Ligand Pharmaceuticals Inc (LGND) 2010 Q4 法說會逐字稿

Thanks to everybody attending in person today.

I see some familiar faces and some new faces.

My name is John Higgins.

I'm the CEO of Ligand and I'm here with my colleague Rob McKay.

Rob joins us from Isis about a year ago and he works with us in both Business Development and Investor Relations.

Welcome, I'm pleased to be here.

This is a good time for us to talk about Ligand.

As a beginning of a new year, new goals and priorities but we also have just come off of a big year for the company and notably closed an important acquisition just a few weeks ago so thank you for attending.

What I'm going to do is walk through the story.

I will be making forward-looking statements.

I encourage you to review our 10-K, 10-Q, and other SEC file documents for forward-view at the risks and issues facing our company.

Just as a very high level overview, Ligand is a company based in La Jolla, San Diego.

We've been around for over 20 years.

[Kline or Perkins] founded biotech company that went public in the early '90s perhaps the golden era of biotech.

Tremendous drug discovery research assets that really set the stage for some exciting partnerships in a growing business.

The company has evolved over time.

I joined about four years ago.

Today, we have just under 20 million shares outstanding, about 170 million market cap.

We had a very impressive run the last two to three years.

Significant asset acquisitions, advancement of our pipeline in a very, very attractive mix of assets right now.

I look forward to talking about all of these.

As I walk through the presentation, in the second half, I will get into more details around some specific programs.

But to start with, I'm going to cover four main highlights.

As you think about Ligand and we're a very unique company.

We've got great assets.

Again, we've got a very good research and development heritage, but when you think about Ligand today, there are four main value drivers.

The first is a blockbuster program.

A drug that we discovered that is now partnered with GSK.

I will talk about that.

Secondly, it's our acquisition focus.

I love this industry.

This is a great industry.

Frankly, the most (inaudible) things fail.

It's a brutal industry.

The discovery, the clinical, regulatory path is strewn with failures and setbacks.

What this has created is a chance for us to diversify, run a business that's diverse, that's built on consolidating assets, and we've been able to do some very unique acquisitions.

Through the process we have assembled a vast portfolio, the largest I believe of any of our peer companies, and I'll show you a picture to illustrate that.

And finally, I will hit the high points in our existing development and licensing platform.

Just to drill down a bit more on these four topics, this blockbuster program -- if you only wanted one reason to buy Ligand, I would encourage you to do research on Promacta.

This is a very, very compelling drug.

Later in the slide show, I have a few more slides that will elaborate on the program but this is a drug that we discovered in 1997.

GSK has done an expert job advancing it through development, product launched about two years ago in the US for thrombocytopenia, a disorder of low platelet count.

It is a serious and chronic disease that manifests itself across a whole range of diseases and maladies of the liver.

GSK is making a significant clinical investment and there is a chance we believe in the next couple of years for significant market expansion.

It has a long patent life and we enjoy what we believe to be a very attractive royalty on what could be a truly blockbuster billion dollar plus market potential.

Secondly, I want to highlight our business model.

It is a very unique acquisition-focused business.

Now, M&A is not unusual.

Companies buy other companies all the time.

Ligand has a thesis on the market though that is unique to other small- and mid-cap companies, and that is we are not commercially focused.

We aren't especially a pharma-focused company, we are not a therapeutically-focused company as we aren't focused purely on neurology or diabetes, et cetera.

We also are not wedded to any specific drug discovery tool.

Our view is more from a financial growth perspective.

How can we efficiently consolidate quality assets, partnered fully-funded assets under one roof.

Partly, you have to be good at selecting the assets.

You have to be good at structuring deals and you have to be competent at integrating companies.

Those are three things that need to come together for acquisitions to work.

In the last two years or so, we have acquired five companies, three are public.

Genero was essentially a company that had a royalty asset for a biologic to treat asthma and CyDex is a private company we just acquired a couple of weeks ago.

Each one of these brought to us a different collection of assets, of partnership programs with Merck, with BMS, sharing (inaudible) AstraZeneca and Roche, et cetera.

They brought discovery tools, patents, assets that we could divest that were non-core to Ligand.

In the process, we had to reduce cost.

We had to shut down programs that were non-core that were not adding value and in the mix, we have grown a very prodigious portfolio of assets, which leads me to the third point, the third value driver.

It is the large asset portfolio.

