Ligand Pharmaceuticals Inc (LGND) 2007 Q3 法說會逐字稿

At this time I would like to welcome everyone to the Ligand Pharmaceuticals third-quarter earnings release conference call.

(OPERATOR INSTRUCTIONS).

I would now like to turn the conference over to Erika Luib with Investor Relations.

Thank you.

Welcome to the Ligand third-quarter earnings and business update call.

Joining me on this call 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, please note 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 third-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 materially from the projections described in the press release and this conference call.

Additional information concerning risk factors and other matters concerning 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, November 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 will turn the conference call over to John Higgins.

Thanks and welcome to all of you joining us on our call this afternoon.

Just to give a quick summary, I will go over recent activities and provide updates on our (inaudible) internal program, Martin Meglasson will provide highlights on our SARM program, and then John Sharp will review our third-quarter financials.

To start out, I'd like to say in comparison to a year ago, we have come a long way.

Ligand's operating plan is on track, we have a strong balance sheet, and many of our partners just recently have projected significant near-term events for their programs.

In addition, we are now receiving meaningful quarterly royalties from the first of several of our corporate partners.

This is an important development as we execute on our strategy to be a royalty-driven company.

Let me review the progress of our key programs, and start with Ligand's lead internal program.

Regarding LGD-4665, our small molecule TPO drug, since the end of the second quarter, we have now concluded our Phase I single and multi-dose study with the drug.

Our program has been accepted for a presentation at the upcoming American Society of Hematology meeting in Atlanta, and we will be presenting the results from that study on December 8.

Since we will be presenting the data at this major medical conference, we won't be discussing the results until then.

However, I will say the drug was safe and well-tolerated, and we are pleased with the findings from this study.

Shifting to our partner programs, we are pleased with the progress our partners have made with their respective programs.

In particular I want to highlight the work that GlaxoSmithKline and Wyeth have done with their programs.

GlaxoSmithKline announced that they will file an NDA for Eltrombopag for short-term ITP by year-end.

You may recall that Glaxo reported in the second quarter their goal was to submit an NDA in late '07 or early '08.

We are, obviously, encouraged by the projected earlier-than-expected NDA submission date, and we're excited about Glaxo's progress with the drug.

I will also highlight that Glaxo recently announced earlier this week that two Phase III studies for Hepatitis C have been initiated.

Moving on to our partnership with Wyeth, they announced that they have completed a response to the earlier FDA approvable letter that they received in April on bazedoxifene.

This is for their drug otherwise known as Viviant, and that submission was for osteoporosis prevention.

Later on in the year, Wyeth expects FDA action, actually by the end of this quarter, for that approvable letter.

In July of this year, a separate application was filed for osteoporosis treatment, and the action date for that indication is expected by the end of May 2008.

In October, Ligand received a milestone payment of $0.25 million for Wyeth's submission of an application to the EMEA in September, seeking approval to market Viviant for osteoporosis prevention and treatment in Europe.

So, clearly, a lot of activity by Wyeth for Viviant from a regulatory perspective, both here in the US, as well as in Europe.

In regards to bazedoxifene CE, also known as Aprela, Wyeth reported in October that additional work is needed before filing the NDA, and the -- before filing the NDA with the FDA, and they're targeting menopausal symptoms in osteoporosis for Aprela.

Given the public remarks made by our partners, we believe that these products for both Glaxo and Wyeth have multi-billion dollar market potential.

At this point I'd like to turn the call over to Martin Meglasson, our Vice President of Drug Research, to review the recent highlights from our SARM program.

Thanks, John.

We are developing a family of SARM compounds at Ligand.

These compounds demonstrate anabolic effects on skeletal muscle and bone, while sparing prostate and (inaudible) side effects typical of existing androgen drugs.

In regards to one of these compounds, LGD-3303, we have presented key preclinical findings at major scientific meetings this fall.

We reported that 3303 increased the bone mineral density and strength of both femur and spine in an animal model of post-menopausal osteoporosis.

Importantly, LGD-3303 was shown to act through an anabolic mechanism, which differentiates it from anti (inaudible) drugs that are now widely used.

The data suggests that LGD-3303 could provide a safe and more effective new drug for osteoporosis treatment, including patients that have had an inadequate response to bisphosphonate treatment.

We continue to work through filing an IND in 2008 and initiating human trials.

Back to you, John.

Martin, Thank you.

