On November 9, 2021 Ligand Pharmaceuticals Incorporated (NASDAQ: LGND) reported financial results for the three and nine months ended September 30, 2021 and provided an operating forecast and program updates (Press release, Ligand, NOV 9, 2021, View Source [SID1234594897]). 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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"Our business has performed exceptionally well over the past few months, and we are pleased to be reporting excellent third quarter financial results," said John Higgins, CEO of Ligand. "Our core royalties tied to Kyprolis and Evomela continue to grow nicely, and we have seen five approvals during the last year for new products or major markets that are now launching and are expected to fuel royalty growth next year and beyond."

"As announced separately today, we are pursuing plans to split Ligand into two separate, publicly traded companies with one featuring the OmniAb business, and the other featuring Ligand’s existing collection of core royalties and the technologies, pipeline and contracts associated with the Pelican protein expression platform and the Captisol business," Higgins added. "Along with outside advisors we have concluded the time is right to pursue this strategic plan and accelerate investment into the OmniAb platform and technologies to further drive value."

Third Quarter 2021 Financial Results

Total revenues for the third quarter of 2021 were $64.8 million, compared with $41.8 million for the same period in 2020. Royalties for the third quarter of 2021 were $15.6 million, compared with $9.0 million for the same period in 2020. Captisol sales were $35.1 million for the third quarter of 2021, compared with $23.4 million for the same period in 2020, with the increase primarily due to higher sales of Captisol for use with remdesivir, a treatment for COVID-19. Contract revenue was $14.1 million for the third quarter of 2021, compared with $9.5 million for the same period in 2020, with the increase primarily due to the additional revenue from Pfenex, which was acquired in October 2020.

Cost of Captisol was $11.4 million for the third quarter of 2021, compared with $6.4 million for the same period in 2020, with the increase primarily due to higher sales of Captisol. Amortization of intangibles was $11.8 million for the third quarter of 2021, compared with $3.9 million for the same period in 2020, with the increase primarily due to amortization of contractual relationships and technologies gained through the Pfenex acquisition. Research and development expense was $16.9 million for the third quarter of 2021, compared with $12.9 million for the same period of 2020, with the increase primarily due to the addition of Pfenex expenses. General and administrative expense was $12.7 million for the third quarter of 2021, compared with $15.0 million for the same period in 2020, with the decrease primarily due to $4.9 million of acquisition and integration costs in the prior-year period.

Other operating income was $3.8 million for the third quarter of 2021, which represented a non-cash valuation adjustment related to eliminating the remaining Pfenex CVR liability. There was no other operating income for the same period in 2020.

Net income for the third quarter of 2021 was $13.7 million, or $0.80 per diluted share, compared with net loss of $(6.7) million, or $(0.42) per share, for the same period in 2020. Net income for the third quarter of 2021 included a $1.6 million net non-cash gain from the value of Ligand’s short-term investments, while net loss for the third quarter of 2020 included a $(11.7) million net non-cash loss from the value of Ligand’s short-term investments. Adjusted net income for the third quarter of 2021 was $27.1 million, or $1.58 per diluted share, compared with $17.5 million, or $1.04 per diluted share, for the same period in 2020. Please see the table below for a reconciliation of net income/(loss) to adjusted net income.

As of September 30, 2021, Ligand had cash, cash equivalents and short-term investments of $323.2 million.

Year-to-Date Financial Results

Total revenues for the nine months ended September 30, 2021 were $204.7 million, compared with $116.4 million for the same period in 2020. Royalties for the nine months ended September 30, 2021 were $31.4 million, compared with $22.8 million for the same period in 2020. Captisol sales were $128.9 million for the nine months ended September 30, 2021, compared with $69.0 million for the same period in 2020, with the increase primarily due to higher sales of Captisol for use with remdesivir. Contract revenue was $44.4 million for the nine months ended September 30, 2021, compared with $24.7 million for the same period in 2020, with the increase primarily due to the additional revenue from the acquisitions of Icagen in April 2020 and Pfenex in October 2020.

Cost of goods sold was $50.2 million for the nine months ended September 30, 2021, compared with $18.7 million for the same period in 2020, with the increase primarily attributable to higher sales of Captisol. Amortization of intangibles for the nine months ended September 30, 2021 was $35.4 million, compared with $11.3 million for the same period in 2020, with the increase primarily due to amortization of contractual relationships and technologies gained through the Icagen and Pfenex acquisitions. Research and development expense was $50.8 million for the nine months ended September 30, 2021, compared with $37.5 million for the same period of 2020, with the increase primarily due to additional expenses following the Icagen and Pfenex acquisitions. General and administrative expense was $39.7 million for the nine months ended September 30, 2021, compared with $34.4 million for the same period in 2020, with the increase primarily due to additional expenses following the Icagen and Pfenex acquisitions, partially offset by acquisition and integration costs in the prior-year period.

