Ligand Pharmaceuticals Announces Third Quarter Results

November 5, 2009 4:05 PM EST

Conference call with slide presentation begins at 4:30 p.m. Eastern time today

SAN DIEGO--(BUSINESS WIRE)-- Ligand Pharmaceuticals Incorporated (NASDAQ: LGND) (the "Company" or "Ligand") today announced financial results for the three and nine months ended September 30, 2009 and provided a business update.

"Over the past few months, we announced agreements to acquire two companies that upon closing will contribute promising new assets to Ligand. We also advanced our internal pipeline, reported numerous positive developments from our partners and took steps that will significantly reduce future expenses," said John L. Higgins, President and Chief Executive Officer of Ligand Pharmaceuticals. "We believe these activities are making Ligand a stronger and more valuable company by diversifying our business, increasing our potential revenue and improving our financial strength. We are very pleased with the progression of the partnerships we gained from our acquisition of Pharmacopeia in December 2008, and look forward to consolidating into Ligand the assets of both Neurogen and Metabasis."

Third Quarter Results

Total revenues from continuing operations for the three months ended September 30, 2009 were $7.9 million, compared with $5.2 million for the same period in 2008. The increase in revenues is due to $6.3 million in collaboration revenues resulting from agreements acquired from Pharmacopeia, partially offset by a $3.6 million decrease in royalty revenues due to the change in the contractual royalty rate on AVINZA(R) from 15% to 5% that became effective in the fourth quarter of 2008.

Operating costs and expenses from continuing operations in the third quarter of 2009 were $27.6 million and include $15.2 million of lease termination costs. Excluding the lease termination costs, operating costs and expenses from continuing operations were $12.3 million in the third quarter of 2009, compared with $12.1 million in the third quarter of 2008. Research and development expenses increased by $3.8 million for the third quarter of 2009, compared with the same period in 2008, primarily due to costs of servicing the collaboration agreements acquired from Pharmacopeia, partially offset by lower expenses associated with internal research programs. Research and development expenses for the third quarter of 2009 also include $1.1 million of asset impairment charges related to the termination of our research collaboration with Schering-Plough Corporation. General and administrative expenses decreased by $3.5 million, compared with the same period in 2008, primarily due to reduced legal expenses.

During the third quarter of 2009, the Company entered into a lease termination agreement for its facility in San Diego, California. As a result, during the third quarter of 2009, the Company recorded lease termination costs of $15.2 million, which include the net present value of the lease termination payments of $14.3 million and $0.9 million of other costs associated with the lease termination. Also as a result of the lease termination, during the third quarter of 2009, the Company recognized $20.4 million of accretion of deferred gain on sale leaseback.

Total net income in the third quarter of 2009 was $1.8 million, or $0.02 per share. Excluding $15.2 million of lease termination costs and $20.4 million of accretion of deferred gain on sale leaseback, the total net loss in the third quarter of 2009 was $3.4 million, or $0.03 per share, compared with a net loss of $18.1 million, or $0.19 per share, in the third quarter of 2008. Income from continuing operations in the third quarter of 2009 was $1.1 million, or $0.01 per share, compared with a loss from continuing operations of $9.1 million, or $0.10 per share, in the comparable 2008 quarter. Income from discontinued operations in the third quarter of 2009 was $0.7 million, or $0.01 per share, compared with a loss from discontinued operations of $9.0 million, or $0.09 per share, in the comparable 2008 quarter.

As of September 30, 2009, Ligand had cash, cash equivalents, short-term investments and restricted investments of $45.5 million.

Year-to-Date Results

Total revenues for the nine months ended September 30, 2009, were $25.0 million, compared with $14.9 million for the same period in 2008. Operating costs and expenses for the nine months ended September 30, 2009, including $15.2 million of lease termination costs, were $57.6 million, compared with $40.3 million for the same period in 2008. The net loss for the nine months ended September 30, 2009, was $5.0 million, or $0.04 per share, compared with a net loss of $28.5 million, or $0.30 per share, for the same period in 2008.

