On May 4, 2016 Ligand Pharmaceuticals Incorporated (NASDAQ: LGND) reported financial results for the three months ended March 31, 2016, and provided an operating forecast and program updates (Press release, Ligand, MAY 4, 2016, View Source [SID:1234511889]).
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Financial highlights for the first quarter of 2016 include:
First quarter total revenues were $29.6 million, including royalty revenues of $14.4 million.
First quarter adjusted EPS was $0.97 and GAAP EPS was $0.30.
A description of adjusted calculations and reconciliation to comparable GAAP financial measures is provided in the accompanying table titled "Adjusted Financial Measures."
"The year is off to a strong start with product approvals and launches from our partners, positive data from multiple programs and robust quarterly growth in revenues. We closed two acquisitions recently, including a major acquisition in the first quarter that will contribute significantly to our portfolio of fully funded programs and financial performance. In addition, we completed multiple new licensing agreements, including those with our recently acquired OmniAb technology," said John Higgins, Chief Executive Officer of Ligand. "We look forward to total revenues growing by approximately 60% in 2016, and to the approval and launch of up to five of our partnered products during the year."
First Quarter 2016 Financial Results
Total revenues for the first quarter of 2016 were $29.6 million, compared with $14.6 million for the same period in 2015. Royalty revenues were $14.4 million, compared with $10.3 million for the same period in 2015 primarily due to higher royalties from Promacta and Kyprolis. Material sales were $5.3 million, compared with $3.7 million for the same period in 2015 due to timing of Captisol purchases for use in clinical trials and commercial products. License and milestone revenues were $9.9 million, compared with $0.6 million for the same period in 2015 due primarily to the timing of milestones and upfront license fees earned, and the acquisition of Open Monoclonal Technology, Inc. ("OMT").
Cost of goods sold was $1.0 million for the first quarter of 2016, compared with $1.1 million for the same period in 2015 due to the timing and mix of Captisol sales. Amortization of intangibles was $2.5 million for the first quarter of 2016, compared with $0.6 million for the same period in 2015 due to additional amortization of intangibles related to the acquisition of OMT. Research and development expense was $4.0 million, compared with $3.4 million for the same period of 2015 as a result of timing of spending on internal development programs. General and administrative expense for the first quarter of 2016 was $6.8 million, compared with $6.0 million for the same period in 2015 due to costs associated with the OMT acquisition and non-cash stock-based compensation expense.
Net income for the first quarter of 2016 was $6.6 million, or $0.30 per diluted share, compared with net income for the first quarter of 2015 of $0.8 million, or $0.04 per diluted share. Adjusted net income for the first quarter of 2016 was $21.0 million, or $0.97 per diluted share, compared with adjusted net income for the first quarter of 2015 of $6.9 million, or $0.33 per diluted share.
As of March 31, 2016, Ligand had cash, cash equivalents and short-term investments of $113.2 million.
2016 Financial Forecast
Including the effects of the synthetic royalty acquisition from CorMatrix, Ligand now expects 2016 total revenues to be between $115 million and $119 million. This guidance assumes approximately $1 million of revenue from the CorMatrix assets in 2016. Ligand’s cash operating expenses are not expected to change due to this transaction. In 2016, adjusted EPS is projected to be in the range of $3.41 to $3.46, which includes approximately $0.04 of incremental EPS contribution from the acquisition.
For 2017, Ligand expects total revenues to exceed $160 million with adjusted EPS of more than $5.03. This guidance assumes approximately $2 million of revenue from the CorMatrix assets in 2017, and approximately $0.08 of incremental EPS contribution from the acquisition.
The adjusted earnings per diluted share guidance does not include changes in contingent liabilities, mark-to-market adjustment for amounts owed to licensors, non-cash stock-based compensation expense, non-cash debt-related costs, pro-rata non-cash net losses of Viking Therapeutics, non-cash amortization of acquired intangibles, non-cash tax expense and unissued shares relating to the Senior Convertible Note.