Other operating income was $37.6 million for the nine months ended September 30, 2021, which represented a non-cash valuation adjustment related to eliminating the Pfenex CVR liability. There was no other operating income for the same period in 2020.

Net income for the nine months ended September 30, 2021 was $62.6 million, or $3.64 per diluted share, compared with net loss of $(8.7) million, or $(0.54) per share, for the same period in 2020. Net income for the nine months ended September 30, 2021 included a $2.4 million net non-cash gain from the value of Ligand’s short-term investments, while net loss for the same period in 2020 included a net non-cash loss in the value of Ligand’s short-term investments of $(17.9) million. Adjusted net income for the nine months ended September 30, 2021 was $79.4 million, or $4.62 per diluted share, compared with $49.4 million, or $2.93 per diluted share, for the same period in 2020. Please see the table below for a reconciliation of net income/(loss) to adjusted net income.

2021 Financial Guidance

Ligand is reaffirming 2021 financial guidance. Ligand expects full-year 2021 total revenues to be between $265 million and $275 million, and adjusted earnings per diluted share to be between $5.80 and $6.05.

Third Quarter 2021 and Recent Business Highlights

OmniAb Platform Updates

OmniAb is Ligand’s industry-leading BI- (Biological Intelligence) powered multi-species antibody platform for the discovery of monospecific and bispecific therapeutic human antibodies. As of September 30, 2021, 19 different OmniAb-derived antibodies have been studied in approximately 84 active or completed clinical trials.

Gloria Biosciences received approval from China’s National Medical Products Administration (NMPA) for zimberelimab (GLS-010), an OmniAb-derived anti-PD-1 monoclonal antibody for the treatment of recurrent or refractory classical Hodgkin’s lymphoma. Zimberelimab is the first OmniAb-derived antibody to receive regulatory approval.

CStone Pharmaceuticals presented data at ESMO (Free ESMO Whitepaper) Congress 2021 from the GEMSTONE-301 trial, a registrational study of OmniAb-derived sugemalimab in the treatment of patients with stage III non-small cell lung cancer (NSCLC). The data for sugemalimab as a consolidation therapy demonstrated a statistically significant and clinically meaningful improvement in progression-free survival (PFS). Sugemalimab was well-tolerated with no new safety signals. CStone also presented updated data from the registrational study of sugemalimab in patients with stage IV NSCLC in an oral presentation at the IASLC 2021 World Conference on Lung Cancer. The final analysis confirmed the efficacy and safety demonstrated in the interim analysis, showing that sugemalimab plus chemotherapy was associated with a significant improvement of PFS as first-line treatment in patients with both squamous and non-squamous metastatic NSCLC. Additionally, the estimated 2-year overall survival rate was nearly 50%. New drug applications for sugemalimab in patients with metastatic stage IV NSCLC and in patients with locally advanced/unresectable stage III NSCLC have been accepted by China’s NMPA and are currently under review.

Aptevo Therapeutics announced positive Phase 1 data showing some patients with relapsed acute myeloid leukemia (AML) or myelodysplastic syndrome (MDS) achieved a remission with APVO436 after failing 1-8 lines of prior therapies. Data was published in the peer-reviewed journal, Cancers, showing the risk of cytokine release syndrome is low for blood cancer patients treated with APVO436. APVO436 is an OmniAb-derived bispecific antibody targeting CD123 and CD3 for the treatment of hematological malignancies.

Harbour BioMed announced the initiation of a Phase 3 trial with batoclimab (HBM9161), its OmniAb-derived anti-FcRn monoclonal antibody, for the treatment of generalized myasthenia gravis (gMG). This study aims to assess the efficacy and safety of batoclimab in patients with gMG in China. Harbour BioMed also announced the start of a Phase 2 trial in China of batoclimab for the treatment of thyroid eye disease. Harbour BioMed licensed batoclimab from HanAll Biopharma and has the right to develop, manufacture and commercialize in Greater China (including Hong Kong, Macau and Taiwan).

OmniAb partnered with LandingAI to incorporate an industry leading LandingLens visual inspection software platform to strengthen the xPloration deep screening platform using AI and computer vision.

During the third quarter, Ligand entered into an OmniAb licensing agreement with Pierre Fabre.

Pelican Platform Updates

The Pelican Expression Technology is Ligand’s proprietary Pseudomonas fluorescens protein expression technology that has major collaborations with Jazz Pharmaceuticals, Merck, Serum Institute of India and Alvogen, each of which has potential to contribute meaningfully to Ligand’s royalty revenue.

Merck announced VAXNEUVANCE met key immunogenicity and safety endpoints in a Phase 3 pivotal trial evaluating use in infants. The FDA approved VAXNEUVANCE for adults 18 years of age and older in July and Merck has submitted a supplemental regulatory licensure application to the FDA for use in children. On October 20, the Center for Disease Control’s committee on immunization practices provisionally recommend vaccination either with a sequential regimen of VAXNEUVANCE followed by PNEUMOVAX23, or with a single dose of 20-valent pneumococcal conjugate vaccine for adults 65 years and older, and for adults ages 19 to 64 with certain underlying medical conditions or other disease risk factors.