Third Quarter and Recent Highlights

    --  Acquisition Announcements: In August and October, Ligand announced
        pending acquisitions of Neurogen Corporation and Metabasis Therapeutics,
        Inc. Consistent with Ligand's business strategy to acquire quality
        partnered and pipeline assets, management expects the acquisitions will
        provide Ligand with a rich platform of development programs, drug
        discovery technologies and fully funded pharmaceutical collaborations.
        Management believes these acquisitions will help diversify Ligand's
        business and contribute valuable programs that could potentially
        generate additional revenues in the future. Neurogen and Metabasis are
        publicly traded biotechnology companies, and the acquisitions are
        subject to approval by each company's stockholders and other customary
        closing conditions.
    --  PROMACTA(R) Updates: In October 2009, GlaxoSmithKline(GSK) announced the
        filing of an NDA for ITP in Japan. The Marketing Authorization for ITP
        is pending review in Europe. GSK confirmed that it has fully enrolled
        one of its two Phase III trials for hepatitis. In addition, GSK said it
        has suspended its Phase III chronic liver disease study as it evaluates
        the intended patient population of chronic liver diseases with severely
        compromised portal blood flow. Last month, PROMACTA (eltrombopag), was
        recognized as "Best Biotechnology Product" by the Prix Galien USA
        committee.
    --  In September 2009, GSK agreed to pay $500,000 to Ligand that would
        otherwise have been required upon the identification of a new lead
        chemical series for advancement in Ligand's alliance with GSK.
    --  In August 2009, Ligand entered into a lease termination agreement for
        its corporate facility in San Diego. In addition, Ligand entered into a
        new lease for premises located in San Diego to serve as its new
        corporate headquarters. As a result of the lease termination, Ligand
        will significantly reduce its annual lease expenses as the Company would
        have been required to pay an estimated $65 million over the remaining
        life of that prior lease.
    --  In October 2009, Exelixis and Ligand amended an existing research
        collaboration, whereby Ligand is entitled to receive potential future
        royalties from a mineralocorticoid receptor program targeting metabolic
        diseases that is partnered with Daiichi Sankyo. This is the third
        Exelixis program from which Ligand will earn potential royalties.
    --  In October 2009, Pfizer notified Ligand that it is extending the
        research collaboration with Ligand relating to the JAK3 research program
        by one year. The original research collaboration was with Wyeth, which
        was acquired by Pfizer in October 2009. By extending the collaboration,
        Ligand is entitled to receive $3.1 million in research funding in 2010.

Operating Forecast and Financial Outlook

Ligand expects 2009 total revenues of approximately $33 million to $34 million, consisting of approximately $12.0 million of non-cash deferred revenue, royalty payments from sales of AVINZA and PROMACTA, revenue from collaboration agreements and potential milestone payments from existing corporate partners. For the fourth quarter of 2009, the Company anticipates total operating expenses will be between $12 million and $13 million, including non-cash expenses of approximately $2.0 million.

The Company currently projects to finish 2009 with approximately $50 million in cash, assuming the acquisition of Neurogen is completed before year end. For 2010, the Company currently forecasts that its operating expenses will be approximately $30 million to $35 million and that revenues are projected to be at approximately the same level as forecasted expenses for 2010. This revenue outlook does not include license or milestone payments from any potential new license agreements.

Conference Call

Ligand management will host a conference call today beginning at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss this announcement and answer questions. To participate via telephone, please dial (877) 356-5578 from the U.S. or (706) 679-0565 from outside the U.S. A replay of the call will be available until December 6, 2009 at 5:30 p.m. Eastern time by dialing (800) 642-1687 from the U.S. or (706) 645-9291 from outside the U.S., and entering passcode 36000073. Individual investors can access the live and archived Webcast through Ligand's web site at www.ligand.com.

The conference call and Webcast are accompanied by a slide presentation. The slides are embedded in the Webcast; those listening by phone can access a PDF version of the presentation in the Investor section of the Web site www.ligand.com

About Ligand Pharmaceuticals

Ligand discovers and develops new drugs that address critical unmet medical needs of patients with muscle wasting, frailty, hormone-related diseases, osteoporosis, inflammatory diseases, anemia, asthma, rheumatoid arthritis and psoriasis. Ligand's proprietary drug discovery and development programs are based on advanced cell-based assays, gene-expression tools, ultra-high throughput screening and one of the world's largest combinatorial chemical libraries. Ligand has strategic alliances with major pharmaceutical and biotechnology companies, including Bristol-Myers Squibb, Celgene, Cephalon, GlaxoSmithKline, Schering-Plough, Pfizer and Wyeth Pharmaceuticals (now Pfizer). With more than 20 molecules in various stages of development, Ligand utilizes proprietary technologies for identifying drugs with novel receptor and enzyme drug targets.

Forward-Looking Statements

This news release contains certain forward-looking statements by Ligand that involve risks and uncertainties and reflect Ligand's judgment as of the date of this release. Actual events or results may differ from Ligand's expectations. For example, we may not receive expected royalties on AVINZA from King Pharmaceuticals, PROMACTA from GSK or any other partnered products or from research and development milestones, and we may not be able to timely or successfully advance any product(s) in Ligand's pipeline. In addition, there can be no assurance that Ligand will achieve its guidance for 2009 or 2010, that Ligand will deliver strong cash flow over the long term, that the proposed acquisitions of Neurogen and Metabasis will close or that Ligand will realize the expected benefits of the acquisitions, Ligand's 2009 revenues will be driven by royalty payments related to AVINZA and PROMACTA sales, that results of any clinical study will be timely, favorable or confirmed by later studies, that products under development by Ligand or its partners will receive regulatory approval, or that there will be a market for the product(s) if successfully developed and approved. Also, Ligand may experience delays in the commencement, enrollment, completion or analysis of clinical testing for its product candidates, or significant issues regarding the adequacy of its clinical trial designs or the execution of its clinical trials, which could result in increased costs and delays, or limit Ligand's ability to obtain regulatory approval. Further, unexpected adverse side effects or inadequate therapeutic efficacy of Ligand's product(s) could delay or prevent regulatory approval or commercialization. Ligand may also have indemnification obligations to King Pharmaceuticals or Eisai in connection with the sales of the AVINZA and oncology product lines. In addition, Ligand may not be able to successfully implement its strategic growth plan and continue the development of its proprietary programs. The failure to meet expectations with respect to any of the foregoing matters may reduce Ligand's stock price. Additional information concerning these and other risk factors affecting Ligand's business can be found in prior press releases available via www.ligand.com as well as in Ligand's public periodic filings with the Securities and Exchange Commission at www.sec.gov. Ligand disclaims any intent or obligation to update these forward-looking statements beyond the date of this release. This caution is made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

