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Ligand Reports First Quarter 2020 Financial Results

May 6, 2020 4:01 PM

Raises 2020 Financial Guidance

Conference Call with Slides Begins at 4:30 p.m. Eastern Time Today

SAN DIEGO--(BUSINESS WIRE)-- Ligand Pharmaceuticals Incorporated (NASDAQ: LGND) today reported financial results for the three months ended March 31, 2020 and provided an operating forecast and program updates. Ligand management will host a conference call with slides today beginning at 4:30 p.m. Eastern time to discuss this announcement and answer questions.

“Our first quarter financial results feature strong sales of Captisol to partners evaluating remdesivir in multiple clinical trials and scaling-up for potential treatment courses for COVID-19. We continue to meet Captisol requirements to support these trials as well as manufacturing scale-up, and are proud to play a role in developing potential treatments to address the pandemic both with Captisol and with various OmniAb® and Vernalis-derived product candidates,” said John Higgins, Chief Executive Officer of Ligand. “We recently closed a strategic acquisition, and throughout the first quarter we added a number of Shots on Goal with new agreements for various technologies, in particular our OmniAb platform. Overall, our business is performing very well, especially given the difficult business environment due to the pandemic. As such, we are pleased to be raising our 2020 financial guidance.”

COVID-19 Impact

As the COVID-19 pandemic continues to evolve, our primary concern remains the health and safety of our employees and partners globally, while we continue to take actions to help address the pandemic.

We are supporting our employees through a range of programs, have enabled working from home and staggered operations in our labs and other critical work spaces. Importantly, Ligand is committed that there will be no COVID-19 related layoffs. Our corporate structure is spread across five sites in the U.S. and England, which positions us well to operate effectively in the current remote working environment. The Ligand team is ready to support a return to full operations with appropriate social distancing measures in place, following the lifting of shelter-in-place restrictions.

We have a very strong balance sheet, and we anticipate no material operational impacts for the rest of the year due to COVID-19. During the first quarter, COVID-19 did not have a material negative impact on our underlying business, financial condition, cash collections or liquidity. During the first quarter we reduced our outstanding convertible debt by approximately one-third given the favorable pricing on the bonds and the lower interest rate environment.

Our partnership with Gilead Sciences for remdesivir resulted in an increase in sales of Captisol to supply the scale up and manufacturing of that medicine as the first new treatment for COVID-19 available under an Emergency Use Authorization. We do not anticipate supply chain disruption for Captisol production at this time given inventory levels, risk management measures and operations at multiple sites throughout the world. We believe we are well positioned to meet Captisol requirements and are planning to make further capital investments in plant and operational capacity.

We have a large portfolio of more than 200 programs fully funded by more than 125 different pharmaceutical and biotechnology companies. We recently surveyed all our partners and found that the majority of them are generally in a relatively strong capital and operating condition with limited expected long-term impact on our partnered programs. Looking ahead to the remainder of the year and after thoroughly analyzing our business, we anticipate royalty and contract revenue will be lower than originally forecasted. We believe that patient access to certain medicines around the world will be disrupted over several months, which may decrease revenue for products from which we earn royalties. In addition, we anticipate that some partners will delay trial initiations or experience a slowdown in patient enrollment. These delays and slowdowns will likely reduce milestone payments for contract revenue due to Ligand. In addition, some smaller partners may face cash constraints or difficulty raising new capital, which could impact their ability to make payments to Ligand. Nonetheless, as the economy begins to reopen we expect our partners will resume important clinical and regulatory work on a wide array of partnered programs. Additionally, to date the increase in sales of Captisol has more than offset our projected decline in royalty and contract revenues. While the mix of revenue will be different than our original outlook, we anticipate total revenue and earnings to be higher in 2020 compared to our previous guidance.

Ligand has multiple programs relating to potential treatments for COVID-19. One is with Gilead for remdesivir, a nucleotide analogue issued an Emergency Use Authorization by the U.S. Food and Drug Administration on May 1, 2020. We also have two OmniAb partners with antibody programs in discovery stage, and a heat shock protein program that was added to our R&D programs when we acquired Vernalis.

