Ligand Reports Financial Results for Full Year and Fourth Quarter 2002; Total Revenues for the Year Increase 27%, Per Share Loss Decreases 35%
25 Feb 2003, 07:02am ET
SAN DIEGO--(BUSINESS WIRE)--Feb. 25, 2003--
End-User Demand for In-Line Oncology Products Rebounds in Second Half
and Hits Record Levels in Fourth Quarter; Co-Promotion Agreement
Initiated with Organon to Accelerate AVINZA(R) Growth
Ligand Pharmaceuticals Incorporated (NASDAQ:LGND) today reported
total revenues for the year ended December 31, 2002, of $96.6 million,
compared to $76.3 million in 2001, an increase of 27%. Net loss for
the year was $32.6 million ($0.47 per share), compared to $43.0
million ($0.72 per share) in 2001, representing an improvement of 24%
(35% per share).
For the fourth quarter ended December 31, 2002, total revenues
were $27.3 million, compared to $22.6 million for the same period in
2001, an increase of 21%. Net loss for the fourth quarter of 2002 was
$6.7 million ($0.09 per share), compared to a net loss of $13.1
million ($0.22 per share) for the same period in 2001, representing an
improvement of 49% (59% per share).
"Ligand's financial results for 2002 reflect a challenging year
for the company," said Paul V. Maier, Ligand's senior vice president
and chief financial officer. "The commercial organization's overall
slower product sales growth in 2002 reflects challenges of launching
AVINZA(R) (morphine sulfate extended-release capsules) during the
second quarter without a co-promotion partner, impacting the
historically strong growth momentum of in-line oncology products
during the first half. This momentum was clearly regained in the
second half through corrective strategies, with record high end-user
demand in the fourth quarter increasingly reflected in wholesaler
purchases. The launch of AVINZA, while below net sales expectations,
has been one of increasing prescription growth, progress in retail
distribution and managed care acceptance, and positive physician
acceptance. All these factors have laid a firm foundation for
successful co-promotion with Organon, which we believe will unlock the
revenue potential of AVINZA this year and next. In addition, we are
pleased with the strong, nearly 40% growth in other revenues, which
underscores the strength of Ligand's corporate partners' portfolio of
product assets."
Ligand's co-promotion agreement with Organon is described in a
separate news release.
Ligand's total net product sales for the year were $54.5 million,
compared to $45.6 million in 2001, an increase of 20%. For the fourth
quarter of 2002, total net product sales were $13.9 million, compared
to $15.6 million for the same period of 2001, a decrease of 11% not
reflective of underlying demand in fourth quarter 2002, but rather, as
noted in previous press releases, significant wholesaler purchasing at
year-end 2001 prior to price increases and initiation of wholesaler
distribution of ONTAK(R). Sales of individual products were:
2002 Net 2001 Net 4Q 2002 4Q 2001
Sales Sales Net Net
(million)(million) Sales Sales
(million) (million)
----------------------------------------------------------------------
ONTAK (denileukin diftitox) $26.6 $24.3 $7.4 $8.0
Targretin(R) (bexarotene)
capsules $12.2 $14.6 $3.6 $5.7
Targretin gel and Panretin(R)
(alitretinoin) gel $3.4 $6.6 $0.8 $1.9
AVINZA(R) $12.2 N/A $2.0 N/A
Total Net Product Sales $54.5 $45.6 $13.9 $15.6
Research and development expenses were $58.8 million for 2002,
compared to $51.1 million in 2001, an increase of 15% that resulted
primarily from clinical expenses associated with the acceleration of
the pivotal Phase III studies of Targretin capsules in non-small cell
lung cancer. To date, Ligand has enrolled nearly half of the 1200
patients required for the two studies, and enrollment is on track to
conclude this year. In the fourth quarter, R&D expenses were $16.4
million, compared to $12.6 million in the same period of 2001, an
increase of 30%.
Selling, general and administrative expenses were $41.7 million
for 2002, compared to $34.4 million in 2001, an increase of 21% due
primarily to AVINZA launch expenses. In the fourth quarter, SG&A
expenses were $11.0 million, compared to $8.2 million in the same
period of 2001, an increase of 34%.
Loss from operations was $24.2 million for 2002, compared to $23.1
million in 2001, an increase of 5%. In the fourth quarter, loss from
operations was $5.5 million, compared to $2.5 million in the same
period of 2001, primarily due to AVINZA launch expenses and Targretin
capsules Phase III trial expenses.
As of December 31, 2002, Ligand had cash, cash equivalents,
short-term investments and restricted cash of $74.9 million, compared
to $40.1 million at the end of 2001, an increase of 87% (favorably
impacted by the fourth quarter convertible debt financing). In
February 2003, Ligand completed its previously announced $20 million
repurchase of approximately 2.2 million Ligand shares owned by Elan
(balance of Elan's share ownership approximately 12.2 million Ligand
shares).
