Ligand Pharmaceuticals Inc (LGND) 2010 Q2 法說會逐字稿

Greetings, and welcome to the Ligand second quarter earnings call.

At this time all participants are in a listen-only mode.

A brief question-and-answer session will follow the formal presentation.

(Operator Instructions).

This conference is now being recorded.

It is my pleasure to introduction your host, Miss Erika Luib, Investor Relations for Ligand.

Thank you, Miss Luid, you may now begin.

Thanks, Christian.

Welcome to Ligand's second quarter financial results and business update conference call.

Speaking for Ligand are John Higgins, President and CEO, and John Sharp Vice President of Finance and CFO.

Just a reminder to everyone that today's call will contain forward-looking statements within the meanings of federal security laws.

These may included but are not limited to statements regarding intent, belief or current expectations of the Company, its internal partner programs and its management.

These statements involve risk and uncertainties, and actual events or results may differ materially from the projections described in the press release and this conference call.

Additional information involving risk factors and matters concerning Ligand can be found in Ligand's 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 represent the Company's best judgment as of today, August 5, 2010.

Ligand undertakes no obligation to revise or update any statements to reflect events or circumstances as of the date of this conference call.

At this time I'll turn the call over to John Higgins.

John?

Thank you, Erika, and welcome to the call.

I hope everyone is enjoying their summer.

We've had a busy past few months at Ligand and are pleased to have this chance to provide some updates here.

Overall, we believe Ligand is on a very solid course and that is demonstrated notably by a recent development.

Costs are coming down, programs with our partners have been advanced or expanded.

And we have acquired additional assets this quarter.

John Sharp will walk through the financial performance, but first I'll address the business highlights.

A couple of highlights first on late stage programs.

Notably with PROMACTATM, our important drug partner with GSK.

GSK won approval for PROMACTATM in Europe for ITP, and the product has now launched in a few countries in Europe so far.

We believe the product will launch in additional countries in and outside of Europe throughout the rest of this year.

And notably the NDA for the drug is pending approval in Japan, and we could hear word on a final approval there by year end.

We view these as all exciting developments from a commercial perspective.

It is the our sense GSK is highly committed to the drug, and it is exciting to see these approvals and launches happen, which clearly should impact sales going forward.

In addition, this past quarter GSK initiated another trial for PROMACTATM in AML cancer indication.

There are numerous studies ongoing in NDS, sarcoma, now AML, in addition to hepatitis.

GSK is well underway to completing two Phase III trials for hepatitis C, which we estimate at Ligand to be completed in about a year, as the trials have now been are fully involved for quite some time.

Moving on to another late stage program, VIVIANTTM.

This is a SERM, a selective estrogen receptor modulator that we partnered with Wyeth.

Pfizer acquired Wyeth, and hence the drug is now part of the Pfizer organization.

Now this past month the drug won approval in Japan, which we think is great news.

Just to recall, the drug was approved in Europe last year, so now approved broadly in Europe, just this past month in Japan.

And also this past month Pfizer signed a promotion agreement with a Spanish company to launch the drug in Spain.

These are encouraging developments as a signal to us that the product is even closer to commercial launch in numerous markets.

Of course, once available to patients, this will become the third product that Ligand will earn royalties from.

So we are excited to see that progress and are looking forward to earning royalties off of this new product, hopefully in the not-to-distant future.

A couple of recent highlights from partner programs.

We have a collaboration with Roche around a hepatitis drug.

Roche advanced their drug named RG7348 to Phase I trials this past quarter.

This earned Ligand a $6.5 million milestone payment.

This is significant partly because we view Roche as one of the biggest players in the increasingly important hepatitis market, and they truly seem highly committed to advancing this program.

And partly it is significant because it validates the attractive acquisition of Metabasis that we closed earlier this year.

While we share the proceeds from the milestone with Metabasis shareholders, per our acquisition agreement, the amount we retained covered most of the amount we actually paid upfront to acquire Metabasis.

And that is significant, as the deal closed three months earlier.

So a significant clinical and business milestone, and obviously we are pleased to have that happen.

Just an update on our partnership with Pfizer around JAK-3.