Actually, we'll turn it over to John Sharp, our CFO, to give some highlights on our third-quarter financials.

Thanks, John.

From a financial prospective, we are very pleased to see that we continue to reduce our quarterly operating expenses while meeting our corporate and scientific goals under our business plan.

These expenses exclude the results of operations related to the sale of our oncology products and AVINZA, as they are reflected as discontinued operations for all reporting periods I will be discussing today.

Now turning to the third-quarter financial results.

Total revenues for the third quarter of 2007 were $5.5 million, compared with no revenues for the third quarter of 2006.

Third quarter 2007 revenues consist of $5.2 million of royalty income from King Pharmaceuticals, and 250,000 of milestone revenue from Wyeth.

Total operating expenses for the third quarter of 2007 were $14.7 million, down from $22.5 million for the third quarter of 2006.

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

As a result, for the third quarter of 2007, we recorded a $4.9 million loss from continuing operations, compared with a $22.2 million loss for the third quarter of last year.

For the third quarter of 2007, we realized $6.1 million of income from discontinued operations, compared with $7.3 million of income for the third quarter of last year.

Our total net income for the quarter was $1.2 million, compared with a net loss of $14.9 million for the third quarter of 2006.

As of September 30th, cash, cash equivalents, short-term investments and restricted investments totaled $99.8 million.

In addition to that, at September 30th we had approximately $27.5 million of cash held in escrow and trust accounts to support potential indemnifiable claims by the purchasers of our commercial products, and certain current and former members of our board of directors, of which we received $10 million in October.

Over the last few months, we continued to repurchase our stock under our share repurchase program authorized by our board of directors.

As of November 8, 2007, we have repurchased a total of 5.9 million shares for $38.3 million.

This amount represents nearly 6% of our outstanding stock.

We now have 95.4 million shares outstanding.

We believe in our business and assets, and are pleased to be able to reduce our share count.

Looking forward to the remainder of the year, our operating expenses for the fourth quarter 2007 are projected to be approximately 15 million, consistent with the third quarter and the outlook we provided on our last call.

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

Thank you, John.

Just a brief summary here.

Ligand continues to execute well on our business plan.

We have a couple of significant near-term events, and just to recap the upcoming milestones -- by the end of 2007, in less than two months, we are looking for Glaxo to submit an NDA for Eltrombopag, and for Pfizer to submit an NDA for Oporia.

In addition, we anticipate FDA action on Wyeth's NDA filing for Viviant in the near-term.

And as I referenced, we are pleased to be at the ASH conference in one month from today in Atlanta on December 8 to present our findings from our Phase I study for LGD-4665.

With that I'd like to thank you for joining us for the call, and I will turn it over to the operator for questions.

(OPERATOR INSTRUCTIONS).

David Webber, Broadpoint Capital.

Thanks for taking the call.

A couple questions.

First, regarding LGD-4665, could you discuss what the next steps will be with that drug?

In a general sense, we're pleased to have finished the study.

We'll have data, obviously, out in a month.

And already, while we're finishing up some of the [safety] data reports and so on, we've got, we think, a very good insight on to the clinical potential of that product.

As far as specific plans for '08, from a development perspective, we're working up our '08 clinical plans right now.

And we'll give more guidance on the timing of when our next trials will initiate and what indications we'll be going after when we give our full overview of our business on our fourth-quarter call.

Thanks for that.

John, could you update us at all -- you've spoken in the past about doing a very thorough examination this year of any of the ownership questions regarding 4665.

Can you update us on where you are with that?

Sure.

Good question.

This is certainly an important priority for us, securing the ownership status of all of our lead programs.

This project we have looked at very carefully and are comfortable with the ownership.

Clearly, we have a valuable relationship with Glaxo.

We helped in the discovery efforts over a decade ago for Eltrombopag.

The TPO mimetic market is a very exciting market for us.

And this compound, and also additional backup compounds, have been developed after the washout with Glaxo, not relying on know-how from that collaboration.

And we carefully have looked at the issue and (inaudible) patents that are out there under Glaxo's name.

And we do not feel that we infringed those patents.

So we are comfortable in our ownership position, and clearly are excited about this molecule, and about the market opportunities this category presents.

Thanks.

The last question I have for now is -- I'm sure you noticed there was a large SARM partnership announced earlier this week between GTx and Merck.

And GTx management in their conference call commented that there had been a number of pharmaceutical and biotech companies interested.

