Ligand Pharmaceuticals Inc (LGND) 2007 Q2 法說會逐字稿

Good afternoon.

My name is Tasha, and I will be your conference operator today.

At this time, I would like to welcome everyone to the second quarter financial result conference call.

All lines have been placed on mute to prevent any background noise.

After the speakers' remarks there will be a question-and-answer session.

(OPERATOR INSTRUCTIONS) I'd like to turn the call over to Ms.

Luib in investor relations.

Thank you, you may begin your conference.

Thank you for joining us.

With me are John Higgins, Ligand's President and CEO, John Sharp, Vice President of finance and CFO, and Martin Meglasson, Vice President of discovery research.

Before we begin, I want to remind you that today's call may contain forward-looking statements within the meaning of federal securities laws.

These may include, but are not limited to statements regarding the 2007 second quarter results and program highlights.

These statements involve risks and uncertainties and reflect Ligand's judgment as of the date of this call.

Actual events or results may differ from Ligand's stated expectations.

Additional information concerning risk factors and other matters concern Ligand can be found in Ligand's public periodic filings with the Securities and Exchange Commission, which are available at sec.gov.

Furthermore, this conference call contains time sensitive information that is accurate only as of the date of the live broadcast, August 8, 2007.

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?

Thank you for joining us this afternoon.

I'll provide an overview of our recent activities and update on partnered and internal programs and then I'll turn it over to John Sharp to review our second quarter financials..

To begin with, I want to say Ligand is in a great position.

Our restructuring is behind us, we have a strong balance sheet, we are executing well on our operating plan and many of our partners recently announced positive data for their programs and project significant near-term events.

To give more details, let me start my update with our key internal programs.

Regarding LGD-4665, our small molecule TPO drug, we continue to make good progress with our Phase I dose escalation trial.

The study has two stages, a single-dose escalation stage and a multiple-dose stage.

Now, here in the second quarter we have completed the single-dose escalation stage and the study so far shows that the drug is safe and well tolerated.

In addition to evaluating safety and dosing in the study, we are measuring platelet level.

With the first stage of the study completed we are pleased to report that we have observed statistically significant elevation in the platelet levels following single dosing to healthy volunteers.

The multiple dosing escalation stage of trial is on going and we expect the study will be completed by the end of 2007.

At the same time now we are beginning to prepare to initiate multiple Phase II trials in the first half of 2008 and we also expect to initiate long-term animal carcinogenicity studies by the end of the year, as well.

We have a few other projects in development, including our SARM program, our SGRM program, and our AIPC program.

In regard to our SARM program, we continue to conduct preclinical studies to advance LGD-3303 toward initiating human studies in 2008.

We have produced some very interesting animal data on this compound that show that anabolic or bone-building action and its tissue selectivity.

We'll be presenting the data at two up coming medical conferences this fall.

They're going to be great events for us to showcase this data.

The first is the American Society of Bone and Mineral Research in Hawaii in September, and the second is the Society for Neuroscience animal meeting -- annual meeting in San Diego in November.

Regarding the status of our share repurchase program, in the second quarter we repurchased 3.8 million shares.

To put this in perspective this is nearly 4% of our outstanding share base and we estimate that we were one of the largest purchasers of our stock during the quarter.

We're very pleased to use our balance sheet to buy back shares following our restructuring, and clearly this reflects the confidence in our business and the value we're building for shareholders.

Moving on to our partnered programs, we're excited about progression of activities conducted by our partners, in particular, Glaxo, Wyeth and Pfizer, and we look forward to multiple significant near-term clinical and regulatory events for their respective programs in the next couple of quarters.

GlaxoSmithKline continues to make good progress with Eltrombopag.

They reported positive six-week results from a pivotal Phase III trial with the drug for ITP in the second quarter of 2007.

And they have announced that -- excuse me -- they have also announced they may file an NDA for short-term ITP by year end or early 2008.

Our partner Wyeth announced in April that they received an approvable letter from the FDA for Bazedoxifene for osteoporosis prevention.

Wyeth expects FDA action on Viviant by the third quarter of 2007.

Also, Wyeth has confirmed with us that the NDA filing for Bazedoxifene/CE as a treatment for the symptoms of menopause and osteoporosis remains on track for the end of 2007.

As I mentioned in our first quarter call in May, Wyeth has made significant progress with their program and they have publicly stated that they believe the market potential for the Bazedoxifene franchise could be in excess of $2 billion annually.

Our partner Pfizer has announced a plan to refile and NDA for Lasofoxifene by the end of 2007.

We're very pleased with this development.

Pfizer experts the results from the recently-completed [PERL] study will address the FDA's requirement in terms of safety and benefits for this product.

With those updates, I will now turn over to our CFO, John Sharp, to review second quarter financials.

Thank you, John, and again, thank you to everyone for joining us today.