Just a few days ago we entered an acid purchase agreement with Wyeth.

Wyeth, again, is now a subsidiary with Pfizer.

This program originated under Pharmacopeia.

Pharmacopeia had a deal with Wyeth to do drug discovery in the area of JAK-3.

And when we acquired Pharmacopeia, we assumed research collaboration as a result of that acquisition.

Now as a result of the agreement we signed with Pfizer, we will receive a total of $3 million in cash as well as a right to continue research for topical and nonhuman uses.

This is a good outcome for Ligand, as it was an early stage program.

It gives us a nice amount of cash right now.

We'll be able reduce costs and refocus our research teams and still retain rights to do research in this area.

Also it is worth pointing out that Pfizer, while they had extended this contract at the end of last year right around the time they acquired Wyeth, the fact is they did have the right terminate.

So this, given the circumstances of the legal contract with Pfizer, we believe is a good outcome for Ligand.

Just a couple of other highlights, expanding the business -- in the area of expanding business this past quarter we acquired royalty and milestone interest in an [aisle nine] program.

AstraZeneca is advancing this product in a Phase II trial for asthma.

It is a biologic.

We find it to be a exciting field, and this is now to our knowledge the largest Phase II study ongoing in asthma for this sort of a drug.

We are encouraged by AstraZeneca's commitment and are pleased to have folded this royalty into the Ligand umbrella.

Just a brief remark about our SARM program.

Earlier this quarter we did announce preliminary data from our Phase I trial.

The Phase I study is ongoing with single ascending and multiple ascending doses.

We're making good progress there and expect that to be out with data out later this fall.

As for some other highlights, this past quarter we launched an updated and substantially expanded Company web page and hosted an analyst day.

We continue to make interaction with analysts and shareholders a priority, and we hope these initiatives are helpful to the public in learning about Ligand.

Just in closing I want to reiterate that we feel Ligand is on a very solid path.

I'm excited about the business.

Our Board of Directors is excited about the business.

As for our immediate priorities, we're focused in four main areas.

First, we continue to drive our research and pipeline forward.

We're conducting drug discovery and early research for a few very interesting programs.

The work we are doing is in what I'll call the sweet zone of what Ligand is good at.

We believe we are working on attractive programs that will -- that we will work on only so long as we meet our research goals and believe the programs are partnerable.

The early stage [inner] objective is to partner these, if possible, at the earliest inflection point possible.

Secondly, a priority is to keep interacting closely with robust team of pharmaceutical partners and providing timely updates with the status of their programs and the value drivers for Ligand.

This is a broad range of programs and partnerships.

I encourage you to look at our new website.

We have a very aesthetically interesting and substantially informative web page regarding our partnered assets.

And we're doing active research with a number of these, but also we are going to continue to work to report on the progress our partners are making to help our investors understand our evolving and growing business.

Finally -- thirdly, our priority is to drive the business toward turning profitable and cash flow positive.

This is a top priority for us.

We have given guidance that, based on our estimates and outlook for the business at this time, we believe that on an operating business we can turn profitable and cash flow positive next year.

And finally, a priority is to continue to meet with investors and analysts to further expand the profile of Company.

We are very pleased this past quarter a new analyst initiated with a buy rating on Ligand.

We've had many new investors come into the stock, and in particular acknowledge new investors that have joined the Company from Europe.

With that I'd like to turn the call over to John Sharp, our CFO.

Thank you, John.

To recap our financial results that were released this morning, our revenues for 2010 were $5.8 million, compared with $7.6 million the same quarter last year.

The decrease of $1.8 million was due to lower collaboration revenue as a result of the termination of Schering-Plough and BMS collaboration agreements at the end of 2009.

R&D expenses in the second quarter were $6.6 million, compared with $9.5 million last year.

The decrease of $2.9 million was due to lower cost to service collaborations, lower clinical trial costs, and lower third party costs for internal programs.

G&A expenses were $3.3 million compared with $2.8 million last year.

The increase of $500,000 was due to costs associated with our recent acquisitions of Neurogen and Metabasis, partially offset by lower facilities and headcount costs.

We also recorded $4 million of other income in the second quarter of 2010, compared to $200,000 for the same quarter last year.

