Ligand Pharma (LGND) Offers Three-Year Financial Outlook; Updates on Business Model, Growth Factors

(Updated - November 18, 2014 11:42 AM EST)

Ligand Pharma (Nasdaq: LGND) offered three year financial outlook at its analyst Day event in New York.

It sees 2015 EPS of $2.14 - $2.18. Revenue is seen at $81 - $83 million. The Street is looking for FY15 EPS of $2.42 and revenue of $91.9 million.

2016 EPS is expected to be greater than $3.20. Revenue is expected to be greater than $107 million.

2017 EPS is expected to be greater than $4.65. Revenue is seen at greater than $146 million.

UPDATE - The company issued the following press release on Tuesday:

Ligand Pharma reviewed the financial leverage in its business model, revenue growth opportunities and its portfolio of partnered assets and unpartnered development programs, as well as its Captisol formulation technology and its financial outlook through 2017.

“Ligand has transformed into a high-growth company with economic rights to some of the world’s most important medicines. Our ‘Shots-on-Goal’ business model is stronger than ever and is projected to continue to drive the business significantly for the long-term,” said John Higgins, President and Chief Executive Officer of Ligand. “We currently have more than 100 programs fully funded by partners, economic rights to seven commercial products including two with blockbuster potential, and six major products in development. We project that more than 20 revenue-generating products will be on the market by 2020. All of this is being managed through a highly efficient infrastructure as evidenced by our projection for 2015 adjusted cash flow to be approximately 60% of our total revenue.”

Highlights of presentations by Ligand’s senior management include the following:

Business model and growth drivers:

• Ligand has more than 100 fully-funded programs in partnership with 62 different pharmaceutical and biotechnology companies. Seven programs are commercialized and generating revenue for Ligand today, and the company projects that in 2020 more than 20 products from its portfolio will be commercialized and generating revenue for Ligand.
• Ligand estimates that in 2015 its partners will spend more than $1.1 billion on R&D to advance partnered programs including funding more than 50 Phase 3 and Phase 2 trials.
• Global product sales by partners on which Ligand is entitled to receive royalty payments are projected to exceed $1.1 billion in 2015, to exceed $2.1 billion in 2016 and to exceed $2.7 billion in 2017. The blended average royalty rate to Ligand during this period is expected to be 3% to 4%.
• Ligand expects revenue growth to accelerate, increasing from a 28% compound annual growth rate (CAGR) over the past three years to a 31% CAGR for the period 2014 through 2017.
• Ligand also expects non-GAAP diluted EPS growth to accelerate, increasing from a 19% CAGR over the past three years to a 44% CAGR for the period 2014 through 2017.

Asset portfolio review:

• Management highlighted six promising pipeline assets including CE-melphalan for oncology (Spectrum Pharmaceuticals), delafloxacin IV for infections (Melinta Therapeutics), MK-8931 for Alzheimer’s disease (Merck), Sparsentan for kidney disease (Retrophin), SAGE-547 for neurology (Sage Therapeutics) and IRAK-4 for oncology (TG Therapeutics), including key milestones for each over the next three years.
• Management also highlighted consistent global revenue growth from Promacta®, with double-digit growth in all geographies. The expanding number of approved indications for Promacta (branded Revolade™ in certain markets outside the U.S.) now includes idiopathic thrombocytopenia, thrombocytopenia induced by the hepatitis C virus and aplastic anemia, as well as a growing number of geographies where the product is sold, which now total 95 countries.
• Kyprolis®, sold by Amgen for the treatment of multiple myeloma, is expanding geographically following recent results from the ASPIRE Phase 3 trial in relapsed multiple myeloma, with further Phase 3 trials underway in relapsed multiple myeloma and as a front-line therapy. Several global regulatory filings for Kyprolis are expected in the first half of 2015.
• Duavee™, marketed by Pfizer for the treatment of moderate-to-severe vasomotor symptoms (hot flashes) associated with menopause and the prevention of postmenopausal osteoporosis, was launched this past year in the U.S. with European regulatory action expected by year-end. In September, Pfizer rolled out a direct-to-consumer campaign. More than 50 million American women are projected to have postmenopausal symptoms by 2020.
• LGD-6972 is Ligand’s proprietary glucagon receptor antagonist in development as an oral treatment for type 2 diabetes, which recently completed a first Phase 1 trial. At the Analyst Day event management profiled the product’s recent clinical data, which suggest significant market advantages for a safe, highly potent oral therapy compared with existing classes of new mechanisms.

Captisol review:

• Management reviewed the four critical components of its Captisol platform technology, including: (1) its ability to maximize safety and improve solubility, stability and bioavailability, or lessen the volatility, irritation, smell or taste of drugs; (2) multi-metric ton cGMP supply chain using the highest-quality partner and standards; (3) a vast safety and clinical database underlying the Drug Master File; and (4) intellectual property protection in the U.S. through 2029 and in Europe through 2025, with additional patents pending.
• Ligand’s partner Hovione is manufacturing Captisol at FDA-inspected sites worldwide, including two facilities in Europe, and is leveraging their full global network.
• In comparing 2013 with 2012, visits to www.captisol.com increased more than three-fold to approximately 47,000, Captisol information requests also increased nearly three-fold to more than 660 and new inbound sample requests increased 57% to approximately 350. Inbound sample requests for year-to-date 2014 are 35% higher than full-year 2013 requests.

Financial outlook:

• Management highlighted revenue and non-GAAP diluted EPS projections, as follows:
  • 2015: Revenue is projected to be in the range of $81 million to $83 million, with non-GAAP diluted EPS projected to be in the range of $2.14 to $2.18. Gross margin is projected to be 85%, adjusted cash flow margin is projected to be 60% and adjusted profit margin is projected to be 55%.
  • 2016: Revenue is projected to exceed $107 million and non-GAAP diluted EPS is projected to exceed $3.20.
  • 2017: Revenue is projected to exceed $146 million and non-GAAP diluted EPS is projected to exceed $4.65.
• Ligand’s cash expenses are expected to remain at approximately $20 million to $22 million per year through 2017, excluding any increases due to new programs acquired or licensed during that period.
• The Company’s gross tax assets are estimated to be $778 million and include net operating loss carry-forwards, tax credits and future tax deductions. These are expected to be utilized over the next five years, potentially keeping the actual rate of taxes paid below 5% through 2018.

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