one is Captisol -- and I know there was a lot of focus on OmniAb, and I really appreciate some of the detail there. Captisol seems to have taken another -- or shifted into, maybe, the next year, given the number of partnerships that you announced here recently, the ramp that we're seeing in the Captisol material sales. As you look at some of these new partners, are any of those working on drugs that you would consider more high-volume type situations? Or, as you look down the road, is there opportunity for another iohexol, for example, where it's expected to be a very high utilization type drug? Are any of those in the mix with some of these new partnerships? Thank you.

Matthew Foehr -- President and Chief Operating Officer

Yeah, Matt, thanks. Yeah, you're correct. We definitely continue to see partner interest in Captisol. As we always say with material sales for Captisol, they can be lumpy, and that's driven by a number of factors. Some partners may have a very large Captisol buy to support a phase-three trial, and then that partner may not need material for a year or so. Others have annual cycles for their commercial buys that are linked to their budget planning or linked to, perhaps, volume tiers that exist within our contract. So, there's always an element of lumpiness to Captisol. That said, we are seeing new uses for Captisol among our partners. We have a few that are going down an oral route that are in fairly advanced trials, and those are fairly heavy users. We have some using in gel caps and some in eye drops -- other things. Again, a range of uses, but, as we see the portfolio advance to later stages, generally, you start to see more use. But again, not all partnerships are created equal as you look at amount of material used, but, in general, yeah, we're seeing good interest in the platform.

Matt Hewitt -- Craig-Hallum Capital Group -- Analyst

That's great. Maybe one last one, and then I'll hop back into queue. As we think about -- you talked about this a little bit at your analyst event, and then I think you mentioned it briefly in the prepared remarks. As we start to look out in a couple years, 2021 through 2023, even given some of the puts and takes mentioned on today's call, how should we be thinking about that time period from an eye-opener or a growth perspective? As I look at some of the upcoming catalysts with phase-three trial readouts and potential launches and that kinda stuff, do you still believe or is it still your expectations that you should see a really healthy step up or a big step up in the revenues and, obviously, the flow-through to earnings during that time period? Has anything changed in your mind?

John Higgins -- Chief Executive Officer

Yeah, Matt, it's John. The business, today, as investors have followed the story -- it looks different today compared to, say, four or five months ago when we still owned Promacta. Again, just a little backstory. We divested that asset, as we described, in march, a very substantial amount of money. It was our largest asset, a major contributor to royalty revenue, and had driven our growth the last few years. I think the question you're getting at, what investors need to look at is how the business has been reset. Financially, the P&L today, the revenues, very roughly, about half of what they were a few months ago projected for this year, and earnings as well, as a function of taking our Promacta. So, the revenue earnings is lower.

The growth outlook for the rest of the business is unchanged, and this is important because there's a very robust calendar of OmniAb-related activities, of course, Captisol. We have Viking assets with TR beta. We have Sparsentan. We've acquired, again, the Novan and the Palvella synthetic royalties. These are phase-three stage drugs that will read out and, we believe, could launch as early as 2021 or 2022. This is a way to say that the business, today, is very well positioned. There's nothing new in terms of what assets we have and the general outlook for the calendar, but the outlook for financial growth is substantially different, substantially higher than it was a few months ago when we still had Promacta. Again, we're centering around $3.20 earnings growth.

Our view is that revenues will continue to grow in 2020/2021. We believe we can maintain the same cost structure. We don't have to build manufacturing and run phase-three trials or build marketing. Those are the high-cost endeavors. We are not doing that. So, if revenues keep growing on very high margins -- we've quoted, today, 90% gross margins. We expect gross margins to increase over the next two to six quarters. Operating margins have been about 50% percent the last quarter. We expect those to go up to 60-70%. And, if we have a similar cost structure with the share repurchase that we described, the earnings in cash flow per share, we believe, will be significant. So, that's the financial growth outlook. We framed this a bit at the analyst day in March following the Promacta divestiture. We, still, are very much committed to that outlook given what we're looking at right now.

The second part of this, though, is the calendar of events. We have more shots-on-goal, more partnered assets in development than ever before, and the quality of programs, the quality of partners in the late stage is the most attractive portfolio we've ever had in the history of the company. We do believe, over the next one to three years, we're gonna have some major data readouts that could drive significant new product launches -- not in the next year or two, but they could launch in two or three years and bring a new class of royalty drivers in the early to mid-2020s, right about the time that we see OmniAb beginning to hit its stride in terms of the calendar of commercial launches. So, it's a business that we're excited about. It's right in line with our outlook and expectations. And, of course, today, it's buttressed by a very substantial balance sheet, $1.3 billion of cash.

