Ligand Pharmaceuticals, Inc. (NASDAQ:LGND)
Q3 2008 Earnings Call Transcript
November 6, 2008, 4:30 pm ET
Erika Luib – IR
John Higgins – President and CEO
John Sharp – VP of Finance and CFO
Andrew Thorning [ph]
Good afternoon. I would now like to turn the call over to Erika Luib, Investor Relations.
Thanks, Jennifer. Welcome to Ligand's third quarter financial results and business update conference call. Speaking today for Ligand are John Higgins, President and CEO; and John Sharp, Vice President of Finance and CFO.
Before we begin, I would like to remind everyone that today's call will contain forward-looking statements within the meaning of the Federal Securities’ laws. These may include, but are not limited to, statements regarding intent, belief or current expectations of the company, its internal and partnered programs, and its management. These statements involve risk and uncertainties and actual events or results may differ materially from the projections described in today's third quarter press release and this conference due to various factors call including but not limited to failure of Pharmacopeia’s stockholders to approve the merger, Ligand’s or Pharmacopeia’s inability to satisfy the conditions of the merger or that the merger is otherwise delayed or ultimately not consummated and the failure of the combined businesses to be integrated successfully.
Additional information concerning risk factors and other matters concerning Ligand and Pharmacopeia can be found in their most recently filed Annual Report on Form 10-K as well as their other public periodic filings with the Securities and Exchange Commission, which are available at www.sec.gov. The information in this conference call related to projections or other forward-looking statements represents the company's best judgment as of today November 6, 2008. Ligand undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call.
At this time, I'll turn the conference call over to John Higgins. John?
Erika, thank you. Good afternoon and thank you everyone for joining us. I would like to start by providing an update on the Pharmacopeia acquisition and then discuss the recent progress on our partnered and internal development programs.
On September 24, we announced that Ligand had entered into a definitive merger agreement to acquire Pharmacopeia, the process of closing the acquisition is on track and we anticipate closing by January 2009 and are working towards partly closing before year end. Last week Ligand was granted by the federal regulators’ early termination of the waiting period required under the Hart-Scott-Rodino Antitrust Laws. Now until then we are continuing with integration planning to the extent possible, I just want to review as we have discussed in the past the four main factors that attracted us to Pharmacopeia. First, a substantial number of royalty partnerships with leading pharmaceutical companies in various stages of development; second, a strong drug discovery platform; third, additional assets that we believe have partnership potential, as you know at Ligand we have a goal to enter to enter one licensing deal per year and Pharmacopeia’s pipeline provides more opportunities for us to drive value through licensing; and finally of course, they will bring us cash and tax assets. We are excited about the opportunities this acquisition will bring to build shareholder value by expanding our pipeline and leveraging our research capabilities. We view Pharmacopeia and Ligand to be a perfect fit. The two companies both have a strong research and drug discovery heritage and by eliminating redundant administrative costs and having tight spending discipline we can drive a company with the diverse rate of royalty assets that is built upon a strong research platform.
Now switching gears to Ligand’s partnered programs, I will start with an update on GSK and PROMACTA. GlaxoSmithKline announced in September that the FDA continues to review the PROMACTA NDA and we remained optimistic about the prospects for the drug’s approval. In May, the FDA’s ODAC panel voted unanimously 16-0 that PROMACTA demonstrated a favorable risk benefit profile for the short-term treatment of patients with chronic ITP. GSK filed the first NDA for this drug for the short-term treatment of ITP at the end of last year. In addition to ITP, GSK also has several other trials underway as well with the drug, including two Phase III studies for hepatitis C and multiple Phase II trials for CIT, and a Phase I trial in sarcoma. Clearly GSK is making a major commitment to advancing the development of this drug. GSK also expects MAA and NDA submissions for the long-term treatment of ITP by the end of 2008.
Switching gears for our selective estrogen receptor modulator or SERMs we have partnerships with Pfizer and Wyeth. To start with Pfizer, the FDA had extended the review period for their NDA through January 2009 so they can fully analyze the completed five-year data from the pivotal PEARL trial for FABLYN. In September, the FDA panel gave a positive 9-3 vote that there is a population of postmenopausal women with osteoporosis in which the benefit of treatment with FABLYN is likely to outweigh the risks. We are encouraged by the panel outcome and with Pfizer’s progress with the FDA and believe their long-term data is compelling.
Moving on to the Wyeth SERM program, their drug VIVIANT, which is a monotherapy bazedoxifene, received a third FDA approval letter for osteoporosis in May of 2008, Wyeth expects to file a complete response with the FDA by the first half of 2009. Wyeth also expects to file an initial NDA in the second half of 2009 for APRELA which is bazedoxifene in combination with PREMARIN.
