Anyone has an opinion about the finacial results?
.Ligand Pharmaceuticals Incorporated (NASDAQ: LGND) today reported financial results for the three- and nine-months ending September 30, 2020 and provided an operating forecast and program updates. Ligand management will host a conference call with slides today beginning at 8:30 a.m. Eastern time to discuss this announcement and answer questions.
"Our business is performing very well across the board. We are pleased to be reporting strong third quarter financial results and foresee substantial momentum and accelerating growth as we close out 2020 and move into 2021," said John Higgins, Chief Executive Officer of Ligand. "Revenue is tracking well against the guidance we raised throughout the year, and we are pleased with our earnings performance with adjusted diluted EPS coming in much higher than our outlook at the start of 2020."
Higgins continued, "Beyond robust financial performance, we closed three acquisitions in the past three months, with Pfenex in particular providing significant P&L contribution and a major new technology platform backed by top-tier partnering contracts. We are proud of our contribution to helping make Gilead's Veklury possible as the first and only FDA approved treatment for COVID-19. Our core business is very strong and forms the foundation of Ligand’s value, but we certainly see the surge in Captisol business due to Veklury as meaningful upside now and over the next few quarters. Captisol material sales will provide Ligand increased cash flow and, in turn, the opportunity to invest in other areas to drive future growth."
Third Quarter 2020 Financial Results
Total revenues for the third quarter of 2020 were $41.8 million, compared with $24.8 million for the same period in 2019. Royalties for the third quarter of 2020 were $9.0 million, compared with $9.8 million for the same period in 2019. Royalties for the third quarter of 2020 and 2019 primarily consisted of royalties from Kyprolis® and EVOMELA®. Captisol sales were $23.4 million for the third quarter of 2020, compared with $6.8 million for the same period in 2019, primarily reflecting higher sales of Captisol for use with remdesivir. Contract revenue was $9.5 million for the third quarter of 2020, compared with $8.2 million for the same period in 2019.
Cost of goods sold was $6.4 million for the third quarter of 2020, compared with $3.1 million for the same period in 2019, with the increase primarily attributable to higher sales of Captisol. Amortization of intangibles was $3.9 million for the third quarter of 2020, compared with $3.6 million for the same period in 2019, with the increase attributable to the Icagen acquisition in April 2020. Research and development expense was $12.9 million for the third quarter of 2020, compared with $13.7 million for the same period of 2019, with the decrease primarily attributable to amortization of research and development expense related to Novan and Palvella in the prior-year period. General and administrative expense was $15.0 million for the third quarter of 2020, compared with $9.5 million for the same period in 2019, with the increase primarily attributable to additional expenses from Icagen and other acquisition-related cost.
Net loss for the third quarter of 2020 was $6.7 million, or $0.42 per share, compared with net loss of $15.3 million, or $0.81 per share, for the same period in 2019. Net loss for the third quarter of 2020 included a $11.7 million net non-cash loss from the value of Ligand’s short-term investments, while net loss for the third quarter of 2019 included a $13.4 million net non-cash loss from the value of Ligand’s short-term investments. Adjusted net income for the third quarter of 2020 was $17.5 million, or $1.04 per diluted share, compared with $9.5 million, or $0.49 per diluted share, for the same period in 2019. Please see the table below for a reconciliation of net income/(loss) to adjusted net income.
As of September 30, 2020, Ligand had cash, cash equivalents and short-term investments of $795 million. Following the closing of the Pfenex acquisition on October 1, Ligand had approximately $400 million in cash, cash equivalents and short-term investments.
Year-to-Date Financial Results
Total revenues for the nine months ended September 30, 2020 were $116.4 million, compared with $93.3 million for the same period in 2019. Royalties for the nine months ended September 30, 2020 were $22.8 million and primarily consisted of royalties from Kyprolis® and EVOMELA®. Royalties for the nine months ended September 30, 2019 were $35.9 million and included $14.2 million in royalties from Promacta; Ligand sold its Promacta license to Royalty Pharma as of March 6, 2019. Captisol sales were $69.0 million for the nine months ended September 30, 2020, compared with $24.4 million for the same period in 2019, with the increase primarily reflecting higher sales of Captisol for use with remdesivir. Contract revenue was $24.7 million for the nine months ended September 30, 2020, compared with $33.0 million for the same period in 2019, with the change due to the timing of partner events.