First Quarter 2016 and Recent Business Highlights
Recent Acquisitions
Today Ligand announced the acquisition of economic rights to multiple programs owned by CorMatrix. Ligand will pay $17.5 million and in return will receive a portion of revenue (synthetic royalty) from CorMatrix’s existing marketed products and will have the right to receive future synthetic royalties from potential future products. CorMatrix’s products are medical devices that are designed to permit the development and regrowth of human tissue. This transaction will be immediately accretive to Ligand and represents Ligand’s entry into the field of medical devices.
In January 2016, Ligand acquired OMT, Inc. and its OmniAb platform for consideration valued at the time of the acquisition at approximately $178 million. OmniAb license agreements existing at the time of acquisition initially added 16 shots on goal, with the potential for additional compounds to be generated from these partnerships. Partners at the time of acquisition included Amgen, Celgene, Genmab, Janssen, Merck KGaA, Pfizer, Seattle Genetics, Five Prime, Symphogen and various other biotechnology and pharmaceutical companies.
Portfolio Program Progress
Promacta/ Revolade
The European Commission approved Revolade (eltrombopag), a Novartis product, for the treatment of pediatric (age 1 and above) chronic immune (idiopathic) thrombocytopenic purpura (ITP) patients who are refractory to other treatments (e.g., corticosteroids, immunoglobulins). The approval includes the use of tablets as well as a new oral suspension formulation of Revolade, which is designed for younger children who may not be able to swallow tablets.
Kyprolis (carfilzomib), an Amgen Product Utilizing Captisol
On January 21, 2016, Amgen announced that FDA approved Kyprolis (carfilzomib) in combination with dexamethasone for the treatment of patients with relapsed or refractory multiple myeloma who have received one to three lines of therapy. The FDA also approved Kyprolis as a single agent for the treatment of patients with relapsed or refractory multiple myeloma who have received one or more lines of therapy, converting to full approval the initial accelerated approval Kyprolis received in July 2012 as a single agent.
On January 28, 2016, Amgen announced Health Canada approval of Kyprolis (carfilzomib) in combination with lenalidomide and dexamethasone for the treatment of patients with relapsed multiple myeloma who have received one to three lines of therapy.
Additional Pipeline and Partner Developments
Spectrum Pharmaceuticals received FDA approval of EVOMELA (melphalan) for use as a high-dose conditioning treatment prior to hematopoietic progenitor (stem) cell transplantation in patients with multiple myeloma, and for the palliative treatment of patients with multiple myeloma for whom oral therapy is not appropriate.
Spectrum Pharmaceuticals announced that the FDA granted seven years of Orphan Drug Exclusivity for EVOMELA for use as a high-dose conditioning treatment prior to hematopoietic progenitor (stem) cell transplantation in patients with multiple myeloma.
Duavive received EU pricing and was launched in Italy by Merck Sharp & Dohme, under license from Pfizer.
Alvogen Inc. received approval from the FDA for Captisol-enabled IV voriconazole.
Zydus Cadila announced the launch of Vivitra, a biosimilar of trastuzumab, in India. Ligand gained rights to royalties on sales of Vivitra in the March 2013 Selexis royalty acquisition.
Lundbeck announced the FDA accepted the resubmission of the NDA for IV carbamazepine. An action letter is anticipated before the end of 2016.
Retrophin announced completion of enrollment in the Phase 2 DUET study of Sparsentan for the treatment of focal segmental glomerulosclerosis (FSGS). The DUET study exceeded its enrollment target of 100 patients, and top-line results are expected in the third quarter of 2016.
Sage Therapeutics presented data that expanded scientific, clinical and burden-of-illness data for SAGE-547 at the 68th American Academy of Neurology Annual Meeting.
Coherus BioSciences and Baxalta announced that CHS-0214, a proposed biosimilar of Enbrel (etanercept) to which Ligand gained royalty rights in the March 2013 Selexis royalty acquisition, met its primary endpoint in a confirmatory, double-blind, randomized, controlled, two-part clinical study. This ongoing study is evaluating the efficacy and safety of CHS-0214 compared with Enbrel in patients with moderate-to-severe rheumatoid arthritis that is inadequately controlled with methotrexate.
