Ligand Pharmaceuticals Announces Fourth Quarter Results
Conference Call Begins at 4:30 p.m. Eastern Time Today
SAN DIEGO--
Ligand Pharmaceuticals Incorporated (NASDAQ:LGND) today announced financial results for the three and 12 months ended December 31, 2006, and reviewed business highlights of the fourth quarter of 2006 and early 2007.
Financial Results
The Company sold its commercial oncology products in October 2006. The results of operations related to the oncology products have been reflected as discontinued operations for all reporting periods discussed below.
For the fourth quarter of 2006, total revenues were $34.1 million, compared with total revenues of $35.7 million in the fourth quarter of 2005. Net product sales in the quarter were also $34.1 million, compared with net product sales of $33.4 million in the prior-year fourth quarter. Total revenues in 2006 were $141.0 million, compared with total revenue of $123.0 million in 2005. Net product sales were $137.0 million in 2006, compared with net product sales of $112.8 million in 2005.
As a result of the sale of the Company's commercial oncology products in the fourth quarter of 2006, and the sale of AVINZA(R) in February 2007, Ligand expects that revenue in 2007 will be driven primarily by royalty payments related to sales of AVINZA.
Operating expenses in the fourth quarter of 2006 were $32.4 million, compared with operating expenses of $37.5 million in the fourth quarter of 2005. Operating expenses in 2006 were $181.8 million (excluding a co-promotion termination charge of $131.1 million), compared with operating expenses of $144.9 million in 2005.
In accordance with the corporate restructuring announced in January 2007, the Company's full-time workforce will be reduced by approximately 76% and the majority of commercial operations have been eliminated.
Net income in the fourth quarter of 2006 was $141.4 million, or $1.61 per diluted share, compared with a net loss of $2.8 million, or $0.04 per share, in the comparable 2005 quarter. Income from continuing operations in the fourth quarter of 2006 was $40.6 million, or $0.42 per diluted share, compared with a loss from continuing operations of $3.7 million, or $0.05 per share, in the comparable 2005 quarter. Income from discontinued operations in the fourth quarter of 2006 was $100.7 million, or $1.00 per diluted share, compared with income from discontinued operations of $1.0 million, or $0.01 per share, in the comparable 2005 quarter.
The net loss in 2006 was $31.7 million, or $0.39 per share, compared with a net loss of $36.4 million, or $0.49 per share, in 2005. Loss from continuing operations in 2006 was $135.9 million, or $1.69 per share, compared with a loss from continuing operations of $31.5 million, or $0.43 per share, in 2005. Income from discontinued operations in 2006 was $104.1 million, or $1.30 per share, compared with a loss from discontinued operations of $4.9 million, or $0.06 per share, in 2005.
As of December 31, 2006, Ligand had cash, cash equivalents, short-term investments and restricted cash of $212.5 million. As of February 28, 2007, Ligand had approximately $415 million of unrestricted cash and investments. Additionally, there is $35.0 million of cash held in escrow accounts following the sales of AVINZA and our oncology product line to support potential indemnification claims by the purchasers of those assets. To the extent not utilized, the escrowed funds will become available at varying dates starting in April 2007 through February 2008. The increase in cash since the end of 2006 is due to the closing of the sale of AVINZA to King Pharmaceuticals on February 26, 2007.
"During the fourth quarter of 2006 and into early 2007, we took several critical steps to restructure Ligand into a highly focused R&D and royalty-driven biotech company," said John L. Higgins, President and Chief Executive Officer. "The extent of the Company's transformation is truly revolutionary, and our new business model and highly disciplined operating plan are designed to deliver value to shareholders. Through the sale of AVINZA and of our oncology product line, we now have significant financial resources to continue the development of our proprietary programs and to consider returning cash to our shareholders through a combination of a dividend and share repurchase."
Fourth Quarter and Early 2007 Highlights
Business highlights of the fourth quarter of 2006 and early 2007 include the following:
-- In March 2007, the Company announced changes to the board of
directors including naming John L. Higgins, Todd C. Davis,
Elizabeth M. Greetham and David M. Knott as directors; and the
resignation of directors John Groom, Irving S. Johnson, Ph.D.,
Daniel Loeb, Carl C. Peck, M.D. and Brigette Roberts, M.D.
Additionally, director John W. Kozarich was named chairman of
the board, replacing Henry F. Blissenbach, who remains a
director.
-- In February 2007, Ligand completed the sale of AVINZA
(morphine sulfate extended release capsules) and associated
assets to King Pharmaceuticals, Inc. in exchange for cash and
royalties. Ligand received $280.4 million in cash, which
represents the purchase price of $246.3 million, net of
certain inventory adjustments of $18.7 million and less $15.0
million placed into escrow, plus $49.1 million in
reimbursement of payments previously made to Organon and
others.
