Ligand Reports First Quarter 2014 Financial Results

  Ligand Reports First Quarter 2014 Financial Results              Conference Call Begins at 9:00 a.m. Eastern Time Today  Business Wire  SAN DIEGO -- May 7, 2014  Ligand Pharmaceuticals Incorporated (NASDAQ: LGND) today reported financial results for the three months ended March 31, 2014, and provided an operating forecast and program updates.  Financial highlights for the first quarter of 2014 include (all comparisons are with the first quarter of 2013):    *Total revenues increased 37% to $16.0 million, and royalty revenues     increased 35% to $7.9 million   *Non-GAAP net income from continuing operations was $0.35 per diluted share   *Net income increased 40% to $2.1 million, or $0.10 per diluted share  A description of the non-GAAP calculations and reconciliation to comparable GAAP financial measures is provided in the accompanying table titled “Non-GAAP Financial Measures.”  “We had an excellent first quarter both financially and operationally. We realized strong year over year revenue and profit growth and a meaningful increase to our cash position. Additionally, during the quarter several of our partners enjoyed important late-stage regulatory progress further reinforcing the depth of our portfolio and potential for future growth based on new products. Specifically, Merck received FDA approval for its NOXAFIL® injection for IV use, GlaxoSmithKline filed a supplemental NDA for Promacta® and Lundbeck’s NDA for Carbella™ was accepted for review by the FDA,” said John Higgins, President and Chief Executive Officer of Ligand.  Higgins continued, “This momentum carried into the second quarter when Spectrum Pharmaceuticals announced that Captisol-enabled™ Melphalan met the primary endpoint in its pivotal trial andGlaxoSmithKline won priority review for its Promacta filing for severe aplastic anemia. Overall we are very pleased with our business as we look forward to our calendar of potential substantive news flow this year.”  First Quarter 2014 Financial Results  Total revenues for the first quarter of 2014 were $16.0 million, an increase of 37% compared with $11.7 million for the same period in 2013. Royalty revenues increased 35% to $7.9 million from $5.8 million for the same period in 2013 primarily due to higher royalties from Promacta. Material sales increased to $5.7 million from $1.5 million for the same period in 2013 due to timing of customer purchases of Captisol^® for both clinical and commercial uses.  Cost of goods sold was $2.5 million for the first quarter of 2014, compared with $0.7 million for the same period of in 2013, with the increase due primarily to higher Captisol material sales. Other operating costs and expenses for the first quarter of 2014 were $8.4 million, compared with $7.1 million for the same period in 2013. The increase is primarily due to higher non-cash stock-based compensation expense.  Net income for the first quarter of 2014 was $2.1 million, or $0.10 per diluted share, compared with net income for the first quarter of 2013 of $1.5 million, or $0.07 per diluted share. Non-GAAP net income from continuing operations for the first quarter of 2014 was $7.3 million, or $0.35 per diluted share, compared with non-GAAP net income from continuing operations for the first quarter of 2013 of $4.4 million, or $0.22 per diluted share.  As of March 31, 2014, Ligand had cash, cash equivalents, short-term investments and restricted investments of $26.6 million. During the first quarter of 2014, Ligand paid down $3.4 million in debt.  2014 Financial Forecast  Affirming its previous full-year 2014 financial forecast, the Company expects total revenues to be between $62 million and $64 million, and non-GAAP earnings per diluted share to be between $1.40 and $1.45.  For the second quarter of 2014, Ligand expects total revenues to be between $9.0 million to $9.5 million and non-GAAP earnings per diluted share to be between $0.11 and $0.13. The non-GAAP earnings per diluted share guidance does not include the effects of any increase or decrease in contingent liabilities and non-cash stock-based compensation expense.  First Quarter and Recent Business Highlights  Partnered Program Updates    *Ligand partner GlaxoSmithKline (GSK) announced that it had submitted a     supplemental New Drug Application (sNDA) to the U.S. Food and Drug     Administration(FDA) for Promacta/Revolade® (eltrombopag) for the     treatment of cytopenias (a reduction in blood cells) in patients with     severe aplastic anemia (SAA) who have had insufficient response to     immunosuppressive therapy. SAA is a rare disorder in which the bone marrow     fails to make enough new blood cells. There are no approved therapies     available for SAA patients who are unresponsive to initial     immunosuppressive therapy (IST). Among patients unresponsive to initial     IST, approximately 40% die from infection or bleeding within five years of     diagnosis. GSK also announced that it has received both Breakthrough     Designation and Priority Review status for Promacta in SAA.   *Ligand announced that it earned a $1 million milestone payment from     partner Merck in the first quarter of 2014, triggered by the FDA approval     of NOXAFIL® (posaconazole) injection (18 mg/mL). NOXAFIL injection for     intravenous use is indicated for prophylaxis of invasive Aspergillus and     Candida infections in patients who are at high risk of developing these     infections due to being severely immunocompromised, such as hematopoietic     stem cell transplant (HSCT) recipients with graft-versus-host disease     (GVHD) or those with hematologic malignancies with prolonged neutropenia     (low white blood cell counts) from chemotherapy. NOXAFIL injection is     indicated for use in patients 18 years of age and older.   *Ligand announced that it earned a $200,000 milestone payment from partner     Lundbeck, triggered by FDA acceptance for review of a New Drug Application     (NDA) for Lundbeck’s investigational therapy intravenous carbamazepine, an     intravenous formulation of the antiepileptic drug carbamazepine. An action     letter is anticipated before the end of 2014. Carbella™ Injection is the     proposed U.S. trade name for this product.   *Ligand partner Spectrum Pharmaceuticals announced that its pivotal trial     of Captisol-enabled™ (propylene glycol-free) Melphalan as a conditioning     treatment in autologous transplant for patients with multiple myeloma met     its primary endpoint. Spectrum also announced that it expects to file an     NDA with the FDA in the third quarter of 2014.  Internal Program Progress    *The last patient completed dosing in Ligand's Phase 1 clinical trial for     the glucagon receptor antagonist LGD-6972 for the treatment of type 2     diabetes during the quarter. This first-in-human trial is evaluating the     safety and tolerability of single ascending oral doses of LGD-6972 in     healthy subjects and in subjects with type 2 diabetes. Results for the     trial will be presented at the American Diabetes Associations Scientific     Sessions meeting in June of 2014.  Non-GAAP Financial Measures  The adjusted non-GAAP (U.S. Generally Accepted Accounting Principles) financial measures discussed above and in the tables below for the three months ended March 31, 2014 and 2013 exclude changes in contingent liabilities, mark-to-market adjustment for amounts owed to licensors, and stock-based compensation expense.  Management has presented net income, net income per share, income from continuing operations and income from continuing operations per share in accordance with GAAP and on an adjusted basis. Ligand believes that the presentation of non-GAAP financial measures provides useful supplementary information to and facilitates additional analysis by investors. Ligand uses these non-GAAP financial measures in connection with its own budgeting and financial planning. These non-GAAP financial measures are in addition to, and not a substitute for, or superior to, measures of financial performance prepared in conformity with GAAP.  Conference Call  Ligand management will host a conference call today beginning at 9:00 a.m. Eastern time (6:00 a.m. Pacific time) to discuss this announcement and answer questions. To participate via telephone, please dial (877) 407-4019 from the U.S. or (201) 689-8337 from outside the U.S., using the passcode “Ligand.” A replay of the call will be available until June 7, 2014 at 9:00 a.m. Eastern time by dialing (877) 660-6853 from the U.S. or (201) 612-7415 from outside the U.S., using passcode 13580713. Individual investors can access the webcast at www.ligand.com.  About Ligand Pharmaceuticals  Ligand is a biopharmaceutical company with a business model that is based upon the concept of developing or acquiring royalty generating assets and coupling them with a lean corporate cost structure. Ligand’s goal is to produce a bottom line that supports a sustainably profitable business. By diversifying the portfolio of assets across numerous technology types, therapeutic areas, drug targets and industry partners, we offer investors an opportunity to invest in the increasingly complicated and unpredictable pharmaceutical industry. In comparison to its peers, we believe Ligand has assembled one of the largest and most diversified asset portfolios in the industry with the potential to generate revenue in the future. These therapies seek to address the unmet medical needs of patients for a broad spectrum of diseases including diabetes, hepatitis, muscle wasting, Alzheimer’s disease, dyslipidemia, anemia, asthma and osteoporosis. Ligand’s Captisol platform technology is a patent-protected, chemically modified cyclodextrin with a structure designed to optimize the solubility and stability of drugs. Ligand has established multiple alliances with the world's leading pharmaceutical companies including GlaxoSmithKline, Onyx Pharmaceuticals (a subsidiary of Amgen Inc.), Merck, Pfizer, Baxter International, Lundbeck Inc., Eli Lilly & Co. and Spectrum Pharmaceuticals. Please visit www.captisol.com for more information on Captisol and www.ligand.com for more information on Ligand.  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 calendar of potential substantive news flow, expectations regarding potential FDA actions, completion and announcement of clinical trial results, and guidance regarding second-quarter and full-year 2014 financial results. Actual events or results may differ from Ligand's expectations. For example, Ligand may not receive expected revenue from material sales of Captisol, expected royalties on partnered products and research and development milestone payments. Ligand and its partners may not be able to timely or successfully advance any product(s) in its internal or partnered pipeline. In addition, there can be no assurance that Ligand will achieve its guidance for 2014 or beyond, that Ligand's 2014 revenues will be at the levels or be broken down as currently anticipated, that Ligand will be able to create future revenues and cash flows by developing innovative therapeutics, 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, that there will be a market for the product(s) if successfully developed and approved, or that Ligand's partners will not terminate any of its agreements or development or commercialization of any of its products. Further, 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. Also, 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. Further, unexpected adverse side effects or inadequate therapeutic efficacy of Ligand's product(s) could delay or prevent regulatory approval or commercialization. 