As you are aware, Ligand has gone through a major transformation in a very short period of time.

We have divested our commercial assets and reduced operating costs considerably with our restructuring.

The results of operations related to our sale of our oncology products and AVINZA are reflected as discontinued operations for all reporting periods I will be discussing today.

Now, turning to the second quarter financial results.

Total revenues for the second quarter of 2007 were $1.4 million, compared to $1.1 million for the second quarter of 2006.

Second quarter 2007 revenues represent the first royalty payment from the sale of our AVINZA product line.

Of the $1.1 million revenues in the second quarter of 2006, $0.8 million relates to collaborative research and development, and $0.3 million relates to milestones.

Total operating costs for the second quarter of 2007 were $16.6 million, compared to $19.1 million for the second quarter of 2006.

The reduction in expense largely reflects savings realized from our restructuring plan.

As a result, for the second quarter of 2007, we reported a $7.7 million loss from continuing operations compared with a $17.2 million loss for the second quarter of last year.

For the second quarter of 2007, we had $7.9 million of income from discontinued operations, compared with $1.2 million for the second quarter of last year.

The increase is primarily due to the release of $10 million of escrow funds from the sale of our oncology product line, partially offset by income taxes.

Our total net income for the quarter was $0.2 million compared with net loss of $16 million of second quarter of 2006.

As of the close of the second quarter, cash, cash equivalents, short term investments and restricted investments total $117 million.

In addition to that there is approximately $35 million of cash held in escrow and trust accounts to support potential indemnifiable claims by purchasers of our commercial products and certain current and former members of our board of directors.

As John stated earlier, in March 2007, our board of directors authorized up to $100 million in share repurchases.

As of June 30th, we had repurchased 3.8 million shares for a total of $25.4 million.

Looking forward to the remainder of the year, our operating expenses for the second half of 2007 are projected to be in the low $30 million range, consistent with the outlook we provided on our last call.

With that, I will turn the call back over to John Higgins.

Thanks.

Again, just to summarize, I want to plainly say, I think the Company is doing great and I'm very pleased how we're executing on our business plan.

The second half of 2007 should be a very busy and exiting time for the Company.

In addition to advancing our own pipeline programs, three of our corporate partners are anticipating potential late-stage developments for their programs.

Just as a quick recap, again Glaxo recently announced data from one of their Phase III studies and has indicated that they expect to file a NDA for Eltrombopag by the end of 2007 or early 2008.

Wyeth expects FDA action on Viviant the third quarter of this year and expects to submit additional NDAs for both Viviant and Aprela in the fourth quarter.

And Pfizer plans to refile its NDA for Lasofoxifene.

At this point we know what we need to accomplish to drive our business.

I join Ligand with the goal of executing on our new plan and to increase transparency to investors on the progress and status of our business.

To that end we have a very busy calendar this fall and will be presenting at multiple conferences, including the Thomas Weisel Partners conference and Bear, Stearns conference, both in early September.

And then in October we'll be attending the Natexis Bleichroeder healthcare conference in New York.

We will have more information on those conferences on our website regarding presentation times and so on, once we get closer to those particular events.

I'm very excited about the next six months and look forward to future updates.

Operator, with that, we'll turn it over to Q & A.

(OPERATOR INSTRUCTIONS) Your first question comes from the line of David Webber.

Hi, thanks for taking the question.

I have a couple of questions.

First, regarding LGD-4665, in the single-dose escalation study could you tell us what toxicities you saw and if there were any serious adverse events?

David, thanks for the question.

We are not getting into the specifics of the study's design or particular findings.

However, as we said in our press release and obviously in our remarks just now, the drug appears to be safe and well tolerated.

We are encouraged with the findings, and pleased with the status of the trial at this time.

We'll give a full safety and efficacy report once the study is finished and hopefully that'll be at the Ash conference in December.

Okay.

And then in terms of the platelet effect, I was impressed by the statistically significant increase in platelets on a single dose.

Can you say whether Promacta in single dose was able to produce a statistically significant increase in platelets?

I'll let Martin comment on that.

David, the answer is no, Promacta did not produce an effect on a single dose.

They have published on their multiple-dose response and there they clearly see a response in healthy volunteers.

So, does this imply that 4665 in humans, as well as in animals, is appears to be more potent?

Just a comment.

From an animal perspective, I'd like Martin to give a recap of what we know.

One thing I'll add, in this study, clearly we're evaluating 4665.

It's not a head-by-head comparator.

By the end of the study we may be able to make more comparative remarks, but the [inmetra] data is very interesting and we discussed those findings in the past.

Okay.

And just regarding -- I know you've been reviewing just to be absolutely sure your ownership of 4665.

Is there been any change in your confidence regarding proprietorship since last quarter?

Yes, David, important question.

This is a priority topic for us, and I'll just offer a couple of thoughts.

We have spent a considerable amount of time and have consulted closely with expert -- external advisors to investigate the ownership status of 4665.

