On August 8, 2023 Ligand Pharmaceuticals Incorporated (NASDAQ: LGND) reported financial results for the three and six months ended June 30, 2023, and provided an operating forecast and business updates (Press release, Ligand, AUG 8, 2023, View Source [SID1234633981]). 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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"We are pleased to report continued momentum across our portfolio of partnered assets, with multiple positive developments for our commercial and pipeline products," said Todd Davis, CEO of Ligand. "Ligand has a strong balance sheet with $219 million in cash, and, after a recent paydown of convertible notes, we are debt free with positive cash flows that can also be deployed. We are well positioned to make additional investments, that, paired with our enhanced deal skillset and expanded team, are expected to add robust programs and diversity to our product pipeline."
Second Quarter 2023 Financial Results
Total revenues for the second quarter of 2023 were $26.4 million. Revenues for the same period in 2022 excluding sales related to COVID-19 were $23.9 million. Total revenues for the second quarter of 2022 including COVID-19 related sales were $50.1 million. Royalties for the second quarter of 2023 were $20.4 million, compared with $17.8 million for the same period in 2022, with the increase primarily attributable to Kyprolis, Rylaze and Vaxneuvance. Core Captisol sales were $5.2 million for the second quarter of 2023, compared with $3.3 million for the same period in 2022. The increase in sales was due to the timing of customer orders. There were no Captisol sales related to COVID-19 for the second quarter of 2023, compared with $26.2 million for the same period in 2022. Contract revenue was $0.7 million for the second quarter of 2023, compared with $2.8 million for the same period in 2022. The difference was due to the timing of partner milestone events.
Cost of Captisol was $1.7 million for the second quarter of 2023, compared with $12.4 million for the same period in 2022, with the decrease due to lower total Captisol sales. Amortization of intangibles was $8.5 million, compared with $8.6 million for the same period in 2022. Research and development expense was $6.9 million, compared with $8.5 million for the same period in 2022, with the decrease attributed to lower stock based compensation, employee related expenses and lab supply expenses. General and administrative expense was $11.3 million, compared with $12.1 million for the same period in 2022, with the decrease primarily attributable to lower legal expenses.
Net income from continuing operations for the second quarter of 2023 was $2.3 million, or $0.13 per diluted share, compared with net income from continuing operations of $12.6 million, or $0.74 per share, for the same period in 2022. The decrease in net income from the prior year period is due primarily to the decrease in COVID-19 related sales offset by increases in royalty revenue, gain from short term investments and interest income. Adjusted net income from continuing operations for the second quarter of 2023 was $25.1 million, or $1.42 per diluted share, compared with $7.4 million, or $0.43 per diluted share, for the same period in 2022 which excluded the impact of gross profit, net of tax, for Captisol sales related to COVID-19. See the table below for a reconciliation of net income from continuing operations to adjusted net income from continuing operations.
On May 15, 2023, the 2023 Notes maturity date, we paid off the remaining balance of the convertible notes in amount of $77.1 million (including interest). As of June 30, 2023, Ligand had cash, cash equivalents and short-term investments of $219.0 million. Also in Q2, Ligand put in place a $50 million share repurchase program that expires in April 2026. The timing and amount of repurchase transactions, if any, will be determined by the Company’s management based on its evaluation of market conditions, share price, legal requirements and other factors.
Year-to-Date Financial Results
Total revenues for the six months ended June 30, 2023 were $70.3 million. Revenues for the same period in 2022 excluding sales related to COVID-19 were $54.5 million. Revenues for the six months ended June 30, 2022 including COVID-19 related sales were $86.6 million. Royalties for the six months ended June 30, 2023 were $37.6 million, compared with $31.3 million for the same period in 2022, with the increase primarily attributable to Kyprolis and the growth in sales of drugs using the Pelican platform. Core Captisol sales were $15.8 million for the six months ended June 30, 2023, compared with $9.6 million for the same period in 2022. The difference in sales was due to the timing of customer orders. There were no Captisol sales related to COVID-19 for the six months ended June 30, 2023, compared with $32.1 million for the same period in 2022. Contract revenue was $16.9 million for the six months ended June 30, 2023, compared with $13.7 million for the same period in 2022. The difference was due to the timing of partner milestone events.
