On May 4, 2022 Ligand Pharmaceuticals Incorporated (NASDAQ: LGND) reported financial results for the three months ended March 31, 2022 and provided an operating forecast and program updates (Press release, Ligand, MAY 4, 2022, View Source [SID1234613567]). Ligand management will host a conference call today beginning at 4:30 p.m. Eastern time to discuss this announcement and answer questions.
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"2022 is off to a strong start with solid financial performance from our growing roster of royalty-bearing products and great execution from all our core technology platforms," said John Higgins, CEO of Ligand. "We are excited about the potential growth of our business in the years to come as several recently approved products are launched and our portfolio of late-stage programs continue to advance. In addition to our financial performance, the announced separation of our OmniAb antibody discovery business is well underway with the merger with the Avista SPAC expected to close this year."
First Quarter 2022 Financial Results
Revenue for the first quarter of 2022 was $45.7 million, compared with $55.2 million in the prior period. First quarter revenue grew across all categories with the exception of COVID-19 related Captisol sales. Core Captisol sales in the first quarter 2022 were $6.2 million compared to $1.3 million in the prior year. The difference in sales is due to timing of customer orders. Captisol sales related to COVID-19 were $5.9 million for the first quarter of 2022, compared with $30.0 million for the same period in 2021. The lower sales are due to reduced demand for the pandemic-related treatment. Royalty revenue grew 93% to $13.7 million due primarily to contribution of sales from products using the Pelican platform. Contract revenue grew 19% to $19.9 million. Revenue attributable to the OmniAb business for the first quarter of 2022 was $9.2 million, compared with $8.6 million for the prior year period.
Cost of Captisol was $4.7 million for the first quarter of 2022, compared with $8.2 million for the same period in 2021, with the decrease primarily due to lower total sales of Captisol. Amortization of intangibles was $11.8 million for the first quarter of both 2022 and 2021. Research and development expense was $20.3 million for the first quarter of 2022, compared with $17.9 million for the same period of 2021. General and administrative expense was $18.2 million for the first quarter of 2022, compared with $12.6 million for the same period in 2021, with the increase primarily due to $4.8 million in transaction costs incurred during the first quarter of 2022 in connection with the planned spin-off of OmniAb.
Net loss for the first quarter of 2022 was $(15.4) million, or $(0.91) per share, compared with net income of $18.1 million, or $1.05 per diluted share, for the same period in 2021. Net loss for the first quarter of 2022 included a $(12.6) million net non-cash loss from the value of Ligand’s short-term investments, while net income for the first quarter of 2021 included a $9.1 million net non-cash gain from the value of Ligand’s short-term investments. Adjusted net income for the first quarter of 2022 was $13.1 million, or $0.76 per diluted share, compared with $24.3 million, or $1.41 per diluted share, for the same period in 2021. Excluding the impact of gross profit, net of tax, for Captisol sales related to COVID-19, adjusted net income for the first quarter of 2022 was $10.0 million, or $0.58 per diluted share, compared with $2.9 million, or $0.14 per diluted share, for the same period in 2021. Please see the table below for a reconciliation of net income/(loss) to adjusted net income.
Ligand repurchased $165.8 million in principal of its 2023 Notes for $163.7 million in cash. As of March 31, 2022, Ligand had cash, cash equivalents and short-term investments of $204.0 million.
2022 Financial Guidance
Ligand is reaffirming 2022 revenue guidance for the combined business and providing revenue estimated to be attributable to the OmniAb business anticipating the spin-off later this year. Ligand expects 2022 royalties of $55 million to $60 million, Captisol sales of $40 million to $50 million and contract revenue of $52 million to $62 million. These revenue components result in total revenue of $147 million to $172 million for the combined business. Ligand expects that $35 million to $45 million of revenue will be attributable to OmniAb, principally in the contract revenue line.
Ligand is introducing full-year 2022 earnings guidance and a breakout of revenue and earnings guidance for the Ligand business excluding OmniAb and COVID-related Captisol. Of the $40 million to $50 million of expected Captisol sales, Ligand expects approximately $17 million to $19 million to be attributable to core Captisol sales, and the balance to be attributable to treatments for COVID-19. Excluding OmniAb and COVID-related Captisol, Ligand expects revenue to be $90 million to $100 million and adjusted earnings per diluted share to be $1.50 to $1.80. Ligand expects the contribution from COVID-related Captisol and the OmniAb business to be between $0.20 and $0.40 per diluted share, resulting in adjusted earnings per diluted share for the full company of $1.70 to $2.20.
Update on the OmniAb Separation Process
On March 23, 2022, Ligand announced the signing of a definitive merger agreement with Avista Public Acquisition Corp. II (APAC) (NASDAQ: AHPA), a publicly traded special purpose acquisition company (SPAC), providing for the spin-off and merger of OmniAb. The combination of OmniAb and APAC is structured to provide a minimum of $130 million in gross cash to the combined company at the time of closing, and up to $266 million in the event of no redemptions by APAC shareholders.
OmniAb will have an initial pre-money equity valuation of $850 million. Ligand intends to distribute 100% of its ownership in OmniAb to Ligand shareholders immediately prior to the business combination with APAC. The transaction is expected to be tax-free to Ligand and its shareholders for U.S. federal income tax purposes. This transaction is expected to close in the second half of 2022.
See "Important Information and Where to Find It" and "Participants in the Solicitation" below for additional information regarding the transaction.