$3.7 million of this other income this quarter relates to the decrease in our liability for contingent value rights, or CVRs.

Now this liability is a result of our acquisition of Metabasis and represents contingent purchase price.

The CVRs are publicly traded, and the liability will be mark to market each period based on the CVR trading price, until the CVRs expire.

And the difference runs through our statement of operations.

It is impossible to estimate the quarterly fluctuations in the value of the CVRs.

However, with that said, we believer that there was an unusually large movement in the value this quarter, as the Metabasis acquisition was recently closed, and the trading price of one of the CVRs was adjusted for the payout of the $6.5 million Roche milestone.

Our total net loss for the second quarter was $283,000 or $0.00 per share, compared with a net loss of $1.7 million or $0.01 per share in the second quarter of 2009.

The loss from continuing operations in the second quarter was $290,000, compared with $4.5 million last year.

And income from discontinued operations was $7,000 compared with $2.8 million in 2009.

At the end of the quarter we had cash and investments totalling $33.6 million.

Now as we look to the second half of 2010, we continue to be highly focused on the activities within our control, such as cost containment and reductions and business development activities.

Now midway through the year we continue to expect 2010 total revenue of $25 million, including $6 million of noncash deferred revenue, royalty payments from AVINZA and PROMACTATM, revenue from collaboration agreements, as well as anticipated revenue from new out-licensing activities.

Our revenue forecast is our estimate at this time, and we will be -- and will be impacted by the actual royalties received from our partners, as well as our ability to generate payments from third parties.

On the expense side, for the full year we continue to anticipate total operating costs from our continuing business will be approximately $30 million, including $2 million of accretion of deferred gain and noncash expenses of approximately $7 million.

And with that I will turn the call back to John.

John, thank you.

We would like open it up for questions now if any investors or analysts have questions for management.

(Operator Instructions).

Our first question comes from the line of Jeffrey Cohen with CK Cooper.

Please proceed with your question; your mike is now live.

Hi, thank you for taking my call.

I just have a number of fairly short questions.

Could you walk through, I guess, either John, on the G&A and R&D for the quarter?

What might you expect for the following two quarters, or perhaps the following six quarters?

Do you expect the $3.3 million from this quarter to continue to decrease?

And also on the R&D side you expect the $6.6 million to continue to decrease?

John Sharp, you want to comment?

Yes, absolutely.

So, Jeff, I would expect both lines to decrease for a number of reasons.

On the R&D side, as you probably saw our 8-K release just a few days ago, we have -- and there was an 8-K about a month ago -- we have now terminated most of employees back east, as so -- which are for the most part research and development employees -- so I would expect obviously the headcount-related costs to decrease.

We have our SARM trials that are winding down.

There were going very heavy in the first half of the year, so expect them to decrease heavily in the second half.

And on the G&A side, we -- there were some costs on the first half of the year, primarily related to, I'll say, winding up the Metabasis and Neurogen acquisitions, which I would the not expect to see continuing.

Okay, perfect.

As far as the CVRs, is there an actually -- is there an existing liability amount that's held now for the CVRs?

There is.

It's just under $5 million.

Okay.

Perfect.

Any comments or thoughts on previous announcements regarding a stock split or share repurchase on timing?

Jeff, the timing for the shareholder meeting is September 9, early September.

Proxies are going out.

And there is nothing more to report in terms of the voting and so on so far, but that is the schedule in five weeks or so.

Perfect.

Thank you for taking my call.

Thank you, Jeff.

Our next question comes from the line of [Steve Flax] from [Flax Investments].

Please proceed with your question; your mike is now live.

Hi, John.

I'm just wondering have you decided on what the ratio on the reverse split is going to be yet?

Steve, thanks for joining the call.

We have not.

As we outlined in our proxy, there is a range.

It is fairly typical with reverse splits to propose a range.

As you know, our range is 5 to 1 or 10 to 1.

We are -- we have not made a decision, and frankly I don't expect that we will until the final vote is in and a chance to look the at market factors and other considerations at that time.

Thank you.

Thank you, Steve.

Thank you.

(Operator Instructions).