First Quarter 2020 Financial Results

Total revenues for the first quarter of 2020 were $33.2 million, compared with $43.5 million for the same period in 2019. Royalties for the first quarter of 2020 were $6.6 million and primarily consisted of royalties from Kyprolis® and EVOMELA®. Royalties for the first quarter of 2019 were $19.5 million and included $14.2 million in royalties from Promacta®; Ligand sold its Promacta license to Royalty Pharma as of March 6, 2019. Captisol sales were $21.1 million for the first quarter of 2020, compared with $9.0 million for the same period in 2019, primarily reflecting higher sales of Captisol for remdesivir. Effective this quarter, Ligand is presenting service revenue as a separate line item. Service revenue includes revenue generated from our Vernalis, Icagen and OmniChicken businesses as we collaborate with partners on early stage discovery and development work, and was $3.4 million for the first quarter of 2020, compared with $3.9 million for the same period in 2019. Contract revenue was $2.1 million for the first quarter of 2020, compared with $11.1 million for the same period in 2019, with the change driven by the timing of partner events.

Cost of Captisol was $4.7 million for the first quarter of 2020, compared with $3.9 million for the same period in 2019. Amortization of intangibles was $3.5 million for the first quarter of both 2020 and 2019. Research and development expense was $11.9 million for the first quarter of 2020, compared with $11.3 million for the same period of 2019. General and administrative expense was $9.3 million for the first quarter of 2020, compared with $11.1 million for the same period in 2019, with the decrease primarily attributable to lower legal expenses.

Net loss for the first quarter of 2020 was $(24.1) million, or $(1.46) per diluted share, compared with net income of $666.3 million, or $31.32 per diluted share, for the same period in 2019. The net loss for the first quarter of 2020 includes a non-cash change in the value of Ligand’s investments of $(25.5) million, while net income for the first quarter of 2019 includes a $17.3 million net non-cash gain from the value of Ligand’s investments as well as a $640.3 million gain, net of taxes, from the sale of the Promacta license. Adjusted net income for the first quarter of 2020 was $15.3 million, or $0.89 per diluted share, compared with $24.7 million, or $1.16 per diluted share, for the same period in 2019. Please see the table below for a reconciliation of net income/(loss) to adjusted net income.

As of March 31, 2020, Ligand had cash, cash equivalents and short-term investments of $738.8 million. During the first quarter of 2020, Ligand repurchased $234 million in principal amount of its convertibles notes at a price of $203 million, and repurchased 878,525 common shares for $73.3 million.

2020 Financial Guidance

Ligand is raising its 2020 financial guidance. Ligand now expects 2020 total revenues to be approximately $140 million and diluted EPS to be $3.65, up from previous guidance for total revenues of approximately $133 million and diluted EPS of $3.62. This increase reflects Ligand’s revised view on the business incorporating an estimated impact from COVID-19. The revised estimate of approximately $140 million in total revenues includes higher sales of Captisol, partially offset by reductions in royalties and contract revenue.

First Quarter 2020 and Recent Business Highlights

Kyprolis® (carfilzomib), an Amgen Product Utilizing Captisol

OmniAb® Platform Updates

Captisol® Business Update

Vernalis Business Update

Additional Pipeline and Partner Developments

Business Development and Corporate Highlights

Adjusted Financial Measures

The Company reports adjusted net income and adjusted net income per diluted share in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. The Company’s financial measures under GAAP include share-based compensation expense, amortization of debt-related costs, amortization related to acquisitions and intangible assets, changes in contingent liabilities, mark-to-market adjustments for amounts relating to its equity investments in public companies, excess tax benefit from share-based compensation, gain on the sale of Promacta and others that are listed in the itemized reconciliations between GAAP and adjusted financial measures included at the end of this press release. However, other than with respect to total revenues, the Company only provides financial guidance on an adjusted basis and does not provide reconciliations of such forward-looking adjusted measures to GAAP due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation, including adjustments that could be made for changes in contingent liabilities, changes in the market value of its investments in public companies, stock-based compensation expense and effects of any discrete income tax items. Management has excluded the effects of these items in its adjusted measures to assist investors in analyzing and assessing the Company’s past and future core operating performance. Additionally, adjusted earnings per diluted share is a key component of the financial metrics utilized by the Company’s board of directors to measure, in part, management’s performance and determine significant elements of management’s compensation.