Shifting to our internal programs, we are on track for submitting an IND this quarter for LGD-4033 that is our lead candidate in our SERM program. Our SERM program focuses on selective androgen receptor modulators. Now androgens have an important role in bone and muscle development and SERM has the desirable effect of testosterone without its undesirable effects such as hypertrophy of the prostate in men and virilization in women. SERM drugs may have utility in patients with ageing related frailty, osteoporosis, cancer cachexia as well as sexual dysfunction. We believe the potential for this type of a therapeutic is very substantial. This is an important program for Ligand and an area to watch in the pharmaceutical space.
In regard to our TPO program, we have completed several Phase I pharmacology studies for LGD-4665 this year to further define drug activity in healthy volunteers, also we are currently conducting a 24-patients double-blind placebo control Phase II trial to evaluate the safety and efficacy of the drug in adult patients with ITP. Ligand intends to present data from its Phase I study at the American Society of Hematology Conference in December of 2008 as well as announce (inaudible) interim information from our ongoing Phase II ITP trial. Ligand has made progress preparing to initiate a study and liaise [ph] with the drug for treatment-induced therapy thrombocytopenia and is completing animal safety study to support initiation of other potential human studies as well.
Switching gears again, we also continued to make progress advancing our drug discovery activities for our EPO Mimetic programs, given our success in developing orally active small molecule EPO Mimetics, we believe that expertise can translate into our EPO Mimetic program as well. We are now in a stage of drug discovery in the EPO program with a goal of identifying and optimizing a lead compound sometime next year.
In summary, our partnered and internal programs continue to make progress and the Pharmacopeia acquisition is on track to close in the near term subject to (inaudible) Pharmacopeia’s shareholders.
At this time I would like to turn it over to John Sharp our CFO.
Thank you, John. Jumping right into things, our total revenues for the third quarter of 2008 were $5.2 million, compared with $5.5 million for the third quarter of 2007. Third quarter 2008 revenues consistent entirely of royalty income from King Pharmaceuticals for AVINZA sales while the 2007 revenues include the AVINZA royalties as well as $300,000 milestone payment received from Wyeth.
Research and development expenses in the third quarter of 2008 were $5.2 million compared with $9.8 million in the third quarter of 2007. The decreases in expenses is primarily due to reduced headcount related cost as a result of our restructuring in the fourth quarter of 2007 as well as lower outside research costs related to our TPO program.
General and administrative expenses in the third quarter were $5.9 million compared with $4.9 million in the third quarter of 2007. The increase in expenses is due to higher legal cost associated with our ongoing litigation and recently settled arbitration partially offset by lower headcount related cost as a result of our restructuring and lower occupancy cost as a result of vacating one of our buildings. The loss from continuing operations for the third quarter of 2008 was $9.1 million or $0.10 per share compared to a loss from continuing operations of $4.9 million or $0.05 per share for the third quarter of 2007.
During the third quarter of 2008, we reported a loss from discontinued operations of $9 million or $0.09 per share compared with income from discontinued operations of $6.1 million or $0.06 per share in the third quarter of 2007. The loss from discontinued operations for the third quarter of 2008 includes $13 million related to our recent settlement with The Salk Institute.
Our total net loss for the third quarter of 2008 was $18.1 million or $0.19 per share compared with total net income of $1.2 million or $0.01 per share for the third quarter of 2007. As of September 30, cash, cash equivalents, short-term investments and restricted investments totaled $72.5 million. In addition, approximately $10.2 million of cash is held in a trust account to support potential indemnifiable claims on behalf of certain current and former members of Ligand’s Board of Directors.
Affirming our previous 2008 revenue forecast, Ligand expects to receive approximately $20 million in royalty revenue for the full year from King Pharmaceuticals for sales of AVINZA as well as a potential $2 million milestone payment associated with the approval of the pending PROMACTA NDA. For the fourth quarter of 2008, we anticipate total operating cost will be between $9 million and $10 million including stock-based compensation and $0.5 million of amortization of deferred gain on sale leaseback.
With that, I will turn the call back over to John.
Thank you. Just in closing, we operate Ligand with staunch spending discipline which will continue following the close of our merger with Pharmacopeia. We are entering a transforming period for Ligand. We anticipate closing on a valuable strategic merger that substantially diversifies our business and we could realize new royalties from multiple products in 2009. We know it is a tough equity environment but we do thank you for your support and look forward to giving you additional updates.