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 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. 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 (Unaudited, in thousands, except per-share data)                                      Three Months Ended March 31,                                        2014                2013 Revenues: Royalties                              $ 7,850                  $ 5,826 Material sales                           5,715                    1,539 Collaborative research and              2,393                  4,286       development and other revenues Total revenues                           15,958                   11,651 Operating costs and expenses: Cost of goods sold                       2,451                    663 Research and development                 3,131                    2,465 General and administrative               5,072                    4,502 Lease exit and termination costs        204                    89          Total operating costs and               10,858                 7,719       expenses Gain from operations                     5,100                    3,932 Other expense, net                       (1,002     )             (721       ) Increase in contingent                   (1,948     )             (1,841     ) liabilities Income tax expense                      (53        )            (66        ) Income from continuing                  2,097                  1,304       operations Income from discontinued                —                      191         operations, net of taxes Net income                             $ 2,097                 $ 1,495       Basic per-share amounts: Income from continuing                 $ 0.10                   $ 0.06 operations Income from discontinued                —                      0.01        operations Net income                             $ 0.10                  $ 0.07        Diluted per-share amounts: Income from continuing                 $ 0.10                   $ 0.06 operations Income from discontinued                —                      0.01        operations Net income                             $ 0.10                  $ 0.07                                                                         Weighted average number of               20,600,683               20,189,378 common shares-basic Weighted average number of               21,208,023               20,280,030 common shares-diluted                                                                                                                                                               LIGAND PHARMACEUTICALS, INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited, in thousands)                                   March 31, 2014      December 31, 2013 Assets Current assets: Cash, cash equivalents and          $    25,252              $     15,979 short-term investments Accounts receivable                      4,673                     2,222 Inventory                                1,949                     1,392 Other current assets                     841                       959 Current portion of co-promote           688                      4,329 termination asset Total current assets                     33,403                    24,881                                                               Restricted cash and                      1,341                     1,341 investments Property and equipment, net              690                       867 Goodwill and other identifiable intangible                  64,743                    65,337 assets Commercial license rights                4,571                     4,571 Long-term portion of                     448                       7,417 co-promote termination asset Other assets                            275                      299 Total assets                        $    105,471             $     104,713                                                               Liabilities and Stockholders' Equity Accounts payable and accrued        $    14,548              $     15,501 liabilities Current portion of co-promote            688                       4,329 termination liability Current portion of note                 5,769                    9,109 payable Total current liabilities                21,005                    28,939                                                               Long-term portion of co-promote termination                   448                       7,417 liability Long-term portion of deferred            2,085                     2,085 revenue Long-term debt                           —                         — Other long-term liabilities             16,932                   16,659 Total liabilities                        40,470                    55,100 Stockholders' equity                    65,001                   49,613 Total liabilities and               $    105,471             $     104,713 