Conference Call

Ligand management will host a conference call with slides 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 (833) 325-0071 from the U.S. or (720) 405-1612 from outside the U.S., using the conference ID 5190682. To participate via live or replay webcast, a link is available at www.ligand.com. Slides to accompany the conference call are available here.

About Ligand Pharmaceuticals

Ligand is a revenue-generating biopharmaceutical company focused on developing or acquiring technologies that help pharmaceutical companies discover and develop medicines. Our business model creates value for stockholders by providing a diversified portfolio of biotech and pharmaceutical product revenue streams that are supported by an efficient and low corporate cost structure. Our goal is to offer investors an opportunity to participate in the promise of the biotech industry in a profitable, diversified and lower-risk business than a typical biotech company. Our business model is based on doing what we do best: drug discovery, early-stage drug development, product reformulation and partnering. We partner with other pharmaceutical companies to leverage what they do best (late-stage development, regulatory management and commercialization) to ultimately generate our revenue. Ligand’s OmniAb® technology platform is a patent-protected transgenic animal platform used in the discovery of fully human mono- and bispecific therapeutic antibodies. The Captisol platform technology is a patent-protected, chemically modified cyclodextrin with a structure designed to optimize the solubility and stability of drugs. The Vernalis Design Platform (VDP) integrates protein structure determination and engineering, fragment screening and molecular modeling, with medicinal chemistry, to help enable success in novel drug discovery programs against highly-challenging targets. Ab Initio™ technology and services for the design and preparation of customized antigens enable the successful discovery of therapeutic antibodies against difficult-to-access cellular targets. Ligand has established multiple alliances, licenses and other business relationships with the world’s leading pharmaceutical companies including Amgen, Merck, Pfizer, Sanofi, Janssen, Takeda, Gilead Sciences and Baxter International. For more information, please visit www.ligand.com.

Follow Ligand on Twitter @Ligand_LGND.

Forward-Looking Statements

This news release contains forward-looking statements by Ligand that involve risks and uncertainties and reflect Ligand's judgment as of the date of this release. Words such as “plans,” “believes,” “expects,” “anticipates,” and “will,” and similar expressions, are intended to identify forward-looking statements. These forward-looking statements include, without limitation, statements regarding: Ligand’s ability to supply Captisol to Gilead and other partners; the potential opportunities for Ligand and its partners related to development of COVID-19 treatments; the impacts that the COVID-19 pandemic will have on Ligand and its partners; Ligand’s belief that recent events in its partnered programs will enhance value; whether Ligand’s pipeline will provide a source of growth and future diversified cash flow; the potential entry into new license or partnering agreements; the timing of the initiation or completion of preclinical studies and clinical trials by Ligand and its partners; the timing of product launches by Ligand or its partners; and guidance regarding the full-year 2020 financial results. Actual events or results may differ from Ligand's expectations due to risks and uncertainties inherent in Ligand’s business, including, without limitation: Ligand may not receive expected revenue from royalties, Captisol sales, contract and service revenue; the COVID-19 pandemic has disrupted Ligand’s and its partners’ business, including delaying manufacturing, pre-clinical studies and clinical trials and product sales, and impairing global economic activity, all of which could materially and adversely impact Ligand’s results of operations and financial condition; Ligand and its partners may not be able to timely or successfully advance any product(s) in its internal or partnered pipeline; Ligand may not achieve its guidance for 2020; development of product candidates by Ligand partners may not be successful, and may not results in increases in Captisol sales; remdesivir may be later shown to not be effective or safe for the treatment of COVID-19 and/or the FDA may revise or revoke its emergency use authorization for remdesivir for the treatment of COVID-19 in patients hospitalized with severe disease if the FDA determines that authorization no longer meets the statutory criteria for issuance; Ligand may not be able to create future revenues and cash flows by developing innovative therapeutics; results of any clinical study may not be timely, favorable or confirmed by later studies; products under development by Ligand or its partners may not receive regulatory approval; there may not be a market for the product(s) even if successfully developed and approved; Amgen, Acrotech Biopharma, Sage Therapeutics or other Ligand partners, may not execute on their sales and marketing plans for marketed products for which Ligand has an economic interest; Ligand or its partners may not be able to protect their intellectual property and patents covering certain products and technologies may be challenged or invalidated; Ligand's partners may terminate any of its agreements or development or commercialization of any of its products; Ligand may not generate expected revenues under its existing license agreements and may experience significant costs as the result of potential delays under its supply agreements; Ligand and its partners 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; unexpected adverse side effects or inadequate therapeutic efficacy of Ligand's product(s) could delay or prevent regulatory approval or commercialization; Ligand may not be able to successfully implement its strategic growth plan and continue the development of its proprietary programs; and ongoing or future litigation could expose Ligand to significant liabilities and have a material adverse effect on the company. 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 can be found in prior press releases available at www.ligand.com as well as in Ligand's public periodic filings with the Securities and Exchange Commission available at www.sec.gov. Ligand disclaims any intent or obligation to update these forward-looking statements beyond the date of this release, including the possibility of additional contract revenue we may receive. This caution is made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Other Disclaimers and Trademarks

