On May 2, 2019 Ligand Pharmaceuticals Incorporated (NASDAQ: LGND) reported financial results for the three months ended March 31, 2019 and provided an operating forecast and program updates (Press release, Ligand, MAY 2, 2019, View Source [SID1234535543]). 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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"The first quarter of 2019 was a great start to the year for Ligand. We saw an important new drug approved that will generate royalties for Ligand, we completed six new OmniAb and Captisol licensing deals, invested in a new technology company called Dianomi and saw our first OmniAb partnered program enter Phase 3 testing. This past quarter we divested Promacta for $827 million, converting the remaining years of royalty cash to be generated into capital today that can be reinvested into growing our business. Our partnered programs experienced significant value-enhancing events in the first quarter with a calendar for the rest of the year stacked with several substantial events," said John Higgins, Chief Executive Officer of Ligand. "At our analyst day we laid out our strategic priorities and cash investment agenda, which centers on M&A, project-financing royalty purchases, seed investments into technology companies and share repurchases. We have a highly diversified portfolio and robust financial outlook with attractive growth of top and bottom lines projected and meaningful expansion of our operating margins anticipated."
First Quarter 2019 Financial Results
Total revenues for the first quarter of 2019 were $43.5 million, compared with $56.2 million for the same period in 2018. Royalties were $19.5 million, compared with $20.8 million for the same period in 2018 and primarily consisted of royalties from Promacta, Kyprolis and EVOMELA. Royalties reflect Ligand’s sale of Promacta to Royalty Pharma as of March 6, 2019, resulting in a partial quarter of Promacta royalties, and Ligand will not receive Promacta royalties going forward. Material sales were $9.0 million, compared with $4.4 million for the same period in 2018 due to the timing of Captisol purchases for use in clinical trials and commercial products. License fees, milestones and other revenues were $15.0 million, compared with $30.9 million for the same period in 2018, with the prior-year quarter including an upfront milestone payment upon the out-license of Ligand’s Glucagon Receptor Antagonist program to Roivant Sciences.
Cost of material sales was $3.9 million for the first quarter of 2019, compared with $0.8 million for the same period in 2018. Amortization of intangibles was $3.5 million, compared with $3.3 million for the same period in 2018. Research and development expense was $11.3 million, compared with $7.4 million for the same period of 2018, due to costs associated with recent acquisitions. General and administrative expense was $11.1 million, compared with $7.6 million for the same period in 2018, due to costs associated with recent acquisitions and non-cash stock-based compensation expense.
Net income for the first quarter of 2019 was $666.3 million, or $31.32 per diluted share, compared with net income of $45.3 million, or $1.83 per diluted share, for the same period in 2018. Net income for the first quarter of 2019 was impacted by an after-tax gain of just over $640 million on the sale of Ligand’s assets and royalty on Promacta to Royalty Pharma. Adjusted net income for the first quarter of 2019 was $24.8 million, or $1.16 per diluted share excluding the impact of the gain recognized on the sale of Promacta, compared with adjusted net income of $35.7 million, or $1.55 per diluted share, for the same period in 2018.
As of March 31, 2019, Ligand had cash, cash equivalents and short-term investments of approximately $1.4 billion. Cash generated from operations during the first quarter of 2019 was $45.3 million.
2019 Financial Guidance
Ligand is affirming existing revenue guidance for 2019 with total revenues expected to be approximately $118 million including royalties of approximately $48 million, material sales of approximately $27 million and license fees and milestones of approximately $43 million. Ligand is also affirming its existing adjusted earnings per share guidance of approximately $3.20, which excludes the impact of the gain recognized on the sale of Promacta of $30.09 per share compared to the initial estimate of the impact of the gain of $29.05 per share.
First Quarter 2019 and Recent Business Highlights
Promacta
In March 2019, Ligand announced the sale of Promacta to Royalty Pharma for $827 million in cash. As of March 6, 2019 Ligand will not receive any royalty on sales of Promacta.
Kyprolis (carfilzomib), an Amgen Product Utilizing Captisol
On April 30, 2019, Amgen reported first quarter 2019 net sales of Kyprolis of $245 million, a $23 million or 10% increase over the same period in 2018.
Recent Acquisitions, Targeted Investments and Partner Funding Events
Ligand announced a $3 million investment in Dianomi Therapeutics in exchange for 1) a tiered royalty of 2% or 3% based on level of net sales for the first five products to be approved using Dianomi’s patented Mineral Coated Microparticle (MCM) technology, and 2) a loan convertible into $1 million of equity at the next qualified financing.
Seelos Therapeutics completed a reverse merger with Apricus Biosciences and is now publicly traded on the Nasdaq Capital Market under the symbol "SEEL". In conjunction with the transaction, Seelos issued common stock and warrants in a private round led by a group of leading venture capital investors, for gross proceeds of $18 million.
