Ligand Pharmaceuticals Inc (LGND) 2009 Q4 法說會逐字稿

Thank you.

Welcome, everybody.

We've got a good good turnout here.

Looks like more people are coming in.

I look forward to sharing with you the Ligand story.

Here we are early in 2010.

We had a very auspicious year last year.

And there have been several substantial updates from our partnerships in our pipeline which are now summarized.

Just this morning, we announced year end financial results, press release was out.

In addition to, along with the business updates, which are also captured in this presentation.

So, it is a good time to be talking with you.

Welcome.

All right.

I would like to direct you to our public filings with the SEC, 10-K and 10-Q, for a full disclosure of the risks and description of our business.

For the presentation, I'm going to give a couple of slides on our financial highlights since we announced our results this morning, give an overview of our Company, just to ground those who may be new to the story, share some highlights with our Pharma partnerships and our internal pipeline, and then conclude with the outlook for the business as we see it right now.

In regard to 2009, we had a very strong year financially.

We're a biotech company.

Many of our peers don't have revenue.

We have substantial revenue.

We finished 2009 with close to $39 million in revenue.

There were four components, royalties, research payments, milestones, also some noncash deferred revenue.

The revenue is up about 50%, 2009 over 2008.

This year we had about $55 million of operating expenses down considerably from last year.

We finished the year with about $55 million in cash.

And we have over $600 million in NOLs before limitations.

In terms of business events last year, again, it was a very significant year, busy year.

Many financial business and clinical events.

We closed the acquisition of two companies.

Neurogen and Metabasis, both public companies.

PROMACTA, which is a drug that we're in partner with GSK, had several substantial events at the end of 2009.

Notably, it was recommended for approval in Europe.

The Phase III trial, there are two very large Phase III trials that have been on-going.

They're fully enrolled.

Also, GSK filed an NDA in Japan for ITP.

I'll have another slide with more details on these activities.

We've successfully completed the first part of our Phase I trial with SARM, an [androgen] drug.

Pfizer has a JAK-3, a late-stage JAK-3, we had a JAK-3 partnered with Wyeth, and now that they've come to merge, they've extended this program.

We received $4 million in milestone payments at the end of the year for Merck.

A couple of drugs, the CXCR2 and p38 both finished Phase II trials with our partners.

We expect data coming out of those and new trials initiating now.

Also, both Conbriza and Fablyn, two drugs that we discovered in our lab, were approved in Europe and may be up for launch in 2010.

That is a year in review.

Again, we're proud of the year in our achievements.

Now, let's talk about going forward.

A quick overview of Ligand for those new to the story.

We're based in San Diego.

We have about 75 employees.

It is a Company focused on drug research and converting our research into profits and cash through our partnerships.

Significantly, we have revenue from current marketed products, over 30 partnered programs, and attractive internal research pipeline, and with $185 million market cap, we're sitting on about $55 million in cash.

Our view of a strong biotech, what makes an attractive company in the industry, first the potential to generate substantial profits in cash from R&D.

Big upside market.

Big opportunities, markets that are attracted to pharmaceutical partners in the medical community.

We believe that Ligand has that.

A strong discovery capabilities and track record.

We've been around about 20 years.

Five drugs that we've discovered have made it all the way from our lab to commercial approval and launch.

We've got a robust pipeline for partnering.

We're targeting some of the largest markets.

Clearly, what we're seeing out of big Pharma is that it is the largest medical markets where the big investment dollars are going for partnering right now.

And finally, strong balance sheet and spending discipline.

You'll see this more as I talk through our financial guidance for 2010, but with our cash balance and our spending outlook, we feel we have a solid business from a financial perspective.

So, why own Ligand right now.

I'll get in to some of the details around our programs, but there are several reasons.

Today, we have the potential to earn major revenues from three partnership programs.

These are late stage programs or currently marketed drugs that have a chance for label expansion.

The first and perhaps our largest asset is our partnership with GSK for PROMACTA.

It is a drug to treat thrombocytopenic or boost platelets.

Second is a drug CXCR2 targeting COPD and asthma.

Also a drug that is partnered with BMS for inflammatory disease, notably rheumatoid arthritis.

Beyond this, we have earlier stage partnerships that are -- that have higher royalties, very substantial milestones tied to them and are targeting what we believe in this environment to be some of the most attractive markets.