When I joined the company, about four years ago, we had basically five or six programs.

We had one product paying us a royalty.

We had two other partner programs and just a couple of internally developed programs.

It was an attractive mix but frankly it was a much smaller business.

Today, we have assembled a portfolio of over 60 programs -- over 60 -- 50 of these are fully funded, partnered, fully-funded programs.

Again, with Merck, AstraZeneca, with Bristol-Myers, with GlaxoSmithKline, (inaudible).

It is a who's who list of [big pharma] and (inaudible).

What is interesting is that seven of these products are paying as royalties right now, revenue-bearing assets, and some products just launched in the last couple of months, and are growing not only because of new regional market expansion, new label expansion, but also as sales grow, our royalties shares grow.

You will see the distribution.

This is a real list of partnered assets.

These are not all concepts that are discovery-phased programs.

About 10%, only 10% are pre-clinical, nearly 80% are in human studies; a third in Phase I and a third in Phase II.

But significantly almost 20% are Phase III or approved.

It is a diverse mix across a whole range of indications, cancers, Alzheimer's, asthma, COPD, osteoporosis, muscle wasting.

It's a very attractive mix, of partnered assets that again we've accumulated through our acquisitions.

And finally, the Ligand heritage, what we were born from, was research that came from Rockefeller and the Salk Institute.

It is a very rich research heritage.

Five drugs that we discovered had been approved, five molecules.

Four are on the market right now.

One may launch within the next year or so.

We've done over 20 licensing deals not only have we discovered our own molecules, but we have done very attractive deals.

This is the core of Ligand and we continue to work on some exciting programs.

I will highlight one, in particular later, an Androgen Receptor program.

We have a diabetes program.

We are working on an oral (inaudible) program so we have some very attractive early stage programs.

In the last six months, we've done some initial licensing deals.

A couple of these are smaller in nature but it just further illustrates that beyond our acquisition we are committed to research and doing new deals.

That is the overview of Ligand

What I'd like to do now is go a little deeper on three or four programs.

I talked about Promacta.

This is a our blockbuster program.

I highlight it not because it's our most favorite.

We believe we have a very attractive portfolio of late stage assets, but the fact is that this is a product that's already approved.

It is approaching announcement of Phase III data and there is a very significant economic structure in relationship with GSK.

So, it's an asset that investors should focus on.

For all of you, who know the blood business, there are good products that boost red blood cells and good products that boost white blood cells.

Before Promacta and another drug that Amgen launched, there was really no medical treatment to boost platelets.

Platelets is the third leg on the stool.

The blood business as we know is a very, very large market.

The neutropenia and anemia categories are well north of $10 billion combined.

We believe that thrombocytopenia or the low platelet category could also be a multi-billion dollar segment that GSK and Amgen will share.

This drug is a pill.

It's a once a day oral medicine.

It's unlike the other blood products which are pepto-bodies or injectable medicines.

It's a fascinating drug.

It has a long safety record and it was approved by the FDA for thrombocytopenia with just one study, one six-week trial.

The FDA advisory panel and the doctors were very encouraged by the medical profile and urged the FDA to approve the product and GSK has launched it.

It rolled out in Europe last year.

And it was approved in Japan at the end of 2010 and we believe it should launch this quarter.

It is now in development for a whole range of indications.

Any malady of the liver, you are likely to have low platelet count.

The leading indication though is hepatitis C.

The virus attacks your liver.

You suffer a terrible disease but the most severe patients have such a low platelet count that they actually can't take their antivirals.

It's about 10% of the population, their platelet count is so low they cannot go on antivirals because the very drug you take to attack the virus also attacks platelets.

GSK published Phase II data in the New England Journal of Medicine, a very encouraging data set.

They started studies in 2008 and clinicaltrials.gov is reporting completion in the third quarter.

GSK has not announced when they expect to release the data, but we believe there could be a major data event for these two large international studies by the end of 2011.

The platelet segment we believe is expected to be the next frontier in a very large segment.

Beyond hepatitis, you can think of liver diseases, liver cancers, cirrhosis, HIV.

Like in the anemia category where the kidney is targeted and the kidney production of red blood cells is deficient so, too, the analog here is liver-related diseases.

GSK is investing a very large clinical campaign, and beyond Promacta, they've licensed a next generation molecule from us that has patent that's five to seven years longer and even higher royalty rate.

They made a very significant investment in this category.