Now before we take questions, I will remind you of some of the news highlights we expect to see from our partners and from Ligand in the near term. Of course, we are eagerly awaiting approval on PROMACTA, GSK’s drug, to treat ITP and also by year end GSK plans to submit an MAA in Europe and an NDA in the US for the long-term treatment of ITP. We are planning to have data for LGD-4665 at the upcoming ASH Conference in December, we are on track for an ID submission by year end for our lead SERM compound, Pfizer’s PDUFA date for FABLYN is now January 2009 and Wyeth expects to file a complete response for VIVIANT in the first half of next year.
Finally, next week I will be in New York with Pharmacopeia’s management at the Rodman & Renshaw Banking Conference and I look forward to seeing many of you at that event. Thank you and with that we will turn it over for questions.
(Operator instructions) Your first question comes from Derek Jellinek.
Hi guys, this is actually Andrew Thorning [ph] for Derek. Just a quick question on PROMACTA, looking at the filing strategy for GSK and sort of the long-term use, I know there was a lot of talk coming out of the FDA panel meeting and sort of panel members about short and long-term use, there wasn’t really a difference because of the concern of the rebound effect. I was wondering if you could comment on can we read anything into the GSK filing strategy, their chronic use and has it been affected by the back and forth between GSK and Agency over their current NDA.
Thank you, Andrew. I will open by saying that we really don’t have any insight directly in terms of the dialogue between GSK and the FDA as you suggest there is back and forth. So, actually we can’t comment on that directly. As far as the filing strategy, just its background, GSK filed December of last year off of one pivotal trial the initial end point was a six-week period of evaluation and it is our understanding that they had agreement from the FDA that they could file with one pivotal trial. All along there was a second pivotal trial that was a six-month study and that study while it was not included in the original NDA the expectations of that would be submitted once that study was finished up. So, it wasn’t so much a change in regulatory strategy all along GSK expected as they did to file which just one study and we anticipate that there will be data available from the second study over the next several months. We don’t know exactly when or how that will be made available but it is our estimate that that study is finished at this time.
Okay and I guess that the question had to do with after the meeting in June, I think there was some thinking that the Agency may be a little bit more lenient based on the discussions at the panel meeting with the labels something similar to end play even though the short-term data was all that the Agency had available. I guess could you comment on the possibility for that if you think that that could be possible or if a label would likely be for the short-term use only and then amended sometime next year.
Right, that is a good question, I think a couple of comments that we pulled out of that panel discussion which you might be referencing is the sense that six weeks treatment or six months that really is all fairly short term acknowledging that these patients have chronic ITP and may be treated for years, three, five years or longer. So, at the same time there is a fairly strong sentiment that the drug appears to be very efficacious and has a good safety profile and there is a real medical need for treatments to help boost platelets. So, as far as what the FDA and GSK will conclude as far as the label is everybody’s open interpretation but clearly by GSK’s filing and their persistent interaction with the FDA they believe the drug could be approved with the existing filing and we are eager to see when this gets approved and I will see what the nature of that label is.
Alright and lastly I know you guys have kind of been taken down with the broader market here and just looking at the Pharmacopeia acquisition we have kind of placed a floor at the $1.65 per share level, is there any concern on your end shares trading at a little below that now that Pharmacopeia’s shareholders may not be as accepting of the deal?
Yes fair question. I cannot estimate how Pharmacopeia’s shareholders are thinking through this all I can say that while there is an opportunity for Pharmacopeia’s four [ph] to opt out of the deal if Ligand’s stock is below $1.65, the two perspectives I can offer is one, we have not received any indication that Pharmacopeia’s four will do that, in fact every signal I received is that they are still excited about this transaction and they are committed to it and as to Pharmacopeia’s shareholders, while this is a very difficult equity environment, the rationale for combining these companies is very compelling, post close we will have a company that is well capitalized, that will not have a need to go to Wall Street for financing, that will have several lucrative near-term news events if these drugs are approved and we will be able to operate with lower combined pro forma expenses. There are a lot of redundant administrative and public company expenses not to mention we can really focus and be disciplined on what we chose to fund as a corporation. So again, in summary, we will be well capitalized, we will have some lucrative assets and particularly in this equity environment we will be able to very adroitly manage our asset base working through this market environment. I am actually very excited about Ligand’s core business, I can’t control the stock price or the macro markets but fundamentally I think we are running a very good business, we have a solid handle on our operations and as I mentioned in my prepared remarks, Pharmacopeia is a very good fit with our business and we think it will be an exciting company for Pharmacopeia’s shareholders to be owners in.
(Operator instructions) There are no further questions.
Okay, thank you. I appreciate your interest. There were a number of people on the call, some new names and a number of analysts as well. We really do appreciate people’s interest. I know it is a very busy day with a lot of other earnings calls. As I said, I will be on the road next week with the management of Pharmacopeia and again we look forward to giving you updates as the next few months unfold. Thank you very much.
This concludes today’s conference call. You may now disconnect.
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