First Quarter 2022 and Recent Business Highlights
OmniAb Platform and Partner Updates
The OmniAb discovery platform provides Ligand’s pharmaceutical industry partners with access to diverse antibody repertoires and high-throughput screening technologies to enable discovery of next-generation therapeutics. At the heart of the OmniAb platform is the Biological Intelligence (BI) of our proprietary transgenic animals, including OmniRat, OmniChicken and OmniMouse that have been genetically modified to generate antibodies with human sequences to facilitate development of human therapeutic candidates. Over 55 partners have access to OmniAb-derived antibodies and more than 250 programs are being actively developed or commercialized. As of March 31, 2022, there were 25 active clinical- or commercial- stage OmniAb-derived antibodies.
In March, Immunovant held an R&D day, where they highlighted Batoclimab (IMVT-1401), an OmniAb-derived monoclonal antibody targeting the neonatal Fc receptor. Immunovant announced plans to initiate a Phase 3 trial in myasthenia gravis in the first half of 2022 with top-line results expected in 2024. Immunovant further outlined plans to initiate clinical trials in four additional indications in 2022, with two of the indications expected to enter directly into pivotal trials. Batoclimab is also being developed by Harbour BioMed in China and is currently in an ongoing pivotal Phase 3 trial in patients with myasthenia gravis.
Aptevo Therapeutics announced that a patient with relapsed/refractory acute myeloid leukemia in an on-going Phase 1b trial received an allogeneic stem cell transplant after receiving APVO436 and experiencing significant reduction in bone marrow blasts. This follows Aptevo’s previous announcement that a patient receiving combination therapy is also moving to transplant after one cycle of therapy.
In Q1 and recently, OmniAb entered into new platform licensing agreements with LTZ Therapeutics, Seismic Therapeutics, LifeArc and an undisclosed venture-backed Bay Area immuno-oncology company.
Other Portfolio Updates
In March, Travere Therapeutics announced the submission of an NDA to the FDA for accelerated approval of sparsentan for IgA nephropathy (IgAN). Travere announced that plans are underway to submit an NDA for accelerated approval to the FDA for focal segmental glomerulosclerosis (FSGS) and a combined IgAN and FSGS Marketing Authorisation Application in Europe in mid-2022.
In April, Merck announced the FDA granted Breakthrough Designation for V116, a 21-valent pneumococcal vaccine utilizing Ligand’s CRM197 vaccine carrier protein produced using the Pelican Expression Technology platform. Merck plans to initiate Phase 3 clinical trials for V116 in 2022.
On February 2, 2022 Jazz Pharmaceuticals announced the submission of a supplemental BLA to the FDA seeking approval for a M/W/F intramuscular dosing schedule for Rylaze as a component of a multi-agent chemotherapeutic regimen for the treatment of acute lymphoblastic leukemia. Jazz announced on their Q4 earnings call plans to submit regulatory filings for Rylaze in Europe in mid-2022 with potential approval in 2023.
In February, BeiGene, Ltd. announced the launch of KYPROLIS (carfilzomib) for injection in China for patients with relapsed/refractory (R/R) multiple myeloma. KYPROLIS is licensed to BeiGene in China under a strategic collaboration with Amgen, and was approved in July 2021 by the China National Medical Products Administration (NMPA) in combination with dexamethasone for the treatment of adult patients with R/R multiple myeloma who have received at least two prior therapies, including a proteasome inhibitor and an immunomodulatory agent.
Outlook Therapeutics announced it submitted a BLA to the FDA for ONS-5010, an investigational ophthalmic formulation of bevacizumab for the treatment of wet age-related macular degeneration that, if approved, will be branded as LYTENAVA (bevacizumab-vikg).
Ligand provides regular updates on partner events through its Twitter account, @Ligand_LGND.
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, non-cash interest expense, 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, gross profit for Captisol sales related to COVID-19, net of tax, transaction costs, and others that are listed in the itemized reconciliations between GAAP and adjusted financial measures included at the end of this press release. However, the Company 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, share-based compensation expense and the 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 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 (866) 518-6930 from the U.S. or (203) 518-9797 from outside the U.S. and use conference ID LP1Q22. To participate via live or replay webcast, a link is available at www.ligand.com.
About OmniAb
The OmniAb discovery platform provides Ligand’s pharmaceutical industry partners access to the diverse antibody repertoires and high-throughput screening technologies to enable discovery of next-generation therapeutics. At the heart of the OmniAb platform is the Biological Intelligence (BI) of our proprietary transgenic animals, including OmniRat, OmniChicken and OmniMouse that have been genetically modified to generate antibodies with human sequences to facilitate development of human therapeutic candidates. OmniFlic (transgenic rat) and OmniClic (transgenic chicken) address industry needs for bispecific antibody applications though a common light chain approach, and OmniTaur features unique structural attributes of cow antibodies for complex targets. We believe OmniAb animals comprise the most diverse host systems available in the industry and they are optimally leveraged through computational antigen design and immunization methods, paired with high-throughput single B cell screening and deep computational analysis of next-generation sequencing datasets to identify fully human antibodies with superior performance and developability characteristics. An established core competency focused on ion channels and transporters further differentiates our technology and creates opportunities to further leverage across modalities, including antibody-drug conjugates and others. The OmniAb suite of technologies and differentiating computational capabilities and BI features are combined to offer a highly efficient and customizable end-to-end solution for the growing discovery needs of the global pharmaceutical industry.