CStone Pharmaceuticals listed shares on the Hong Kong Stock Exchange and raised $266 million in an equity offering that, in part, will be used to fund the company’s OmniAb-derived Phase 2/3 program CS1001.
Internal R&D
Ligand announced completion of enrollment of the Company’s Phase 1 clinical trial of its internal Captisol-enabled Iohexol program and announced that top-line data from the trial is expected in the third quarter of 2019.
Additional Pipeline and Partner Developments
Ligand’s portfolio of partnerships now includes more than 200 Shots on Goal driven by business development and licensing activity, and the expansion and advancement of OmniAb partnerships.
Sage Therapeutics announced U.S. Food and Drug Administration (FDA) approval of ZULRESSO (brexanolone) injection for the treatment of postpartum depression. Ligand received a $3 million milestone payment as a result of the approval. Sage Therapeutics plans to launch ZULRESSO in late June 2019.
Daiichi Sankyo announced receipt of marketing approval in Japan for MINNEBRO (esaxerenone) for the treatment of hypertension.
Melinta Therapeutics announced preparation of a supplemental new drug application (sNDA) for Baxdela in community-acquired bacterial pneumonia with the sNDA expected to be filed in the second quarter of 2019.
CStone Pharmaceuticals announced dosing of the first patient in a Phase 3 clinical trial assessing OmniAb-derived CS1001 in combination with chemotherapy for the treatment of gastric adenocarcinoma or gastro-esophageal junction adenocarcinoma.
Viking Therapeutics announced that additional VK2809 Phase 2 data was presented at the 2019 annual meeting of the European Association for the Study of Liver, and that results demonstrated promising efficacy at doses as low as 5 mg daily. Viking also announced plans to initiate a Phase 2b study of VK2809 in biopsy-confirmed NASH in the second half of 2019.
Metavant updated Ligand that they no longer plan to initiate a clinical proof-of-concept trial this year for RVT-1502 in Type 1 diabetes following requests from FDA for additional non-clinical studies. Metavant is evaluating its development plans for the program, and we expect them to provide an update on the status of the program.
Verona Pharma announced positive interim efficacy and safety data from part one of a two-part Phase 2 clinical trial of a dry powder inhaler formulation of ensifentrine in patients with moderate-to-severe chronic obstructive pulmonary disease (COPD).
Verona Pharma also announced the European Patent Office granted an additional key patent relating to the company’s lead development candidate ensifentrine.
Sermonix Pharmaceuticals announced a poster presentation on the performance of its lead investigational drug, lasofoxifene, at ENDO 2019.
Opthea Limited announced that the independent Data and Safety Monitoring Board for the company’s ongoing Phase 2b study of OPT-302 in wet age-related macular degeneration reaffirmed its positive recommendation that the trial continue without modification.
Aptevo Therapeutics provided an update on OmniAb-derived APVO436 and announced that Phase 1 data is anticipated in the fourth quarter of 2019. New preclinical data for APVO436 was also presented at the American Association for Cancer Research (AACR) (Free AACR Whitepaper) 2019 Annual Meeting.
OmniAb partner xCella Biosciences presented high-throughput functional screening of antibody libraries, highlighting OmniRat and OmniChicken, at the 2019 Protein Engineering Summit (PEGS).
Business Development
Ligand announced a worldwide license agreement with Genagon Therapeutics AB to use the OmniAb platform technologies to discover fully human antibodies. Genagon is an immuno-oncology biotechnology company located in Sweden. Ligand is eligible to receive development milestone payments and tiered royalties on future product sales.
Ligand disclosed a worldwide license agreement with a San Francisco Bay Area venture-stage biotechnology company to use the OmniAb platform technologies to discover fully human antibodies. Ligand is eligible to receive development and commercial milestone payments and royalties on future product sales.
Ligand entered into new Captisol clinical use or commercial license and supply agreements with Merck KGaA, reVision Therapeutics, Takeda and SQ Innovation.
Publications and Presentations
At PEGS 2019 Ligand scientists announced the launch of OmniClic, a novel next-generation common light chain OmniChicken-based antibody discovery technology focused on bispecific antibodies.
Preclinical data of the combination of the BCL-2 inhibitor S55746 and the MCL1 inhibitor S63845, compounds originating from the Servier collaboration and now partnered with Novartis, in models of AML were recently published in the journal Leukemia, demonstrating potential to rapidly suppress leukemia with limited toxicity to normal human bone marrow cells compared to chemotherapy.
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 stock-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, unissued shares relating to the Senior Convertible Notes, gain on the sale of Promacta 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 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) 591-4752 from the U.S. or (720) 405-1612 from outside the U.S., using the conference ID 6375579. To participate via live or replay webcast, a link is available at www.ligand.com.