AVINZA Update
"Although AVINZA sales and prescription volume from Ligand's own
efforts were below our expectations in the fourth quarter, we
continued to make important progress with the product," said Thomas H.
Silberg, Ligand's executive vice president and chief operating
officer. "We increased the size of our sales force to drive greater
prescription volume, and expanded AVINZA's distribution in retail
pharmacies. And we continue to receive positive feedback from doctors
and patients that AVINZA's true once-daily product profile makes it a
best-in-class product. We look forward to maximizing this considerable
potential through our co-promotion agreement with Organon."
In the fourth quarter, Ligand doubled the size of its specialty
pain sales force to 50 sales representatives fully dedicated to
promoting AVINZA to high-prescribing pain specialists. In addition,
the company has begun to increase this specialty pain force further,
and is currently expanding to approximately 70 representatives over
the next several months.
Monthly prescriptions for AVINZA continued to grow steadily from
launch through year end, as shown below.
Month Total Prescriptions
(IMS Health Xponent retail/mail order
and DDD hospital)
---------------------------------------------------------------------
July 536
August 988
September 1632
October 2428
November 2949
December 3683
Weekly prescriptions, with some volatility around the December and
January holidays, reached new highs during February, providing a solid
launch platform for co-promotion efforts expected to roll out in March
and April 2003.
In the fourth quarter, Ligand also made significant progress in
expanding AVINZA's availability in retail pharmacies. "We estimate
that AVINZA is now stocked in 4,000 to 5,000 pharmacies nationwide, as
well as in several central warehousing retail pharmacy chains,"
Silberg said. "Retail distribution will be a renewed major focus for
Ligand and Organon from the start. Since increased prescriptions lead
to retail pull-through, and retail pull-through leads to wholesaler
buying, we expect the added muscle of our co-promotion partner to have
a multifaceted benefit on product performance."
AVINZA's fourth quarter net sales of $2.0 million, including $1.0
million of net sales deferred from the product's launch, reflected the
slower progress of retail distribution pull-through from wholesalers,
which left inventories at year-end adequate for current market demand.
As of December 31, 2002, $0.8 million of AVINZA net sales continues to
be deferred.
Update on In-Line Products
"We are pleased that fourth quarter sales of our in-line products
continued to rebound compared to the second and third quarters, based
on record end-user demand," Silberg said. "Specifically, in the fourth
quarter we achieved record prescription levels for Targretin capsules
and Targretin gel, and record levels of ONTAK unit shipments from
wholesalers to end users. These positive trends reflect the steps we
have taken to revitalize physician interest and expand use of ONTAK
and Targretin, and are expected to be increasingly reflected in
wholesaler purchases."
Unit shipments of ONTAK to end users in 2002 increased 4% compared
to 2001. In the fourth quarter, unit shipments were up 20% compared to
the same period of 2001. Importantly, demand for ONTAK re-accelerated
in the second half of 2002. This strong demand reflects Ligand's
improved execution of consultant advisory meetings and
physician-initiated clinical studies, as well as expanding clinical
data.
Prescriptions for Targretin capsules in 2002 increased 10%
compared to 2001, and the corresponding number of 75 mg. capsules
prescribed increased 16%. In the fourth quarter of 2002, Targretin
capsules prescriptions were up 13% over the prior year period, and the
corresponding number of capsules increased 20%. "We believe the
increase in Targretin capsules prescriptions, and especially the
increase in the average dose used and the average prescription size,
reflect growing use in CTCL and growing interest in other
applications," Silberg said.
Prescriptions for Targretin gel continued to show solid growth in
2002, increasing 24% compared to 2001. In the fourth quarter of 2002,
Targretin gel prescriptions were up 22% compared to the prior year
period.
Underlying demand continued to accelerate in the second half of
2002 and hit record levels in the fourth quarter, which is
increasingly reflected in wholesaler purchase patterns. Fourth quarter
2002 demand compared to earlier quarters is described in the following
table:
Versus 3Q Versus 2Q Versus 1Q
2002 2002 2002
----------------------------------------------------------------------
ONTAK (unit shipments to end users) +12% +29% +27%
Targretin capsules (prescriptions) +15% +14% +23%
Targretin capsules (number of capsules) +10% +18% +27%
Targretin gel (prescriptions) +12% +12% +27%
Financial Outlook for 2003
"We believe Ligand's net product sales will continue to accelerate
in 2003, based on strong end-user demand for our in-line oncology
products and greatly increased sales and marketing capabilities behind
AVINZA," Maier said. For the year, Ligand expects:
-- Total revenues between $160 and $175 million.
-- Net product sales between $125 and $135 million, with in-line
oncology product sales being more than half.