Switching gears, I'd like to talk about one of our internal programs.

Again, we are bounded on a great drug research and our leading program is a Phase I program targeting a muscle health, frailty, and weakness.

Just a focus on the market, this is the androgen-related market to put in perspective, we know we have an aging population of elderly.

We have population that will double over the next 15 to 20 years, from 35 million to 70 million.

The elderly, the oldest people is the fastest growing segment and the fact is today we spend about $65 billion a year on supplemental disability programs.

This is a growing problem while it's not specific to one disease, a muscle health and frailty go hand in hand with a very, very significant high cost care for our population.

There is 80 years of [empiric] clinical epidemiological data that prove the unequivocal evidence that androgens impact muscle mass and strength.

This is a well researched and well published fact.

Now testosterone is what mother nature gave us.

It does wonders for us in the natural course of human development but it is not a good medicine.

That is a fact.

Despite the fact that it's available and in some ways it is still a growing market, testosterones are not a good medical drug.

We need a SARM.

A SARM is a selective androgen receptor modulator.

It is an androgen that we have designed to be selective, and it hits only the good part of the receptors triggering a significant muscle growth and development as well as bone health improvement.

But it spares prostate, breast, urine, and other tissue/organs that are highly suspect to cancer.

When we look at our SARM program, we have a lead molecule.

We have a whole class of molecule, the lead molecule is LGD-4033.

We are now in a Phase I study.

We are finishing multi-ascending dose program and the data should be done or out in the second quarter, and we will use that as a pivot point for talking with corporate partners.

In our experience, we look at the big categories Alzheimer's, diabetes, and hepatitis are three big medical markets.

Muscle health is the fourth biggest medical market.

In our experience, big pharma is investing significantly at building out muscle health groups within their companies and there is a real appetite for muscle health-related products.

This is a program that builds on the success of our research in SERMs, selective estrogen receptor modulators.

In the mid-90s we did a deal with Pfizer and another deal with Wyeth.

Both of these products now have been approved just in the last couple of years, and they are drugs that are targeting osteoporosis and post menopausal hot flashes.

We have proven by the core of our research that we are capable at discovering and developing a good molecule.

This is beyond the estrogen space and is focusing on androgen.

Moving on to another program, I'd like to give some highlights on CyDex.

This is an acquisition we closed a few weeks ago.

It's a really neat company and a great fit with Ligand.

The quick facts, this is a private company.

They are based near Kansas City.

They have been around for 20 years but really the last five years they have been put on the map, so to speak, financially and in terms of recent business deals.

They have a technology which is called Captisol.

It is a sugar-based technology.

It is a fairly simple product that is used to reformulate medicine.

Existing products that are unstable.

They have absorption issues in the gut.

There are stability issues with IV formulations or ophthalmic formulations.

We're able to take existing or unapproved products, reformulate them in a sugar-based formulation and make them better.

Not only more stable, more [bio-available] but significantly extending the market protection through new patents and so on.

This is a company that is cash flow positive.

Last year, they had the highest sales ever just doing over $16 million.

And close to $8 million in operating cash flow.

This is a business that we acquired partly to bolt on their financials to our business.

But also to really integrate their technology into our long list of partnerships.

Existing relationships we have with the big pharma as well as tapping into new programs that we can expand it to new relationships.

It's a business where we can formulate a product, receive some milestones and license fees, if we're successful we will sell product for clinical use and for commercial sales and eventually if the product is launched we will get a royalty on sales.

It's a very good complement to our business.

Again, when we look at diversity, we want to be in different medical markets.

We want to be partnered with different products, with different companies, but also this gives us a platform to access the important reformulation segment of the pharmaceutical industry.

Captisol again is chemically modified cyclodextrin.

It is a simple concept but the value of this reformulation science is that it's been in development for 20 years.

Not only are there patents, significant patents, there is know-how but there is a drug master file.

Really a platinum dossier that companies can reference in their drug applications that will save them three to four years of formulation time and maybe $10 million to $20 million.

Other companies are trying to come up with competition to Captisol but they cannot compete in terms of the years and costs it takes to come up with this drug master file.

Just as a point of record, there are five FDA approved products, again, Pfizer, Prism, Bristol-Myers, these are quality products that span a whole range of indications.

It's illustrative of the potential.

With CyDex, the acquisition brought to us over 25 partnered programs.