Our next question comes from the line of Chris James from MLV.

Please proceed with your question; your mike is now live.

Hi, John.

Good morning, and thanks for taking my questions, and congratulations on a great quarter and successful analysts day.

Just a few questions.

First, can you give us an update on reimbursement for PROMACTATM in Europe and Japan?

I'll share with you what we know.

And, Chris, first, thanks for the question.

Nice hearing your voice.

The product has launched so far in Sweden, Germany and the UK.

In the UK it did not get additional pricing authorization for government reimbursement, but it is available to private payers.

As far as the reimbursement environment, generally what I can say is the -- when the drug is priced by the federal authorities, it reimbursed at that level.

This is encouraging because while some markets like the UK may not authorize pricing, it is being granted pricing authorization in countries, and it is only in a few markets now.

There were some reported sales for just a couple of months in Q2, which we are encouraged by.

But we really are eager to look out the next few quarters to see which other countries grant pricing authorization.

As far as Japan, the NDA was filed about six months ago.

It is still pending approval.

We are looking at possibly October or November for the target approval timing in Japan.

It's not only -- it's not until after that that we'll see any information about pricing in Japan.

Great.

Thank you.

Thanks for taking my questions.

I just have two more quick ones.

Will you be providing -- I mean, PROMACTATM has been on the market for some time now.

Will you or GSK provide any guidance on potential sales at some point?

A good question.

Just a quick review.

The product launched December of '09 -- I'm sorry, December of '08 So it has essentially been on the market for six quarters now, principally only in the US.

The fact or the point that we are very excited about regarding this product is that the patent extends well beyond 2020.

So it has a very long remaining patent life, and we believe the biggest indications are still to come, notably hepatitis C as well as potentially some of these cancer indications.

So just as a general background, that is the outcome for the product from a market perspective.

Specific to projections, we do not know what GSK will do.

In the past they have not given guidance, and we certainly will not be giving guidance on the product ourselves.

If we look about guidance GSK provides, we'll share that with our investors, but not be making projections ourselves.

Great.

That's very helpful, John.

Final question, it looks like GTx is going forward with their SARM, Ostarine.

Can you at least maybe qualitatively describe the partnership discussions around your SARM program?

Sure.

And I'll do so in a general matter.

We obviously don't want to get into the details of partnering discussions.

But generally the SARM field we've been working on for several years.

The research is early stage up until a year ago when we started our first human trial.

We remain very excited about this category.

It is incredibly important market, muscle wasting and frailty.

We believe it is a growing market with the aging -- notably the aging US population.

And it's the type of market that we believe could be very attractive to the handful of the largest international drug companies.

Having said that, while we had on the drawing board a very exciting molecule last year, it was important to Ligand for us to conduct a Phase I study.

Get some initial human safety data, possibly some proof of concept data, and we're right on track.

This study that we are in, the Phase I study should be finished in the next three to four months.

We'll have data announced at conferences this fall, and that really be the impetus to get out and start talking to partners.

It takes a while to get deals put together, and we certainly can't guarantee we'll do a deal at all.

But we think we're at a turning point.

And frankly, while we are surprised that Merck canceled their SARM deal with GTx, we are encouraged GTx is still pursuing it.

I think they as well as a few other companies share our vision that SARM could be an attractive market.

And it is our sense that big pharma players are interested in looking at the field as well.

Great.

No, that's helpful, and congratulations on a great first half.

Thank you, Chris.

Thank you.

Mr.

Higgins, no further questions at this time.

I'd like to turn the floor over to you for any closing comments you may have.

Well, thank you, operator.

Appreciate your time and attention.

We typically do this in the afternoon.

I'm actually in New York City presenting at the BMO Conference this afternoon at 3.30.

The event will be webcast, so certainly invite people to participate and listen to that content.

Also, we are presenting at the Stifel Nicolaus Conference in Boston in mid-September.

So we'll be on the road a bit.

Thank you for your interest and support.

Again, we are excited about Ligand.

We feel we are doing well, and we believe we have a very promising future.

Thank you, and with that, we can close out the call.

Ladies and gentlemen, this does conclude the conference.

You may disconnect the call and have a good day.