The information in this press release regarding certain third-party products and programs, including Kyprolis, an Amgen product, EVOMELA, an Acrotech Biopharma product, and ZULRESSO, a Sage Therapeutics product, comes from information publicly released by the owners of such products and programs. Ligand is not responsible for, and has no role in, the development of such products or programs.

Ligand owns or has rights to trademarks and copyrights that it uses in connection with the operation of its business including its corporate name, logos and websites. Other trademarks and copyrights appearing in this press release are the property of their respective owners. The trademarks Ligand owns include Ligand®, Captisol® and OmniAb®. Solely for convenience, some of the trademarks and copyrights referred to in this press release are listed without the ®, © and ™ symbols, but Ligand will assert, to the fullest extent under applicable law, its rights to its trademarks and copyrights.

LIGAND PHARMACEUTICALS INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share amounts)

Three Months Ended March 31,

2020

2019

Revenues:

Royalties

$

6,565

$

19,538

Captisol

21,109

8,959

Service revenue

3,357

3,883

Contract revenue

2,130

11,104

Total revenues

33,161

43,484

Operating costs and expenses:

Cost of Captisol

4,683

3,858

Amortization of intangibles

3,535

3,503

Research and development

11,891

11,289

General and administrative

9,264

11,088

Total operating costs and expenses

29,373

29,738

Gain from sale of Promacta license

—

812,797

Income from operations

3,788

826,543

Gain (loss) from Viking

(25,457

)

17,293

Interest expense, net

(3,818

)

(2,997

)

Other expense, net

(4,928

)

1,874

Total other income (loss), net

(34,203

)

16,170

Income (loss) before income taxes

(30,415

)

842,713

Income tax benefit (expense)

6,284

(176,376

)

Net income (loss):

$

(24,131

)

$

666,337

Basic net income (loss) per share

$

(1.46

)

$

32.59

Shares used in basic per share calculation

16,529

20,447

Diluted net income (loss) per share

$

(1.46

)

$

31.32

Shares used in diluted per share calculations

16,529

21,277

LIGAND PHARMACEUTICALS INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands)

March 31, 2020

December 31, 2019

ASSETS

Current assets:

Cash, cash equivalents and short-term investments

$

738,811

$

1,011,532

Investment in Viking

32,879

58,335

Accounts receivable, net

39,506

30,387

Inventory

7,320

7,296

Income taxes receivable

7,271

11,361

Other current assets

4,940

4,734

Total current assets

830,727

1,123,645

Deferred income taxes, net

26,358

25,608

Goodwill and other identifiable intangible assets, net

300,861

305,677

Commercial license and other economic rights, net

10,381

20,090

Other assets

17,590

19,895

Total assets

$

1,185,917

$

1,494,915

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable and accrued liabilities

$

15,213

$

12,256

Current contingent liabilities

871

2,607

Deferred revenue

4,354

2,139

Total current liabilities

20,438

17,002

2023 convertible senior notes, net

444,432

638,959

Long-term contingent liabilities

5,811

6,335

Deferred income taxes, net

21,769

32,937

Other long-term liabilities

31,571

32,450

Total liabilities

524,021

727,683

Total stockholders' equity

661,896

767,232

Total liabilities and stockholders' equity

$

1,185,917

$

1,494,915

LIGAND PHARMACEUTICALS INCORPORATED

ADJUSTED FINANCIAL MEASURES

(Unaudited, in thousands, except per share amounts)

Three months ended March 31,

2020

2019

Net income (loss)