A deal with Pfizer for drug targeting asthma and arthritis, a partnership with Merck targeting Alzheimer's and a partnership with Roche targeting hepatitis C.

Internally, we have an attractive pipeline.

We expect to get data this year that could drive new deals.

Again, strong financials.

We have solid revenue, cash revenue, a strong balance sheet decreasing expenses.

The Company has no plans to do financing.

And finally, significant news flow.

I'll show you a calendar our outlook for the near term.

We think we have a very prodigious schedule of events driven both by partnered activities as well as our internal programs.

If we were to look at the big picture, go out a couple of years, the major potential value drivers through the end of next year, PROMACTA, the product launched just about a year ago, we expect US revenue growth and rest of world launch, major trial completion.

There is a long list of studies, but most significantly, we believe these Phase III hepatitis trials will be finished.

This could be a very significant water shed period for Ligand presuming those data are positive .

The CXCR2 Phase IIb studies, these are large studies and the trials should finish within a year or so.

And finally, the p38 Phase II trials.

These are large [incations], significant investment by the partners in a chance to see the data in this time frame.

Finally, product approvals and launch.

This is the growth of the business, a chance to see new products launch this year in Europe for treating osteoporosis.

Chance to see PROMACTA launch in Europe and Japan.

And finally, Acadesine is finishing up a Phase III study.

This is a Schering-Plough program.

Right now, what we understand is the trial's on course to be finished here in 2010.

Ligand just has a simple overview.

There are two main components of our business.

We have a robust partnership portfolio and a biotech business.

The partnership portfolio, these are fully funded programs.

Again, over 33 programs, I'll give some details on those and then the biotech business, this is what the Company was founded on.

Drug discovery, drug research, that is driving toward some of the largest markets.

To go into it, let's break it down.

Let's first focus on the Pharma partnership portfolio.

Here's a simple slide, the logos of all of the companies we have partnerships with.

We think it is an impressive list.

We're working with the world's largest drug companies and a handful of other mid cap biotechs that have a very strong reputation.

Beyond this list though, what's important is the significant investment.

These are partners that are highly committed to the programs.

They're investing hundreds of millions of dollars and are targeting some of the largest indications.

When we look at the distribution of the research right now, we're excited about this because again, these are fully-funded programs.

This is a pie chart that breaks down by stage, a development these 33 programs.

Now, as I mentioned already, Ligand, our market cap is less than $200 million.

We're not aware of any other company our size, or frankly multiples of our size, that has this sort of roster of fully-funded assets.

Now, just over a third are in preclinical.

That's not a surprise.

There are a lot of shots on goal.

The hit ratio is pretty good though.

We're seeing a lot of conversion from the preclinical, the prehuman research into human trials.

Working up the pie chart, if you look at the three purple slices, those represent the human stages of development.

Phase I, II, and III.

Over half of these programs are in human trials right now.

Driving toward potential NDA filings and obviously announcement of data.

The Phase II and the Phase III slices, we believe will generate significant news flow this year.

As well as driving potential milestone payments.

Then in the upper right, we just comment that in the NDA category, we have a couple of products pending approval, a couple that have recently been approved and haven't launched yet.

We have Phase III programs that may have data within a year that could be ready for an NDA filing.

So this category, again, is the leading edge of our business.

It is where we believe there will be a chance for new market expansion and increased revenues.

A couple of highlights on a handful of these programs.

I've already mentioned PROMACTA is our leading asset.

It is a major value driver given the market size.

We believe this could be a multibillion dollar revenue potential for GSK.

We have a substantial royalty and there is a long patent life.

Upwards of 12 years of remaining patent life.

The product was just approved a year ago for a small indication, ITP.

It was a very good proof of concept indication.

Showing patients who are thrombocytopenic or have low platelet counts, the drug in a once a day oral medicine has a very profound effect at boosting platelets, reducing bruising, bleeding, and the risk of hemorrhagic stroke.

Now, the US sales were $20 million in 2009.

We are looking at expected European launch early 2010.

It was recommended for approval just a couple of months ago.

And an NDA is filed in Japan.

Beyond this though, the big market is hepatitis.

There are tens if not hundreds of thousands of more eligible patients to be treated with hepatitis.

These are patients that not only have low platelet counts, their platelet count is so low, they can't go on their antivirals.

They cannot take the treatment for their underlying disease.

This is very substantial investment by GSK.

