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Biotech / Medical : Ligand (LGND) Breakout! -- Ignore unavailable to you. Want to Upgrade?

To: Bryce Elkins who wrote (29193)	8/18/1999 10:52:00 AM
From: Webhead	Read Replies (1) \| Respond to of 32384

Here's more mixed-bag opinion and "news". Ed ----- theonlineinvestor.com Ligand Pharmaceuticals Biotech's Bumpy Road to Profitability August 17, 1999 - Ligand Pharmaceuticals (Nasdaq:LGND) is poised to launch several new drugs in the coming quarters if all goes according to plan, but its first two products are off to a rocky start this year. On Monday, Ligand reported a larger-than-expected loss and pushed back its profitability target to 2000. This biotech firm boasts one of the more diverse product pipelines and already has two products on the market, but Ligand may be testing the patience of investors with this latest setback. It's not uncommon for biotech companies to spend a decade or more in the development stage, racking up massive losses while they research potential drugs, develop the compounds and then nurse them through the lengthy clinical trial process. So when a biotech company gets its lead products through FDA approval and is finally on the verge of breaking into profitability, it should be an exciting time for investors. Ligand is in such a position and investors have had their share of excitement, but it hasn't all been of the good variety. Ligand has been a somewhat controversial biotech stock, not to mention one of the more complicated. It tumbled from a peak of $16.68 in 1998 to as low as $5.50, then recovered as high as $14.75. LGND closed below $10 on Monday. The stock price has been buffeted by a tug-of-war between short-sellers (speculators who are betting on a drop in the stock price) and long-term proponents of Ligand. It has two products on the US market now and could have as many as five in the next year. Few development-stage biotechs use debt financing (often because no one will lend them money at reasonable rates), but Ligand has been able to borrow extensively to fund product and company acquisitions as well as internal R&D. Some analysts tout Ligand for building a technology franchise in several key areas like cancer and endocrinology even before it had a product on the market. Other professional investors question its broadening scope of targeted indications and its complex financing which could further dilute potential profits if and when its products reach the market. Ligand's expertise is in gene transcription technology, developing drugs that target specific hormones and cytokines involved in disease processes. In simple terms, Ligand looks for ways to interrupt the disease process at the intracellular level, paying particular attention to receptors within the cells that serve as chemical docking stations. The company originally focused on cancer and therapeutic drugs for women, but Ligand has discovered many additional indications for some existing drug candidates and for its transcription technology in general. The company is now developing drugs to treat everything from diabetes and osteoporosis to obesity and inflammatory diseases. Through collaborations with other drug developers, Ligand is involved with somewhere in the neighborhood of three dozen compounds in various stages of clinical trials. The list of corporate collaborations reads like a Who's Who of the pharmaceutical industry--Eli Lilly, AHP, Elan, Abbott Labs, Pfizer, and Glaxo-Wellcome among them. These partners account for more than a quarter of worldwide pharmaceutical sales. The marketing muscle of these partners is impressive, and many consider their involvement to be a validation of Ligand's technology. Perhaps most important, the breadth and depth of its product pipeline gives Ligand a degree of diversity that is rare in biotech. But Ligand stands out from the biotech crowd in other ways that aren't universally praised. The company is shouldering a substantial debt load, much of it in bonds that can be converted into stock under certain conditions. This has resulted in a complicated capital structure involving some of its big pharmaceutical partners. Last year a strategic alliance was announced in which Elan bought a $20 million stake in Ligand and up to $110 million in convertible bonds (as of last month, $80 million in that credit agreement was exercised). Elan also sold Ligand an exclusive license for North American sales of Morphelan, a once-a-day dosage of morphine for cancer and HIV patients that is in pivotal Phase III trials currently. Ligand can pay for these marketing rights with either cash or more stock. Ligand's first two products gained FDA marketing clearance in early 1999. Ontak treats cutaneous T-cell lymphoma (CTCL). Panretin gel is the first topical treatment for AIDS-related Kaposi's sarcoma, a common cancer among AIDS patients. Sales of Panretin gel were limited in the second quarter due to a variety of problems including Medicare reimbursement delays. As a result, product sales in the second quarter were just $1.9 million versus $4.4 million in the first quarter. The company was upbeat about product revenues accelerating in the second half of this year, but after the second quarter problems Ligand had to pushed back its target for a break into profitability from 1999 to 2000. The first few products out of the chute for Ligand address fairly small patient populations, but many of the drugs in its pipeline address much larger markets such as diabetes, osteoporosis and cardiovascular diseases. If Ligand and its partners can successfully commercialize a fair share of them, the payoff should be huge. The diversity of Ligand's pipeline reduces some of the risk normally associated with biotechs, but with any development-stage biotech there is always enormous uncertainty for investors to consider. This company's second quarter difficulties remind us that the uncertainty can continue even after FDA approval. - James Hale RETURN TO COMPANY SPOTLIGHT ARCHIVE The Online Investor makes no buy or sell recommendations nor does it receive compensation in any form from companies discussed on our site. Any material read on this site should not be misconstrued as individual investment advice. Our information is limited to offering commentary and methods for evaluating investments. Our mission is to provide investors with information and insight, and encourage those who are comfortable in making their own investment decisions to do so based on their own thorough, independent research.