Cost of Captisol was $5.4 million for the six months ended June 30, 2023, compared with $17.1 million for the same period in 2022, with the decrease due to lower total Captisol sales. Amortization of intangibles was $17.1 million for both the six months ended June 30, 2023 and 2022. Research and development expense for the six months ended June 30, 2023 was $13.5 million, compared with $17.6 million for the same period in 2022, with the decrease attributed to lower employee related expenses and lab supply expenses. General and administrative expense for the six months ended June 30, 2023 was $22.1 million, compared with $24.0 million for the same period in 2022, with the decrease primarily attributable to lower legal expenses.
Net income from continuing operations for the six months ended June 30, 2023 was $45.9 million, or $2.57 per diluted share, compared with net loss from continuing operations of $0.3 million, or $0.02 per share, for the same period in 2022. The increase in net income was driven by a gain from short term investments of $43.5 million in the current year period and a loss from short term investments of $14.8 million for the same period in 2022. Adjusted net income from continuing operations for the six months ended June 30, 2023 was $65.0 million, or $3.69 per diluted share, compared with $18.4 million, or $1.07 per diluted share, for the same period in 2022 which excluded the impact of gross profit, net of tax, for Captisol sales related to COVID-19. See the table below for a reconciliation of net income (loss) from continuing operations to adjusted net income from continuing operations.
2023 Financial Guidance
Ligand is reaffirming its 2023 revenue guidance of $124 million to $128 million and raising adjusted EPS guidance. Guidance for royalties is unchanged at $78 million to $82 million. Sales of Captisol are now expected to be $24 million (previously $21 million) and contract revenue is now expected to be $22 million (previously $25 million). We now expect 2023 adjusted diluted EPS of $4.85 to $5.00 (previously $4.60 to $4.75). The increase in EPS guidance is driven primarily by additional gains realized from the sale of Viking Therapeutics securities. Due to the unpredictable nature of the pandemic and related Captisol sales, Ligand excludes Captisol sales related to COVID-19 from guidance and will update investors as orders are received and shipped each quarter.
Second Quarter 2023 and Recent Business Highlights
On July 14, 2023 Ligand made a $3 million bridge loan to Novan, Inc. (Nasdaq: NOVN) in contemplation of Novan filing for bankruptcy relief. On July 17th Novan filed for bankruptcy relief and Ligand entered into an agreement with Novan to purchase its assets for $15 million in cash and provide them up to $15 million in debtor-in-possession financing, inclusive of the $3 million bridge loan. The purchase is subject to approval by the bankruptcy court. Novan’s assets include Berdazimer gel, which is in development for molluscum contagiosum infection, and has an NDA with the FDA and an assigned PDUFA goal date of January 5, 2024. If the purchase agreement is approved, and Ligand’s bid is successful in the anticipated bankruptcy sale and auction process, Ligand will acquire the Novan assets and consistent with Ligand’s business model, will seek to outlicense or sell the existing development programs and commercial business assets of Novan.
On July 17, 2023 Travere Therapeutics (Nasdaq: TVTX) announced that 417 new patient start forms (PSFs) were received in the second quarter and a total of 563 PSFs have been received since the accelerated approval of FILSPARI was obtained in the first quarter of 2023. Travere also announced the sale of its bile acid product portfolio to Mirum Pharmaceuticals for $210 million upfront and up to $235 million in additional sales based milestones. The sale enables Travere to further focus its efforts on the ongoing launch of FILSPARI for IgA nephropathy and pursing a potential regulatory path forward in FSGS.