-- In January 2007, Ligand announced a restructuring including
the elimination of approximately 204 positions across all
functional areas. Associated with the restructuring, several
executive officers agreed to step down including the Company's
Chief Financial Officer, Chief Scientific Officer and General
Counsel.
-- In January 2007, John L. Higgins joined the Company as Chief
Executive Officer, President and in March 2007 was named a
member of its board of directors.
-- In November 2006, Ligand announced initiation of clinical
trials for LGD-4665, an oral, small-molecule drug that mimics
the activity of thrombopoietin (TPO), a growth factor that
promotes growth and production of blood platelets.
-- In November 2006, noteholders of Ligand's outstanding 6%
convertible subordinated notes, in the aggregate principal
amount of $128.2 million, converted all of the notes into 20.8
million shares of common stock. Accrued interest and
unamortized debt issue costs related to the converted notes of
$0.2 million and $1.0 million, respectively, were recorded as
additional paid-in capital. Ligand currently has approximately
101.0 million shares outstanding.
-- In October 2006, Ligand completed the sale of its oncology
product line to Eisai Co., Ltd. (Tokyo) and Eisai Inc. (New
Jersey) for $205.0 million. Of this, $185.0 million was
received in cash and $20.0 million was placed into escrow. The
sale included Ligand's four marketed oncology drugs ONTAK(R)
(denileukin diftitox), Targretin(R) (bexarotene) capsules,
Targretin(R) (bexarotene) gel 1% and Panretin(R)
(alitretinoin) gel 0.1%.
Program Update
The Company also provided the following update on the status and outlook of its key proprietary and partnered development programs.
Proprietary Program Highlights:
-- LGD-4665, oral thrombopoietin (TPO) mimetic; as noted above, a
Phase I clinical trial began in November 2006; the trial is
expected to be completed in the fourth quarter of 2007.
-- SARMs (selective androgen receptor modulators); as part of the
alliance with TAP, the company has exercised options for
development of certain compounds, and is engaged in
preclinical research at this time. Ligand anticipates
advancing its lead drug candidate, LGD-3303, into clinical
studies in 2008.
-- SGRMs (selective glucocorticoid receptor modulators): Although
the overall program will continue to advance, the Company has
determined not to pursue further development of LGD-5552, as
Good Laboratory Practice studies failed to demonstrate desired
preclinical safety characteristics. The Company expects to
optimize other potential drug candidates to advance to
clinical studies.
Partnered Program Highlights:
-- TPO Mimetics: Ligand's partner GlaxoSmithKline has completed a
Phase II/III trial and initiated another Phase III trial with
eltrombopag (Promacta) for idiopathic thrombocytopenic
purpura. GlaxoSmithKline plans to initiate a Phase III trial
in 2007 for hepatitis C.
-- SERMs (selective estrogen receptor modulators): Ligand's
partner Wyeth, in the fourth quarter, reported positive Phase
III trial data for bazedoxifene (Viviant) for osteoporosis,
and bazedoxifene CE (Aprela) for menopause. Bazedoxifene
(Viviant) currently has a PDUFA date in April 2007, and an NDA
filing for bazedoxifene CE (Aprela) is expected in late 2007.
-- SARMs (selective androgen receptor modulators): Ligand's
partner TAP is continuing its Phase I trial with the LGD-2941
program for osteoporosis and frailty.
Conference Call
Ligand management will host a conference call today to discuss this announcement and answer questions; the call will begin at 4:30 p.m. Eastern time (1:30 p.m. Pacific time). To participate via telephone, please dial (800) 323-0845 from the U.S. or (760) 634-8407 from outside the U.S. A replay of the call will be available until March 17, 2007 at 5:30 p.m. Eastern by dialing (800) 642-1687 from the U.S. or (760) 645-9291 from outside the U.S., and entering passcode 2147471. Individual investors can access the Webcast through CCBN's Individual Investor Center at www.earnings.com or by visiting any of the investor sites in CCBN's Individual Investor Network. Institutional investors can access the Webcast via CCBN's password-protected event management site, StreetEvents (www.streetevents.com).
About Ligand Pharmaceuticals
Ligand discovers and develops new drugs that address critical unmet medical needs of patients in the areas of thrombocytopenia, cancer, hepatitis C, hormone-related diseases, osteoporosis and inflammatory diseases. Ligand's proprietary drug discovery and development programs are based on its leadership position in gene transcription technology, primarily related to intracellular receptors.