LIGAND PHARMACEUTICALS INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share data)

                Three Months Ended               Nine Months Ended

                September 30,                    September 30,

                2009             2008            2009             2008

Revenues:

Royalties       $ 1,651          $ 5,248         $ 6,386          $ 14,926

Collaborative
research and
development       6,250            --              18,577           --
and other
revenues

Total revenues    7,901            5,248           24,963           14,926

Operating
costs and
expenses:

Research and      9,921            6,165           29,744           19,707
development

General and       2,415            5,929           12,190           20,579
administrative

Lease
termination       15,235           --              15,235           --
costs

Write-off of
acquired
in-process        --               --              442              --
research and
development

Total
operating         27,571           12,094          57,611           40,286
costs and
expenses

Accretion of
deferred gain     (20,444     )    (491       )    (21,426     )    (1,473     )
on sale
leaseback

Income (loss)
from              774              (6,355     )    (11,222     )    (23,887    )
operations

Other income      281              221             316              336

Income (loss)
before income     1,055            (6,134     )    (10,906     )    (23,551    )
taxes

Income tax
(expense)         --               (2,990     )    --               (179       )
benefit

Income (loss)
from              1,055            (9,124     )    (10,906     )    (23,730    )
continuing
operations

Discontinued
operations:

Gain on sale
of AVINZA
Product Line      608              122             5,331            7,287
before income
taxes

Gain (loss) on
sale of
Oncology          140              (12,799    )    591              (12,569    )
Product Line
before income
taxes

Income tax
benefit
(expense) on      --               3,676           --               525
discontinued
operations

Discontinued      748              (9,001     )    5,922            (4,757     )
operations

Net income      $ 1,803          $ (18,125    )  $ (4,984      )  $ (28,487    )
(loss)

Basic and
diluted per
share amounts:

Income (loss)
from            $ 0.01           $ (0.10      )  $ (0.09       )  $ (0.25      )
continuing
operations

Discontinued      0.01             (0.09      )    0.05             (0.05      )
operations

Net income      $ 0.02           $ (0.19      )  $ (0.04       )  $ (0.30      )
(loss)

Weighted
average number    113,006,842      95,068,102      113,102,455      95,059,166
of common
shares - basic

Weighted
average number
of common         113,139,102      95,068,102      113,102,455      95,059,166
shares -
diluted

LIGAND PHARMACEUTICALS INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

                                           September 30, 2009  December 31, 2008

Assets                                     (unaudited)

Current assets:

Cash, cash equivalents and short-term      $ 44,193            $ 80,671
investments

Accounts receivable, net                     2,110               --

Other current assets                         1,667               2,300

Current portion of co-promote termination    11,925              10,958
asset

Total current assets                         59,895              93,929

Property and equipment, net                  9,893               12,903

Goodwill and other identifiable              482                 5,375
intangible assets

Long-term portion of co-promote              45,374              47,524
termination asset

Restricted indemnity account                 --                  10,232

Other assets                                 1,442               1,485

                                           $ 117,086           $ 171,448

Liabilities and Stockholders' Equity

Accounts payable and accrued liabilities   $ 27,970            $ 35,972

Allowance for loss on returns, rebates       354                 9,590
and chargebacks

Current portion of deferred gain             1,702               1,964

Current portion of co-promote termination    11,925              10,958
liability

Current portion of equipment financing       172                 1,829
obligations

Current portion of deferred revenue          10,924              10,301

Total current liabilities                    53,047              70,614

Long-term portion of equipment financing     --                  2,178
obligations

Long-term portion of co-promote              45,374              47,524
termination liability

Long-term portion of deferred revenue        4,866               16,819

Long-term portion of deferred gain           2,128               23,292

Other long-term liabilities                  12,824              9,041

Total liabilities                            118,239             169,468

Common stock subject to conditional          8,344               12,345
redemption

Stockholders' equity                         (9,497  )           (10,365 )

                                           $ 117,086           $ 171,448

    Source: Ligand Pharmaceuticals Incorporated

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