Over 1,500 patients in 200 countries worldwide, and again, we believe potential data by the end of 2011.

Also, there are Phase II trials on-going MBF and sarcoma.

If you go went to clinictrials.gov, there are over 31 different clinical studies that are mentioned that are being sponsored by GSK or investigators.

There is a very robust investment with the outlook that this could be a promising and large market.

The next program I'll comment on is the CXCR2 program with Merck.

This was originally partnered with Schering-Plough but now with the Merck merger, Merck has carried it forward.

What is notable about this is it is targeting pulmonary disease.

There essentially are no good drugs out there.

This is believed to be a very substantial market, potentially a $5 billion category.

Following the merger, Merck's acquisition of Schering, Merck has extended this program.

They have finished the Phase IIa trials.

They got good results.

They have now advanced these these to Phase IIb.

It's significant; these are large studies.

Over 1,000 patients between the pulmonary disease and asthma trials.

It's severe asthma Very significant investment.

And the COPD data we believe could be out first quarter of next year.

It is a large market and Merck, by far, has the most advanced program.

Another program is the p38 program.

This is a program targeting inflammatory disease.

It is the partnership with Bristol-Myers.

We have leads, several back-ups, several studies in Phase II trials, perhaps the most exciting is targeting arthritis.

This is a large market and it is one where the positive Phase I data, while it came out about a year ago, we think portends positively for potentially more data out of the Phase II rheumatoid arthritis trials and advanced in to Phase IIb or Phase III trials.

Another program we have with Merck is a Beta-Secretase program.

This is a partnered program originally also with Schering-Plough given the merger with Merck, Merck is advancing this.

They're finishing up a Phase I trial.

Alzheimer's is arguably the largest untapped medical market.

Every new report that's analyzing Alzheimer's, it seems the potential risk, the incident rate, the potential size of the market keeps increasing the more we learn about the disease.

While there are several Phase III programs, researchers are very excited about the Beta-Secretase target.

Merck has announced Phase I data significantly with a single dose.

They saw the drug cross the blood brain barrier and they had a 58% reduction in A-Beta Peptide in the cerebral and spinal fluid.

This is a significant finding.

We believe there could be more Phase I data out in the next few months and a Phase II trial start by the middle of 2010.

Another program to share some highlights on, Pfizer owned two [SERM]s.

These are selective estrogen receptor modulators targeting osteoporosis.

Vista is on the market right now at peak sales that did about $1.7 billion.

These are two SERMs that we discovered that came out of our lab.

One was partnered with Wyeth, the other, Pfizer.

Now, with that merger, Pfizer owns both of them.

Notably, both drugs were approved in the spring of 2009.

That's about the time that Pfizer announced their acquisition of Wyeth.

So, the launch plans were essentially put on hold until the merger closed.

It is our estimate that one or both of these products could be up for launch in Europe this year.

And we could also see some advancement on the regulatory front for Viviant, which was Wyeth's product, in the US.

The panel meeting as well as the NDA filing for a combination drug which has the SERM plus Premarin in it.

So, we're excited about this.

This is a late stage regulatory launch stage program.

And finally, the last partner update I'll provide is around JAK-3.

This is a hot topic, those who do know Pfizer or [Insight] know the promise of this field.

Pfizer is described as their most important pipeline program.

They have a Phase III program.

This program actually is an early research stage program, originally done with Wyeth.

Now, of course, Pfizer owns Wyeth and owns this program.

What's significant is that this program was set to naturally expire or terminate at the end of last year.

Pfizer saw the data, they wanted to extend it.

We agreed to extend it.

They've extended the contract.

To date, we've received over $50 million in research payments.

It is a very promising target.

There is a chance to earn up to $175 million in milestones and a significant double digit royalty.

We could not have a better partner for this program than Pfizer.

We're excited about their commitment to their program.

Switching gears to our internal pipeline, those are our partnered programs.

Fully funded research projects that our partners are driving forward with.

Internally, we have five programs that we're advancing.

We're doing animal work, toxicology work, Phase I studies with the goal to announce data and drive for new deals.

We have an androgen receptor modulator, a SARM, targeting muscle wasting and frailty.

Merck is the largest player in this category right now.

We have a Phase I program.

We have a TR beta program for hyperlipidemia.

A thing of Lipitor.

It is a huge market.

And with the Lipitor coming off patents, we think this is an attractive category for partnering.