It's a very exciting program for the Company, and a very important one.

I'll plainly say we are satisfied and confident in our position that Ligand has full ownership.

As background, following the completion of our collaboration with Glaxo, Ligand retained the right to conduct R&D on new drugs to target the TPO receptor.

Our R&D activities in this area have been conducted independent of our collaboration with Glaxo and using our own drug discovery technology.

And plainly I'll say, with the extent of review and the analysis recently performed by outside legal counsel and other consultants we remain confident that we have the full ownership rights of that program.

Okay, thanks, I'll get back in the queue.

Your next question comes from the line of [Ian Stephan].

Hey, just a quick question, Just wanted to know --you guys bought back $25 million worth of stock.

Do you expect that rate to be similar going forward for the rest of the year?

Yes.

Ian, thanks for the question.

We are not going to comment on our future repurchase activities.

We have had the question the last couple of months, and on a go-forward basis we just don't talk about perspective of repurchase activity.

But plainly I'll say that we committed to a 100 million share repurchase program.

Clearly we've been active in repurchasing the stock.

I am very pleased that we could pull in almost 4% of our share base, and, again, as I indicated,I think it's a clear representation about our excitement for the business.

As far as the timing, the amount of the extent of repurchases in the future, we'll report that on a historical basis on future call.

Great.

Thanks so much.

Congrats on a good quarter.

Thank you, Ian.

Your next question comes from the line of [Dick Spar].

Hi, John, how are you.

Good.

Good quarter.

I just wanted to ask you when you would expect to announce a partner for LGD-4665 or what benchmarks you would like to hit in that study before you would [pursue one]?

Yes, yes.

Two perspectives.

Big picture, we aren't going to give guidance on when we expect to enter a partnership in terms of the timing.

Obviously we don't have full control over that.

However, I will say strategically for the Company, we believe getting a partnership is important.

This is a very large and significant market.

We expect it will be a highly competitive market and developing it in concert with a partner is a priority for Ligand.

We believe we've made excellent progress establishing preclinical activity.

We've executed very, very well so far on Phase I study, and now by the end of this year are going to be in long-term carcinogenicity studies, which will support future registration, as well as we expect that we will have manufactured a substantial amount of drug supply to start our Phase II drug studies starting next year.

So we're making very good progress.

I'm incredibly proud of our team and what we've achieved so far.

But at the same time we're going to use the data we have and the progress we've made to seek a partnership.

which we think is appropriate for the Company.

Have you conducted any discussions to date?

I'm not going to comment on the status of partnering, but I will say that there is certainly interest for the program.

All right.

That's it.

Thank you very much, guys.

(OPERATOR INSTRUCTIONS) We have a follow-up question from David Webber.

A follow-up question.

I don't know if you'll have this information at hand, but regarding AVINZA, King in its quarterly conference call yesterday said that it had signed approximately 60 contracts with managed care groups since acquiring AVINZA, or perhaps just since being involved in marketing it this year.

And it seems that one of the problems with AVINZA has been that a number of those contracts were either terminated or lost by the Company last year under the previous management.

But do you have any idea how many contracts were lost and -- which would give us an idea of how many would need to be made up?

David, good question, and I certainly understand what you're driving at.

I do not have that information right now.

Transitionally for about a year or so we had been seeking acquirers for the assets, so Ligand, as I understand, deemphasized some of its commercial activities.

And at the same time, in credit to King and the work they did in pursuing the drug, what I've been told is that they did have not only a lot of excitement for the drug, but had several ways that they thought they could expand or change the commercial marketing activities.

So I don't have the exact facts and I can't contrast specifically what they're doing versus what they inherited, but I -- we certainly have reviewed the transcript and heard their remarks yesterday and are encouraged by their activities with the drug so far.

Okay.

And another question you may not know the answer to, but Wyeth recently commented or confirmed that they did file a response letter to the approvable letter on Viviant at the end of June.

Do you know -- happen to know whether FDA has accepted that as a complete response yet?

No, we do not know.

Okay.

We -- what we do know is that Wyeth had publicly said they expect action in the near term, so -- and clearly we're excited about this.

They seem quite bullish on the product, and seem to be on schedule with responding to the FDA's inquiries and also seem confident that they'll receive action in the next several months.

Okay.

Thanks very much.

Thank you, David.

At this time there are no further questions.

Thank you, operator, and thank you, everyone, for joining the call.

It appears we had an excellent turnout.

This is my third conference call and it may be the largest list of participants we've had, which speaks well, I think, for the business.

We are getting out on the road.

We're making ourselves available to investors.

The restructuring is behind us.

The business is going well.

And, again, we believe we have an event-filled calendar over the next six months.

We have invitations to several conferences and we look forward to meeting with investors this fall.

Thank you for your time.

This concludes today's conference call.

You may now all disconnect.