Jazz Pharmaceuticals announced the National Comprehensive Cancer Network added Rylaze to its Clinical Practice Guidelines in Oncology as a treatment option for both pediatric and adult acute lymphoblastic leukemia patients with hypersensitivity to E. coli asparaginase products as a component of the multi-agent chemotherapeutic regimen.

Other

Travere Therapeutics announced positive topline interim results from the ongoing Phase 3 PROTECT study of sparsentan in IgA nephropathy. Sparsentan treatment demonstrated a statistically significant mean reduction of proteinuria from baseline after 36 weeks, more than threefold the reduction of active comparator irbesartan (p<0.0001). Travere met with the FDA for sparsentan in focal segmental glomerulosclerosis (FSGS) confirming plans to submit additional data in the first half of 2022 as part of an accelerated approval submission. Additionally, Travere and Vifor Pharma entered into a licensing agreement for the commercialization of sparsentan in Europe, Australia and New Zealand.

Ligand entered into a collaboration agreement with China Resources Double-Crane for exclusive Asia rights to develop a novel oral COVID-19 antiviral treatment using Ligand’s BEPro technology. BEPro is a proprietary prodrug technology for the development of compounds with improved product profiles. Ligand had generated preclinical pharmacokinetics data showing its oral BEPro-enabled COVID-19 antivirals have favorable blood concentration profiles and generated lower levels of active nucleotide in the kidney, a potential site for toxicity, compared with other oral and intravenous compounds.

Sermonix Pharmaceuticals announced completion of enrollment in the Phase 2 ELAINE 1 randomized trial assessing oral lasofoxifene versus intramuscular fulvestrant for the treatment of ER+/HER2- breast cancer in patients with an ESR1 mutation. Sermonix expects data from the trial to be reported in the first half of 2022. Lasofoxifene is also being studied in a separate fully-enrolled trial, ELAINE 2, in combination with Eli Lilly and Company’s CDK4 and 6 inhibitor Verzenio (abemaciclib). Topline data are also expected in the first half of 2022.

Icagen Ion Channel Technology’s Dr. Anil Nair presented at the 3rd Annual Drug Discovery & Development Summit and gave an oral presentation entitled "In Silico Drug Discovery: Application of Computer-Aided Drug Design in an Industrial Environment".

In July, Ligand announced the appointment of Jennifer Cochran, Ph.D. to the Company’s Board of Directors. Dr. Cochran is the Shriram Chair of the Department of Bioengineering at Stanford University, where she also is a professor of bioengineering and (by courtesy) of chemical engineering and a member of the cancer biology, biophysics and immunology programs and was a Founder and former CEO of xCella Biosciences.

Ligand provides regular updates on individual 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, 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 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 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 (833) 540-1167 from the U.S. or (929) 517-0358 from outside the U.S., using the conference ID 5486177. 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 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. 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 microfluidic-based 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.

About the Pelican Expression Technology

Pelican is a robust, validated, cost-effective and scalable platform for recombinant protein production that is especially well-suited for complex, large-scale protein production where traditional systems are not. Multiple global manufacturers have demonstrated consistent success with the platform and the technology is currently out-licensed for numerous commercial and development-stage programs. The versatility of the platform has been demonstrated in the production of enzymes, peptides, antibody derivatives and engineered non-natural proteins. Partners seek the platform as it can contribute significant value to biopharmaceutical development programs by reducing development timelines and costs for manufacturing therapeutics and vaccines. Given pharmaceutical industry trends toward large molecules with increasing structural complexities, Pelican is well positioned to meet these growing needs as the most comprehensive broadly available protein production platform in the industry.

About Captisol

Captisol is a patent-protected, chemically modified cyclodextrin with a structure designed to optimize the solubility and stability of drugs. Captisol was invented and initially developed by scientists in the laboratories of Dr. Valentino Stella, University Distinguished Professor at the University of Kansas’ Higuchi Biosciences Center for specific use in drug development and formulation. This unique technology has enabled several FDA-approved products, including Gilead’s VEKLURY, Amgen’s KYPROLIS, Baxter International’s NEXTERONE, Acrotech Biopharma L.L.C.’s and CASI Pharmaceuticals’ EVOMELA, Melinta Therapeutics’ BAXDELA and Sage Therapeutics’ ZULRESSO. There are many Captisol-enabled products currently in various stages of development. Ligand maintains a broad global patent portfolio for Captisol with more than 400 issued patents worldwide relating to the technology (including over 40 in the U.S.) and with the latest expiration date in 2033. Other patent applications covering methods of making Captisol, if issued, extend to 2040.