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Staff Reporter
12/15/97 5:32 PM ET
Ligand (LGND:Nasdaq) has started to say it's going to make money a year earlier than most investors expect. But Wall Street isn't listening -- yet. Every company says it's a leader and that it's recognized as
such: Ligand actually happens to be both. Ligand develops drugs to attack intercellular targets. In particular, the company specializes in developing a slew of vitamin A derivatives called retinoids, which are benign compounds meant to treat diseases like cancer. Ligand has five compounds in human testing -- two that are being tested by Pfizer (PFE:NYSE) for which it will get royalties -- and plans to put up to seven more into the clinic by the end of 1998. It's a number that could turn Schering-Plough green.
Wall Street likes to know a pipeline is there, but only starts to really care about one when a company starts to need one badly. Amgen (AMGN:Nasdaq) or Agouron (AGPH:Nasdaq) provide recent examples of this. Consequently, despite making clinical progress, Ligand's stock has actually tumbled this year, down 11%. Investors criticize Ligand for not having vigilantly protected its shareholders from dilution. It has 38 million shares outstanding now, but fully diluted the number stands at 49 million, including warrants and employee options. Currently, the company has a market cap of about $500 million. It also has to spend about $35 million a year to maintain all that research, a sizable amount for a biotech. Ligand will have $70 million in cash by the end of the year, which means it probably will have to raise cash again before becoming profitable -- at least that's the expectation. Investors can be a forgiving bunch, however, if products sell, and that's what Ligand is hoping for as it campaigns for more Wall Street attention. For talking points, the biotech has four products close to the market. The San Diego company coming to East Coast money managers with the message that even though the products initially address small markets, given what it plans to charge for the drugs, it can make money. The company is suggesting to analysts that it can be modestly profitable, perhaps earning a nickel a share, in 1999. Then, watch out. "Once we get over through the '98, '99 hump, it's not going to be smooth sailing, but we aregoing to be a very profitable company," says Susan Atkins, the company's spokeswoman. Ligand says most analysts currently expect profitability in 2000. Informally, some analysts see earnings as early as the company does, but haven't published that belief. It's one thing to expect it and another to start telling clients that Ligand is moving to the black. Within that time, Ligand intends to launch two different formulations of two drugs, Panretin and Targretin. "On these four drugs, sales could reach $100 million to $150 million in the next two to three years," forecasts Atkins. Still, she acknowledges: "Two years is a little aggressive. But we expect within two to three years of launch, 20% to 25% market penetration."
Last week, Ligand said that Panretin gel worked in a second Phase III trial in Kaposi's sarcoma (KS) patients. In August, Ligand said that a similar European trial was halted early because it showed such strong efficacy. The company plans to file for approval with the Food and Drug Administration
in the first quarter. The oral formulation is being tested in Phase II trials in KS, a skin cancer that afflicts AIDS patients, as well as other cancers including breast and ovarian. It's in Phase III for a rare form of leukemia called acute promyelocytic leukemia (APL). The company plans to file a new drug application for the oral form in KS or APL in early 1999 There is little buzz about any KS drugs among investors, since new AIDS drug cocktails have been saving and prolonging lives, leading to a dwindling of the incidence of the skin cancer. But as patients develop resistance to the new AIDS drug combinations, the incidence of KS could go up. Ligand says it expects to charge $4,000 to $6,000 per course of treatment and puts the number of patients at 22,000 to 25,000 in the U.S.
Allergan, which owned a piece of an off-balance sheet development company called Allergan Ligand, which Ligand bought out in a deal that closed in late November, gets 15% of U.S. sales on topical and oral Panretin. Targretin is in Phase III trials for a cutaneous t-cell lymphoma (CTCL), a blood cancer with about 15,000 patients in the U.S. Ligand expects to file for approval of both the oral and the gel formulations of Targretin in the second half of next year. The company expects to charge $15,000 to $20,000 per course of treatment for the oral formulation. The current treatments for the CTCL, like interferon and treatments with ultra-violet rays, can cost $25,000 to $40,000 per course, according to Ligand. |