Viking Therapeutics highlighted positive data from a Phase 1b trial of VK2809 (TR Beta) in subjects with mild hypercholesterolemia at the 65th Annual Scientific Session and Expo of the American College of Cardiology.
Merrimack Pharmaceuticals presented data on MM-302, MM-141 and MM-151 at the 2016 American Association for Cancer Research (AACR) (Free AACR Whitepaper) Annual Meeting.
Opthea Limited announced that the primary objective of safety in the dose-escalation phase of its ongoing first-in-human clinical trial of OPT-302, a novel VEGF-C/D ‘Trap’ therapy for wet age-related macular degeneration, had been met.
Marinus Pharmaceuticals announced that the FDA granted Orphan Drug designation for ganaxolone IV for the treatment of status epilepticus. A Phase 1 clinical trial evaluating the safety, tolerability and pharmacokinetics of ganaxolone IV is expected to initiate in the first half of 2016.
Marinus Pharmaceuticals presented preclinical data of ganaxolone IV, which showed robust activity in the model. The data were presented during an oral and poster presentations at the 68th American Academy of Neurology Annual Meeting.
AVEO Oncology announced granting CANbridge Life Sciences worldwide rights, excluding the United States, Canada and Mexico, to AV-203, AVEO’s clinical-stage ErbB3 (HER3) inhibitory antibody candidate.
The journal Nature published an article highlighting the efficacy of Gilead’s GS-5734 against the Ebola virus in rhesus monkeys.
New Licensing Deals
Ligand announced a worldwide license agreement with Emergent BioSolutions that allows Emergent to use the OmniAb platform to discover fully human mono- and bispecific antibodies. Ligand is eligible to receive annual access payments, fees on patent filings, milestone payments and royalties on future net sales of any antibodies discovered under the license.
Ligand announced a worldwide license agreement with Tizona Therapeutics that allows Tizona to use the OmniAb platform to discover fully human mono- and bispecific antibodies. Ligand is eligible to receive annual access payments, fees on patent filings, milestone payments and royalties on future net sales of any antibodies discovered under the license.
Ligand announced a worldwide license agreement with ABBA Therapeutics that allows ABBA to use the OmniAb platform to discover fully human mono- and bispecific antibodies. Ligand is eligible to receive milestone payments and royalties on future net sales of any antibodies discovered under the license.
Ligand entered into a Clinical Use Agreement with XTL Biopharmaceuticals to supply Captisol for use in the formulation of its lead drug, hCDR1, for the treatment of systemic lupus erythematosus. Under the terms of the agreement, Ligand is eligible to receive milestones and revenue from clinical Captisol sales.
Internal Glucagon Receptor Antagonist (GRA) Program
Ligand scientists gave an oral presentation on GRA at ENDO 2016 and presented a poster at the Levine-Riggs Diabetes Research Symposium, which highlighted data from the Phase 1b trial demonstrating that GRA significantly reduced fasting and post-prandial glucose in subjects with type 2 diabetes.
Adjusted Financial Measures
The adjusted financial measures discussed above and in the tables below for the three months ended March 31, 2016 and 2015 exclude stock-based compensation expense, non-cash debt-related costs, non-cash tax expense, changes in contingent liabilities, non-cash amortization of acquired intangibles, non-cash pro-rata net losses of Viking Therapeutics, fair value adjustments to Viking Therapeutics convertible note receivable, mark-to-market adjustment for amounts owed to licensors and unissued shares relating to the Senior Convertible Note.
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 the presentation of adjusted financial measures provides useful supplementary information to investors and reflects amounts that are more closely aligned with the cash profits for the period as the items that are excluded from adjusted net income are all non-cash items. Ligand uses these adjusted financial measures in connection with its own budgeting and financial planning. These adjusted financial measures are in addition to, and not a substitute for, or superior to, measures of financial performance prepared in conformity with GAAP.