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(R) from King Pharmaceuticals or any other partnered products or from research and development milestones, and we may not be able to timely or successfully transform the Company or advance any product(s) in our pipeline. In addition, we may have indemnification obligations to King Pharmaceuticals or Eisai in connection with the sales of the AVINZA and oncology product lines. Further, we may not be able to complete our reductions in workforce on any particular or expected timeframe, we may not realize significant operating savings due to our restructuring, we may not be able to successfully or timely complete a transformation of the company, our early stage programs or any specific business or research initiative(s). In addition, we may not be able to successfully implement our strategy, and continue the development of our proprietary programs. Also, the Company's Board of Directors has not completed the analyses necessary to determine the amount and timing of return of cash to stockholders. The failure to meet expectations with respect to any of the foregoing matters may reduce our stock price. Additional information concerning these and other risk factors affecting Ligand's business can be found in prior press releases available via www.nasdaq.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 Year Ended
December 31, December 31,
------------------------ -----------------------
2006 2005 2006 2005
------------------------ -----------------------
Revenues: (unaudited)
Product sales $34,130 $33,426 $136,983 $112,793
Collaborative
research and
development and
other revenues, net -- 2,273 3,977 10,217
------------ ----------- ----------- -----------
Total revenues 34,130 35,699 140,960 123,010
------------ ----------- ----------- -----------
Operating costs and
expenses:
Cost of products
sold 5,874 5,103 22,642 23,090
Research and
development 12,913 9,309 41,926 33,096
Selling, general and
administrative 21,671 13,035 79,748 56,168
Co-promotion 3,799 10,029 37,455 32,501
Co-promote
termination charges (11,902) -- 131,078 --
------------ ----------- ----------- -----------
Total operating
costs and
expenses 32,355 37,476 312,849 144,855
------------ ----------- ----------- -----------
Gain on sale
leaseback 3,119 -- 3,119 --
------------ ----------- ----------- -----------
Income (loss) from
operations 4,894 (1,777) (168,770) (21,845)
------------ ----------- ----------- -----------
Other expense, net (388) (1,876) (5,503) (9,625)
Income tax benefit 36,124 -- 38,414 --
------------ ----------- ----------- -----------
Income (loss) from
continuing
operations 40,630 (3,653) (135,859) (31,470)
Discontinued
operations 100,734 931 104,116 (4,929)
------------ ----------- ----------- -----------
Net income
(loss) $141,364 $(2,722) $(31,743) $(36,399)
============ =========== =========== ===========
Basic per share
amounts:
Income (loss) from
continuing
operations $0.46 $(0.05) $(1.69) $(0.43)
Discontinued
operations 1.15 0.01 1.30 (0.06)
------------ ----------- ----------- -----------
Net income (loss) $1.61 $(0.04) $(0.39) $(0.49)
------------ ----------- ----------- -----------
Weighted average
number of common
shares 87,677,662 74,057,555 80,618,528 74,019,501
------------ ----------- ----------- -----------
Diluted per share
amounts:
Income (loss) from
continuing
operations $0.42 $(0.05) $(1.69) $(0.43)
Discontinued
operations 1.00 0.01 1.30 (0.06)
------------ ----------- ----------- -----------
Net income (loss) $1.42 $(0.04) $(0.39) $(0.49)
------------ ----------- ----------- -----------
Weighted average
number of common
shares 100,460,489 74,057,555 80,618,528 74,019,501
------------ ----------- ----------- -----------
LIGAND PHARMACEUTICALS INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
Assets December 31, 2006 December 31, 2005
----------------- -----------------
Current assets:
Cash, cash equivalents, short-
term investments, and
restricted cash $210,662 $ 86,930
Other current assets 24,895 46,037
----------------- -----------------
Total current assets 235,557 132,967
Restricted investments 1,826 1,826
Property and equipment, net 5,551 22,483
Acquired technology, product
rights and royalty buy-down,
net 83,083 146,770
Other assets 36 10,573
----------------- -----------------
Total assets $326,053 $ 314,619
================= =================
Liabilities and Stockholders'
Equity (Deficit)
Current liabilities, excluding
deferred revenue, deferred
gain, co-promote termination
liability, and debt $ 60,936 $ 77,348
Current portion of deferred
revenue, net 57,981 157,519
Current portion of deferred gain 1,964 --
Current portion of co-promote
termination liability 12,179 --
Current portion of debt 37,750 344
----------------- -----------------
Total current liabilities 170,810 235,211
Long-term debt -- 166,745
Long-term portion of co-promote
termination liability 81,149 --
Long-term portion of deferred
gain 27,220 --
Other long-term liabilities 7,177 10,737
Common stock subject to
conditional redemption 12,345 12,345
Stockholders' equity (deficit) 27,352 (110,419)
----------------- -----------------
Total liabilities and
stockholders' equity
(deficit) $326,053 $ 314,619
================= =================
Source: Ligand Pharmaceuticals Incorporated
Released March 15, 2007