So that clearly reflects considerable interest in SARMs in the industry.

Could you discuss your partnering strategy for the SARM program at Ligand, and whether you have been in any discussions or been approached by any parties about that?

Sure.

Again, I'll make some general remarks.

First, I'll start by saying we are very excited about our SARM program.

A little background.

Obviously, for those who know us, we've got a great heritage of drug discovery.

We're seeing that with our partnerships with Glaxo, with Pfizer, with Wyeth, with TAP.

We a decade or more ago entered a couple of very interesting deals that now are on the verge of NDA filings or NDA approvals.

And that speaks well for our internal efforts and what we're trying to do by advancing our own pipeline drug.

Specific to our SARM program, we have a deal with TAP; they've got a Phase I fixed molecule; it's a little more advanced than our program.

We have a next-generation compound in LGD-3303, as well as a couple of other compounds that are also very exciting that are moving toward an IND filing.

And we are excited about it.

And I want to pick up on your remark that industry is very interested in this category.

We have had some inquiries.

We did see the deal announced earlier this week.

Having said that, our program is a little earlier in development than the deal that Merck just did their deal around, and we aren't commenting specifically on (inaudible) partnering discussions.

We're excited about the category.

We're excited about our drug discovery efforts and the molecules we have.

And our objective -- similar to our TPO program, our objective is to eventually have a partnership.

These are going to be for very large markets that will need to be developed globally, and we think that we've got the credentials and the resources to advance it to the stage where we can entice a partnership.

Thanks very much.

Neil Weiner, Foxhill Capital Management.

Can you just give us a little more granularity on what the timetable will be for the ENABLE 1 and 2 trials, and if they're successful, when -- what kind of timeline we'll see for NDA, and kind of revenue from that?

I'll ask Martin to comment on the timelines for the two recently initiated hepatitis C trials by Glaxo.

Let me first provide just a little bit of background comments to point out that thrombocytopenia is relatively common in cirrhotic patients; roughly a half to up to two-thirds of cirrhotic patients show signs of thrombocytopenia.

And cirrhosis is the most -- thrombocytopenia in cirrhotic patients is the most common reason that they are unable to initiate appropriate antiviral therapy for Hepatitis C virus.

In the ENABLE 1 and ENABLE 2 trials, our partner, GSK, will be determining the effect of Eltrombopag on the ability of cirrhotic patients to initiate antiviral chemotherapy treatment, will remain on the antiviral chemotherapy treatment for the full duration of recommended treatment, and then the effect on sustained viral response.

The studies are essentially made up of three phases.

The first phase is a wash-in phase that may take up to nine weeks, where the patients will be titrated with Eltrombopag to achieve the most effective dose on platelets for each patient.

This will be followed by a period of antiviral treatment.

For the most common genotypes of HCV in the US, the recommended duration of treatment is 24 weeks.

That will be for genotypes 2 and 3.

Following that, there will be a need to determine the sustained viral response.

So that will require 24 weeks of follow-up after the cessation of antiviral treatment.

So, roughly, we're talking about a year on out to finish the earliest enrolling patients, for them to begin ramping up from the study.

Martin, thanks.

While we can give our perspective, obviously, we would encourage analysts and investors to talk to Glaxo directly.

Your second question about market timing, and I looked at that in terms of market potential, to give a little more color, we think Glaxo has done some excellent work so far with their Hepatitis C indication.

The Phase II data looks very encouraging.

And our view -- and we've done our own third-party market research as it relates to our program -- we think the Hepatitis C category is very, very exciting.

We think it may be the largest indication of all the target markets for a TPO agonist product.

And particularly, we think, an oral small molecule TPO agonist could have a very, very significant role here.

So we're encouraged by Glaxo's work, and we're pleased to see that they have started their Phase III trial.

One other question, just on the NDA for short-term.

What's your research show of what kind of off-label use (inaudible) for long-term -- for long-term use?

A fair question.

We won't comment on that.

It's not our NDA, and we aren't going to have a role in product commercialization.

There is a clear medical need.

We know that.

And we believe that Glaxo will have long-term data eventually.

So, those pieces will fall into place, but we can't comment on off-label usage.

(OPERATOR INSTRUCTIONS).

At this time there are no further questions.

Thank you again, everybody, for joining us.

It's a very busy time, a busy end to 2007.

We look forward to giving you further updates on our business, including our clinical results, in one month.

Thank you.

This does conclude today's conference call.