Again, a very significant addition to our roster of partnered assets where again it's perhaps simple science compared to the discovery work we do in other areas.

But it's a very attractive business from solving real needs to big pharma and biotech has.

Just to highlight a few of the partnerships, most of these deals are not public because of the nature of reformulation.

However, there are a couple of marquee relationships we have.

One is with Onyx.

Many of you may be familiar with carfilzomib.

This is a cancer drug for multiple myeloma.

Some analysts forecast this drug could do $0.5 billion dollars in sales.

Just a couple of months ago, Onyx announced positive Phase II data.

They have received fast track designation by the FDA and are authorized to submit their NDA on a rolling basis and that process has started.

What is exciting about this is that as important and promising of a cancer drug carfilzomib is, it is formulated in a high purity Captisol.

This company Onyx came to CyDex.

They needed a formulation solution.

We gave it to them and now this formulation is integrated into the carfilzomib NDA filing that is ongoing right now.

If the product is approved, we will enjoy not only commercial sales of the product but also royalties and potential milestones.

We have a relationship with Prism.

Prism is a private company that just received FDA approval for Captisol-enabled IV formulation of amiodarone.

Nexterone is the brand for arterial fibrillation.

It's an exciting product and launch planning is underway right now for a launch that we believe could happen in 2011.

And again, there is a long list of other partnered assets, while we can't disclose the products or the partner name, many of the companies that CyDex already had partnered with are companies that we have relationships with for other research projects.

Finally in our conclusion, just a financial outlook, and some upcoming events, we announced our financial results for 2010 this morning.

In some ways is taking place of a regularly scheduled earnings call, but I just would like to profile that in 2010 we had $23.5 million in revenue, about a third were royalty-based off of existing products.

Some of these royalties streams were growing and also $16.2 million in collaborative and other revenues.

Operated expenses were about $55 million.

You see the mix.

There are some non-cash expenses and one-time charges and lease write offs.

Keep in mind that number, the $55 million.

In my next slide or two, I'm going to share with you our guidance for 2011.

Our expense outlook is $16 million to $18 million, a small fraction of the expenses in 2010.

Cash, about $30 million, we finished the year with $24 million but we had some tax refunds and some other receivables that hit the last few weeks.

We also initiated a share repurchase program and had modest share repurchases in the fourth quarter.

The revenue outlook for 2011, what we are looking at is a revenue base that coincidentally is about the same level as last year, that really is a coincidence.

I want to highlight the mix, the mix of the revenue is a much higher quality.

And that most of our revenue last year were one-time contract payments for research that is nonrecurring.

This year the revenue is tied to a growing commercial and royalty-based revenues.

We believe a higher quality revenue and this guidance excludes any new revenue from licensing deals.

We give the breakdown between sales, royalties, and license and other.

Operating expenses again, our outlook is $16 million to $18 million assumes integration of CyDex.

It is in line with what we have been subscribing to the last six to 12 months.

When I joined, we are spending about $85 million a year.

We have consistently brought expenses down.

This year again we are looking at expenses to be in this range.

And again, just a note, we have just under 20 million shares outstanding.

We will also have a cost of goods associated with our product sales, and we will be determining what our non-cash amortization charges will be for CyDex shortly.

This is a business that's built for financial growth.

In 2008, we only had one product paying us royalty.

Today we have seven.

We have many more partnerships.

We have ways to earn licenses and milestones.

We have a core platform to do more deals from.

Again, the bar chart here illustrates how expenses are coming down.

We believe we will be able to overlay this continued trend with growing revenues over the next several years.

I've showed you this pie chart.

It's the same chart we saw at the beginning of the slide deck.

Here are 10 or 12 major news events.

What you will see as you review this chart, is a list of product launches, NDA filings, potential approvals, Phase II and Phase III data.

This is not every major event we anticipate happening this year, but it illustrates when you have a large portfolio of assets in any given year we would expect to have some substantive late stage news events.

And finally to conclude we are pleased to be here.

It's a good time in the new year.

We will have a busy year but the next couple of months in particular we will be back here in New York at the City Conference and I'm presenting in China.

In mid-March, we did a broad platform deal with the Chinese company a month ago.

We'll also be hosting an analyst day to really get deeper into our programming, sometime probably in June.

Thank you.

We got a full room for those who are not attending.

It literally is standing room only.

I'm excited by your attention and attendance.

And we are out of time but I know we have a breakout.

Thank you.