$

(24,131

)

$

666,337

Share-based compensation expense

5,653

5,347

Non-cash interest expense(1)

7,203

7,449

Amortization related to acquisitions and intangible assets

3,535

3,503

Amortization of commercial license and other economic rights(2)

3,730

2,437

Change in contingent liabilities(3)

(367

)

1,388

Acquisition and integrations costs(4)

—

311

Loss (gain) from Viking

25,457

(17,293

)

Unrealized (gain) loss in equity securities(5)

4,234

(2,257

)

Other

258

(854

)

Income tax effect of adjusted reconciling items above

(9,411

)

(7

)

Excess tax benefit from share-based compensation(6)

(886

)

(1,371

)

15,275

664,990

Gain from sale of Promacta license, net of tax

—

(640,265

)

Adjusted net income

$

15,275

$

24,725

Diluted per-share amounts attributable to common shareholders:

Net income (loss)

$

(1.46

)

$

31.32

Share-based compensation expense

0.34

0.25

Non-cash interest expense(1)

0.44

0.35

Amortization related to acquisitions and intangible assets

0.21

0.16

Amortization of commercial license and other economic rights(2)

0.23

0.11

Change in contingent liabilities(3)

(0.02

)

0.07

Acquisition and integrations costs(4)

—

0.01

Loss (gain) from Viking

1.54

(0.82

)

Unrealized (gain) loss in equity securities(5)

0.26

(0.11

)

Other

0.01

(0.04

)

Income tax effect of adjusted reconciling items above

(0.57

)

—

Excess tax benefit from share-based compensation(6)

(0.05

)

(0.06

)

Adjustment for shares excluded due to anti-dilution effect on GAAP net loss

(0.04

)

—

0.89

31.25

Gain from sale of Promacta license, net of tax

—

(30.09

)

Adjusted net income

$

0.89

$

1.16

GAAP - Weighted average number of common shares-diluted

16,529

21,277

Add: Shares excluded due to anti-dilutive effect on GAAP net loss

611

—

Adjusted weighted average number of common shares-diluted

17,140

21,277

(1) Amounts represent non-cash debt related costs that are calculated in accordance with the authoritative accounting guidance for convertible debt instruments that may be settled in cash.

(2) For the three months ended March 31, 2020, the amounts represent the amortization of commercial license and other economic rights to revenue and research and development expenses in amounts of $1,222 and $2,508, respectively. For the three months ended March 31, 2019, the amounts represent the amortization of commercial license and other economic rights to revenue and research and development expenses in the amounts of $1,245 and $1,192, respectively.

(3) Amounts represent changes in fair value of contingent consideration related to Crystal, CyDex and Metabasis transactions.

(4) Amounts represent severance costs and certain contract termination costs in connection with the acquisition of Vernalis plc.

(5) Amounts represent mark to market adjustments associated with our mutual funds and equity investments in Retrophin, Seelos and Nucorion, net of amounts due to a third party licensor.

(6) Excess tax benefits from share-based compensation are recorded as a discrete item within the provision for income taxes on the consolidated statement of operations as a result of the adoption of an accounting pronouncement (ASU 2016-09) on January 1, 2017. Prior to the adoption, the amount was recognized in additional paid-in capital on the consolidated statement of stockholders' equity.

LIGAND PHARMACEUTICALS INCORPORATED

ADJUSTED FINANCIAL MEASURES

(Unaudited, in thousands, except per share amounts)

Three months ended

March 31, 2019

Consolidated revenue

$

43,484

Less: royalty revenue from Promacta

(14,193

)

Adjusted consolidated revenue

$

29,291

Adjusted net income

$

24,725

Less: royalty revenue from Promacta

(14,193

)

Add: tax effect of the royalty revenue from Promacta

3,048

Adjusted net income excluding royalty revenue from Promacta

$

13,580

Adjusted net income per diluted shares, excluding royalty revenue from Promacta

$

0.64

GAAP - weighted average number of common shares - diluted

21,277

Ligand Pharmaceuticals Incorporated

Patrick O'Brien

Email: [email protected]

Phone: (858) 550-7893

Twitter: @Ligand_LGND

LHA Investor Relations

Bruce Voss

Email: [email protected]

Phone: (310) 691-7100

Source: Ligand Pharmaceuticals Incorporated

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