The [Glucagon] program targets diabetes.

We have an H3 program targeting cognitive disorders, ADHD and the like as well as an oral [EPO].

We're familiar with [Erythropoietin], the large franchise [Angin] has with the [ESA]s.

The recent headlines with [Acanat] and [Tacayta].

This is an important category.

We think one that could be opened wide up with an oral versus an injectable medicine.

As I mentioned earlier, we have a five molecules discovered in our labs that have made it to approval or are marketed.

We've done over 15 licensing deals.

In terms of our SARM program, we believe this is the best in class molecule.

We've had some Phase I single dose data on a successfully finished study.

We're now at this month starting the Phase II multidose.

We expect to that data later this year.

It is targeting muscle wasting, frailty, [cancer cachexia].

Our objective is to announce the data and then move the program forward to partnering later this year.

We have other research programs.

I mentioned these.

The take away is that these are important targets.

Ligand's discovery platform isn't therapeutic specific.

It is a broad discovery platform that can target any receptor target that either our partners bring us or that we want to go after.

Our objective is to pick the largest markets that can be differentiated from a large Pharma platform, driving toward potential partnering deals.

Now, just to conclude, a few slides on our business outlook and upcoming events.

For 2010, our financial outlook, revenues are projected to be about $30 million.

This will come from royalties, milestones and research payments.

Plus, we'll have some noncash revenue as well.

We believe this is achievable and this is -- this does not include revenue from new licensing deals.

We have a chance to enter potential licensing deal, we're focusing on this revenue guidance for the operating budget, and there is a chance for revenue upside if we bring in new deals.

Operating expense is approximately $35 million, in that are a significant amount of noncash expenses.

When you look at the business, while revenues don't quite equal expenses, this is a very efficient business.

We have an attractive base of revenue, cash revenue, that is going almost all the way to cover expenses.

We expect a very small amount of cash burn on an operating basis in 2010.

Given the potential for additional revenue from new license agreements and over $600 million in the operating loss carry forward before the limitations.

When we look at our calendar of events, it is a very robust calendar.

This is what we're looking at for 2010.

This is not everything, obviously.

But it is a good characterization of the depth of our business.

There are product launches, there are regulatory events, late stage clinical events, and so on.

Notably, the year started off strong.

We've seen PROMACTA Phase II studies fully enrolled and the CXCR2 Phase II trials started.

The drumbeat is now picking up on those important programs.

We expect multiple opportunities to present data on our SARM program.

We do believe that Conbriza will launch in Europe as well as PROMACTA.

We believe that Merck will start their Alzheimer's Phase II trial.

We will complete our Phase I SARM trial.

We believe we're in line to declare a lead oral candidate for our EPO program.

Acadesine, this is a drug to treat bypass graft surgery to minimize the risk of heart attack and stroke.

Phase III data should be out by the end of this year.

We could see PROMACTA approved toward the end of 2010, as well as potential milestones from existing collaborations for hitting some important research targets.

My final slide just to leave you with kind of a visual what we're call the Pyramid of Value, Ligand has -- we believe, a very compelling story.

We have closed acquisitions of three companies the last year.

We have rebuilt and restructured the business.

Those who know Ligand the last couple of years, we've cut costs and realigned the business.

Now we're sitting on, we think, a very envious roster of assets.

At the top of our pyramid are our top value drivers.

If you were to look at the story as a new investor, these are the two or three reasons that we think are most compelling in terms of financial upside.

PROMACTA, CXCR2, and p38.

These are important partnerships for big targets with big royalty potential.

Beyond that, in the middle, we have a core of potential news and deal flow.

These are the programs that we're driving forward.

They're not high cost programs from an investor perspective.

But they're high value.

We can drive for deal and potential data here in the next year or so.

And finally, the bottom layer is what we call the [defoundation].

The benefit of having these fully funded partnerships is that there's hundreds of millions of dollars being invested by our partners for programs that we are waiting for data, for news events, and potential milestone payments.

Any one single event may not be the number one reason to buy the stock.

But across a whole platform of JAK-3 programs, the Beta Secretase, our SARM, the Acadesine Phase III trial, over 14 other undisclosed programs, again, there is a defoundation that could drive news as well as financial events.

We expect, over time, some of the programs again will migrate higher up.

We're proud of the business that we have built.

We're excited about the future.

And we look forward to having a dialogue with you as 2010 continues.

Thank