Matt Hewitt -- Craig-Hallum Capital Group -- Analyst

That's great. Thank you very much for the detail.

Operator

Great. And again, if you do have a question, please press *1 on your telephone keypad. Your next question is from the line of Larry Solow with CJS Securities.

Larry Solow -- CJS Securities -- Analyst

Great. Good morning, guys. Most of my questions have been answered. Just a couple of follow-ups. On the OmniAb, you mentioned, I think, there are 27 active trials, and I know all the phase-3 are with C-Stone. Is it still 12 compounds that are -- or are there more than 12 that are actually making up those --

Matthew Foehr -- President and Chief Operating Officer

Yeah, Larry. Yeah, thanks for the question. It's Matt Foehr. Yeah, there are 29 trials that have either been very recently completed or are active. For those 29, it depends on exactly how you define it. Ten novel antibodies but used in multiple formats. So, we have situations where the same discovered antibody is now used in multiple formats or dosages for different geographies, and that brings the number up to 13 to 15, depending on how you count those different programs. I think that summarizes it for you.

Larry Solow -- CJS Securities -- Analyst

Okay. Yeah, no, that's helpful. It looks like, just on share purchases this quarter, if I do the math from, I guess, your last conference call, looks like you spent about $40 million. Is that right?

Matthew Korenberg -- Executive Vice President, Finance and Chief Financial Officer

Yeah, I think it's between $35 and $40 million. That's right.

Larry Solow -- CJS Securities -- Analyst

Okay, OK. I know guidance hasn't changed. Any change in the sales, the tiered royalties, milestones? Any change there? Sounds like Captisol material sales were just timing. I know you had a little bit more potential on the license and milestones. Is there any update there? On the royalties, do you expect -- has anything changed there?

Matthew Korenberg -- Executive Vice President, Finance and Chief Financial Officer

Yeah. For the year, we still see the mix, roughly, the same as we had seen before, but we didn't provide the precise breakdown because we may see some shift over the back half of the year between some of the buckets. The total is still definitely there at $118 million. If it is any shift, it'll be $1 million or $2 going from one bucket to the other for the year. But right now, it all still looks, generally, in line. Obviously, no change to the outlook longer-term for any one of the three buckets.

Larry Solow -- CJS Securities -- Analyst

Okay. Just quickly, on Evomela, the opportunity in China, is that supposed to be commercialized next year? What's that timeline?

Matthew Foehr -- President and Chief Operating Officer

Yeah, Larry, thanks. It's Matt Foehr. So, they got approval at the end of last year, and, as standard process in China, they get their designation in barcode, and they've indicated they will be launching Evomela in China this year. It will be the, as we understand from CASI, the only approved melphalan product in China. So, we're obviously looking forward to that.

Larry Solow -- CJS Securities -- Analyst

Just some time in the back half of this year, it sounds like.

Matthew Foehr -- President and Chief Operating Officer

Yep, yeah.

Larry Solow -- CJS Securities -- Analyst

Just lastly, Kyprolis, additional trial data -- I know you had spoken about data at your analyst day. Is that an early 2020 thing? When do we expect something from them?

Matthew Foehr -- President and Chief Operating Officer

Yeah, Larry, generally, obviously, we'll direct folks to Amgen on updates on exactly when they expect their trials to read out. Generally, ASH Meeting at the end of the year. We've generally seen Kyprolis data at major medical meetings, and we generally expect to see that this year as well.

Larry Solow -- CJS Securities -- Analyst

Okay, great. Thanks very much.

Operator

Okay, and there are no further questions at this time. Gentlemen, do you have any closing remarks?

John Higgins -- Chief Executive Officer

Thank you. We appreciate people's turnout today, and we'll be on the road. We've got some conference invitations this fall. We'll keep you posted as the business evolves. Thank you.

Operator

Thank you, again, for participating in today's conference call. This concludes the conference. You may now disconnect.

Duration: 49 minutes

Call participants:

Todd Pettingill -- Senior Director, Corporate Development

John Higgins -- Chief Executive Officer

Matthew Korenberg -- Executive Vice President, Finance and Chief Financial Officer

Matthew Foehr -- President and Chief Operating Officer

Joseph Pantginis -- H.C. Wainwright & Co. -- Analyst

Matt Hewitt -- Craig-Hallum Capital Group -- Analyst

Larry Solow -- CJS Securities -- Analyst

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