stockholders' equity                                                                                                                                           LIGAND PHARMACEUTICALS INCORPORATED NON-GAAP FINANCIAL MEASURES (Unaudited, in thousands, except share data)                    Three Months Ended March 31, 2014                                                      Mark-to-market                                                          Contingent       adjustment for     Stock-based                                         liabilities      investments        compensation                                                          owed                      GAAP               adjustment       to licensors       expense          Non-GAAP                                                                                                                                                                                             Income from          $ 5,100            $ —              $  —               $ 2,067          $ 7,167 operations Other (expense)              (1,002     )       —                 1,233             —                231 income, net Increase in contingent             (1,948     )       1,948             —                 —                — liabilities Income tax            (53        )      —                —                —               (53        ) expense Income from continuing            2,097            1,948            1,233            2,067           7,345       operations Income from discontinued          —                —                —                —               —           operations, net of taxes Net income           $ 2,097           $ 1,948          $  1,233           $ 2,067          $ 7,345       Basic per-share amounts: Income from continuing           $ 0.10            $ 0.10           $  0.06            $ 0.10           $ 0.36        operations Net income           $ 0.10            $ 0.10           $  0.06            $ 0.10           $ 0.36                                                                                                      Diluted per-share amounts: Income from continuing           $ 0.10            $ 0.09           $  0.06            $ 0.10           $ 0.35        operations Net income           $ 0.10            $ 0.09           $  0.06            $ 0.10           $ 0.35                                                                                                      Weighted average number         20,600,683         20,600,683        20,600,683        20,600,683       20,600,683 of common shares-basic Weighted average number         21,208,023         21,208,023        21,208,023        21,208,023       21,208,023 of common shares-diluted                                            Three Months Ended March 31, 2013                                                          Mark-to-market                                         Contingent       adjustment for     Stock-based                                         liabilities      investments        compensation                                                          owed                      GAAP               adjustment       to licensors       expense          Non-GAAP                                                                                               Income from          $ 3,932            $ —              $  —               $ 1,124          $ 5,056 operations Other (expense)              (721       )       —                 175               —                (546       ) income, net Increase in contingent             (1,841     )       1,841             —                 —                — liabilities Income tax            (66        )      —                —                —               (66        ) benefit Income from continuing            1,304            1,841            175              1,124           4,444       operations Income from discontinued          191              —                —                —               191         operations, net of taxes Net income           $ 1,495           $ 1,841          $  175             $ 1,124          $ 4,635       Basic per-share amounts: Income from continuing           $ 0.06             $ 0.09           $  0.01            $ 0.06           $ 0.22 operations Discontinued          0.01             —                —                —               0.01        operations Net income           $ 0.07            $ 0.09           $  0.01            $ 0.06           $ 0.23                                                                                                      Diluted per-share amounts: Income from continuing           $ 0.06             $ 0.09           $  0.01            $ 0.06           $ 0.22 operations Discontinued          0.01             —                —                —               0.01        operations Net income           $ 0.07            $ 0.09           $  0.01            $ 0.06           $ 0.23                                                                                                      Weighted average number         20,189,378         20,189,378        20,189,378        20,189,378       20,189,378 of common shares-basic Weighted average number         20,280,030         20,280,030        20,280,030        20,280,030       20,280,030 of common shares-diluted                                                                                                             Contact:  Ligand Pharmaceuticals Incorporated John L. Higgins, President and CEO 858-550-7500 or LHA Bruce Voss 310-691-7100 bvoss@lhai.com