Viking Therapeutics, Inc. (Nasdaq: VKTX) announced its Phase 2b clinical trial of VK2809 in patients with biopsy-confirmed non-alcoholic steatohepatitis (NASH) achieved its primary endpoint, with patients receiving VK2809 experiencing statistically significant reductions in liver fat content from baseline to Week 12 as compared with placebo. The median relative change from baseline in liver fat as assessed by magnetic resonance imaging, proton density fat fraction (MRI-PDFF) ranged from 38% to 55% for patients receiving VK2809. Additionally, VK2809-treated patients demonstrated statistically significant reductions in low-density lipoprotein cholesterol (LDL-C), triglycerides, and atherogenic lipoproteins compared with placebo.
Merck (NYSE: MRK) announced its Phase 3 clinical trial of V116, an investigational 21-valent pneumococcal conjugate vaccine, met key immunogenicity and safety endpoints in two Phase 3 trials. If approved, V116 would be the first pneumococcal conjugate vaccine specifically designed for adults. Results from the STRIDE-3 trial demonstrated statistically significant immune responses compared to PCV20 (pneumococcal 20-valent conjugate vaccine) in vaccine-naïve adults for serotypes common to both vaccines. Positive immune responses were also observed for serotypes unique to V116. Additionally, results from STRIDE-6 demonstrated that V116 was immunogenic for all 21 pneumococcal serotypes in the vaccine among adults who previously received a pneumococcal vaccine at least one year prior to the study. In both studies, V116 had a safety profile comparable to the comparator in the studies.
Jazz Pharmaceuticals plc (Nasdaq: JAZZ) announced that the European Medicines Agency’s (EMA) Committee for Medicinal Products for Human Use (CHMP) adopted a positive opinion recommending the European Commission marketing authorization of JZP458 (approved as Rylaze in the U.S.) for use as a component of a multi-agent chemotherapeutic regimen for the treatment of acute lymphoblastic leukemia (ALL) and lymphoblastic lymphoma (LBL) in adult and pediatric patients (1 month and older) who developed hypersensitivity or silent inactivation to E. coli-derived asparaginase.
Verona Pharma Plc (Nasdaq: VRNA) submitted an NDA to the FDA for approval of ensifentrine for the maintenance treatment of patients with chronic obstructive pulmonary disease (COPD). Verona also published results from its Phase 3 ENHANCE trials in the American Journal of Respiratory and Critical Care Medicine demonstrating improvements in lung function, symptoms and quality of life measures, a substantial reduction in the rate and risk of COPD exacerbations and a favorable safety profile.
Palvella Therapeutics announced a planned pivotal Phase 3 study design of QTORIN rapamycin for the treatment of Microcystic Lymphatic Malformations, following previously announced positive Phase 2 results. Additionally, Palvella announced QTORIN rapamycin did not show a treatment effect when compared to placebo in the pivotal Phase 3 trial in Pachyonychia Congenita and will no longer continue development in that indication.
Gilead Sciences, Inc. (Nasdaq: GILD) received FDA approval of Veklury (remdesivir) for COVID-19 treatment in patients with severe renal impairment, including those on dialysis. With this approval, Veklury is now the first and only approved antiviral COVID-19 treatment that can be used across all stages of renal disease. The U.S. approval follows the European Commission decision to extend the approved use of Veklury to treat COVID-19 in people with severe renal impairment, including those on dialysis.
Xintong Pharmaceuticals made an NDA submission of pradefovir for hepatitis B virus (HBV) in China and received Priority Review.
Aldeyra Therapeutics, Inc. (Nasdaq: ALDX) announced positive top-line results from its Phase 3 clinical trial of reproxalap in patients with allergic conjunctivitis. The clinical trial successfully achieved statistical significance for the primary and all secondary endpoints.
Adjusted Financial Measures
Ligand 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, income tax affect of adjusted reconciling items 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 (888) 350-3452 using the conference ID 6501694. Callers outside the U.S. may dial 1 (646) 960-0369. To participate via live or replay webcast, a link is available at www.ligand.com.