-- Total operating expenses between $125 and $135 million
(excluding cost of products sold but including co-promotion
expenses).
-- Full-year operating income between $2 and $8 million.
It is important to note that Ligand has not yet transitioned to a
quarterly earnings-based company and remains subject to considerable
quarter-to-quarter variability in revenues and earnings. Since the
impact of AVINZA co-promotion and wholesaler purchases of in-line
oncology products are highly variable in the near term, the company
will not be giving detailed quarterly guidance.
Highlights of Fourth Quarter 2002 and Early 2003
-- Ligand restructures AVINZA license and supply agreement with
Elan. Through the restructuring, Ligand improved its gross
margin on AVINZA and paved the way for the co-promotion
agreement with Organon. Ligand paid Elan $100 million in
return for a reduction in Elan's royalty rate on sales of
AVINZA by Ligand, rights to sublicense and obtain a
co-promotion partner in its territories, and rights to qualify
and purchase AVINZA from a second manufacturing source. Elan's
new royalty and supply price of AVINZA is approximately 10% of
the product's net sales, compared to approximately 30-35% in
the prior agreement.
-- Ligand raises $150 million net in convertible debt offering.
Ligand financed the restructuring by offering $135 million of
five-year, 6%, convertible subordinated notes to qualified
institutional buyers pursuant to the exemption from
registration provided under Rule 144A of the Securities Act of
1933. The initial purchaser of the notes exercised its
overallotment option to acquire an additional $20 million of
notes.
-- Ligand, Elan agree to share re-purchase, lock-up period.
Ligand has retired the approximately 2.2 million Ligand shares
it purchased from an affiliate of Elan for $20 million. Elan
also agreed to a six-month lock-up period on 11.8 million of
its remaining 12.2 million Ligand shares, and to changes in
its registration rights to facilitate an orderly distribution
of its shares after the lock-up period.
-- Ligand expands SERM royalty agreement with Royalty Pharma,
forms new partnership for Targretin capsules. Royalty Pharma
exercised an expanded option in December and agreed to pay
Ligand $6.775 million for 0.1875% of potential future sales of
three selective estrogen receptor modulator (SERM) products
now in Phase III development and for 1% of worldwide sales of
Targretin capsules from January 2003 through 2016. To date,
Royalty Pharma has paid $19.3 million for the right to receive
0.6875% of net sales of the three SERM products and 1% of
Targretin sales. Royalty Pharma has remaining options to
purchase at escalating prices rights to receive up to another
0.875% of the SERMs' net sales for up to $25 million in two
installments in 2003, and up to $26.5 million in two
installments in 2004.
-- Ligand's Targretin(R) Gel Shows Promise for Chronic Severe
Hand Dermatitis Patients. Nearly 40% of patients with chronic
severe hand dermatitis who were treated with Targretin gel
experienced clinical improvement of 90% or more, and almost
80% of patients improved by at least 50%, according to final
results of a Phase I/II dose escalation study presented at the
27th Hawaii dermatology seminar conducted by the Skin Disease
Education Foundation.
-- Ligand earns $2.1 million milestone as Lilly IND for LY674
clears FDA, paving way for initiation of Phase I studies.
LY674 is a novel peroxisome proliferation activated receptor
(PPAR) modulator for the treatment of dyslipidemias. The
Lilly-Ligand collaboration, which began in 1997, has selected
multiple clinical candidates and advanced three PPAR
modulators into early clinical studies.
-- Ligand earns $2 million milestone as GlaxoSmithKline begins
clinical studies of oral thrombocytopenia drug. SB-497115 is
an oral, small molecule drug that mimics the activity of
thrombopoietin (TPO), a protein factor that promotes growth
and production of blood platelets. SB-497115 is the first
product to move into clinical studies from Ligand's core
technology platform around Signal Transducers and Activators
of Transcription.
-- ONTAK shows potential to treat CLL, NHL and GVHD. ONTAK may
benefit patients with chronic lymphocytic leukemia (CLL), B-
and T-cell non-Hodgkin's lymphoma (NHL) and graft-versus-host
disease (GVHD) after allogeneic hematopoietic stem cell
transplantation, according to five abstracts from the annual
meeting of the American Society of Hematology. Ligand intends
to begin a company-sponsored, large-scale Phase II study of
ONTAK in refractory CLL this year. In a separate study
presented at a major meeting of transplant specialists,
treatment with ONTAK generated complete remission of acute
graft-versus-host disease (GVHD) in five of 11
steroid-resistant patients after allogeneic stem cell
transplants, and partial remission in two more patients.
Web Cast Conference Call
Ligand will host a live web cast, open to all interested parties,
of a conference call during which Ligand management will discuss
financial results for the fourth quarter and full year 2002. The web
cast will be available at streetevents.com and at
ligand.com (investor relations page) on Tuesday, February
25 at approximately 9:00 a.m. Eastern Time / 6:00 a.m. Pacific Time.
Ligand Pharmaceuticals Incorporated
Ligand discovers, develops and markets new drugs that address
critical unmet medical needs of patients in the areas of cancer, skin
diseases, men's and women's hormone-related diseases, osteoporosis,
metabolic disorders, and cardiovascular and inflammatory diseases.
Ligand's proprietary drug discovery and development programs are based
on its leadership position in gene transcription technology, primarily
related to Intracellular Receptors (IRs) and Signal Transducers and
Activators of Transcription (STATs).
Ligand(R), Targretin(R), Panretin(R), AVINZA(R) and ONTAK(R) are
trademarks of Ligand Pharmaceuticals Incorporated. Other trademarks
are the property of their owners. Full prescribing information for
Ligand's products may be obtained in the U.S. from Ligand Professional
Services by calling toll free 800-964-5836 or on Ligand's web site at
ligand.com.
Ligand Pharmaceuticals' releases are available on the World Wide
Web at www.businesswire.com/cnn/lgnd.htm.
Caution Regarding Forward-Looking Statements
This news release contains certain forward-looking statements by
Ligand that involve risks and uncertainties and reflect Ligand's
judgment as of the date of this release. These statements include
those related to the outlook for 2003 financial performance, revenue,
growth, momentum, demand, product sales, operating expenses, the
launch, co-promotion and commercialization of AVINZA, clinical studies
of ONTAK, and the exercise of options by Royalty Pharma. Actual events
or results may differ from Ligand's expectations. There can be no
assurance that Ligand will achieve its outlook for 2003, increase
revenues or margins from currently marketed products or reduce
operating losses; that Ligand will be able to achieve its goal of
operating profitability; that the results from the periods discussed
in this release will be indicative of results for future periods; that
results of any clinical study will be confirmed by later studies; that
products under development by Ligand or any of its collaborative
partners will receive marketing approval; that there will be a market
for the drugs if successfully developed and thereafter approved; that
collaborative or co-promotion arrangements will be successful or
continued; that Royalty Pharma will exercise any options; or that
Ligand will receive any milestone payments for the discovery and/or
development of any compounds. Additional information concerning these
and other risk factors affecting Ligand's business can be found in
prior press releases as well as in Ligand's public periodic filings
with the Securities and Exchange Commission, available via Ligand's
web site at ligand.com. Ligand disclaims any intent or
obligation to update these forward-looking statements beyond the date
of this release. This caution is made under the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995.
LIGAND PHARMACEUTICALS INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share data)
Three Months Ended Year Ended
December 31, December 31,
--------------------------------------
2002 2001 2002 2001
-------- --------- --------- ---------
Revenues:
Product sales $13,875 $15,608 $54,522 $45,623
Collaborative research and
development
and other revenues 13,447 7,035 42,118 30,718
-------- --------- --------- ---------
Total revenues 27,322 22,643 96,640 76,341
-------- --------- --------- ---------
Operating costs and expenses:
Cost of products sold 5,519 4,386 20,306 13,947
Research and development 16,370 12,626 58,807 51,104
Selling, general and
administrative 10,975 8,178 41,678 34,427
-------- --------- --------- ---------
Total operating costs and
expenses 32,864 25,190 120,791 99,478
-------- --------- --------- ---------
Loss from operations (5,542) (2,547) (24,151) (23,137)
-------- --------- --------- ---------
Other expense, net (1,186) (10,508) (8,445) (19,858)
-------- --------- --------- ---------
Net loss $(6,728) $(13,055) $(32,596) $(42,995)
======== ========= ========= =========
Basic and diluted per share
amounts:
Net loss $(0.09) $(0.22) $(0.47) $(0.72)
======== ========= ========= =========
Weighted average number of
common shares outstanding 71,410 59,747 69,119 59,413
======== ========= ========= =========
LIGAND PHARMACEUTICALS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)
December 31, December 31,
2002 2001 (1)
------------ ------------
Assets
Current assets:
Cash, cash equivalents and short-term
investments
($8,998 restricted at December 31, 2002) $64,248 $37,688
Other current assets 19,505 15,886
------------ ------------
Total current assets 83,753 53,574
Restricted investments 10,646 2,370
Property and equipment, net 9,672 9,690
Acquired technology and product rights, net 148,546 41,879
Other assets 17,992 9,960
------------ ------------
$270,609 $117,473
============ ============
Liabilities and Stockholders' Equity
(Deficit)
Current liabilities $30,535 $31,726
Long-term debt 155,250 133,404
Other long-term liabilities 10,809 10,218
Stockholders' equity (deficit) 74,015 (57,875) |