Cost of goods sold was $18.7 million for the nine months ended September 30, 2020, compared with $9.4 million for the same period in 2019, with the increase primarily attributable to higher sales of Captisol. Amortization of intangibles for the nine months ended September 30, 2020 was $11.3 million, compared with $10.6 million for the same period in 2019, with the increase attributable to the Icagen acquisition. Research and development expense was $37.5 million for the nine months ended September 30, 2020, compared with $37.2 million for the same period of 2019. General and administrative expense was $34.4 million for the nine months ended September 30, 2020, compared with $31.6 million for the same period in 2019, with the increase primarily attributable to additional expenses from Icagen and other acquisition-related costs.
Net loss for the nine months ended September 30, 2020 was $8.7 million, or $0.54 per share, compared with net income of $636.7 million, or $31.29 per diluted share, for the same period in 2019. Net loss for the nine months ended September 30, 2020 included a net non-cash loss in the value of Ligand’s short-term investments of $17.9 million, while net income for the same period in 2019 was impacted by an after-tax gain of approximately $643 million on the sale of the Promacta license. Adjusted net income for the nine months ended September 30, 2020 was $49.4 million, or $2.93 per diluted share, compared with $48.2 million, or $2.37 per diluted share, for the same period in 2019. Please see the table below for a reconciliation of net income/(loss) to adjusted net income.
2020 and 2021 Financial Guidance
Ligand reiterates 2020 financial guidance and 2021 financial guidance newly introduced at its Analyst Day event on October 20, 2020, as follows:
For 2020, Ligand expects total revenue to be approximately $170 million and adjusted diluted EPS to be $3.95. Total revenue is expected to consist of $92 million in Captisol sales, $33 million in royalty revenue and $45 million in contract revenue.
For 2021, Ligand expects total revenue to be approximately $285 million and adjusted diluted EPS to be $6.00. Total revenue is expected to consist of $200 million of Captisol sales, $45 million in royalty revenue and $40 million in contract revenue.
Third Quarter 2020 and Recent Business Highlights
OmniAb® Platform Updates
OmniAb is Ligand’s multi-species antibody platform for the discovery of mono- and bi-specific therapeutic human antibodies. As of the third quarter of 2020, more than 8,500 clinical subjects have been or are planned to be treated by partners in clinical trials with OmniAb-derived antibodies. New clinical programs are pending at Johnson & Johnson and Merck, among others. Ligand expects the first regulatory submission for OmniAb-derived antibodies in 2021, with potential for as many as 10 approvals expected by 2025.
As part of the OmniAb platform, Ligand recently announced OmniTaur™, featuring Ultralong CDR-H3 humanized binding domains recently acquired from Taurus Biosciences. The OmniAb platform also includes the ultra-high resolution, high-speed automated antibody selection technology acquired from xCella Biosciences.
Multiple OmniAb partners reported clinical or regulatory progression with OmniAb-derived antibodies during the third quarter. Additionally, three Ligand partners (Takeda, Immunoprecise and Genovac) are pursuing development of therapeutic antibodies for the treatment of COVID-19 that were discovered with OmniAb.
CStone Pharmaceuticals announced the formation of a $480 million strategic collaboration that encompasses a $200 million equity investment by Pfizer Hong Kong in CStone, collaboration between CStone and Pfizer Investment for the development and commercialization of CStone’s PD-L1 antibody sugemalimab (CS1001) in mainland China and a framework between CStone and Pfizer Investment to bring additional oncology assets to the Greater China market. CStone announced updated results from two clinical studies of sugemalimab at the 2020 Chinese Society of Clinical Oncology Annual Meeting. CStone announced that sugemalimab met the primary endpoint as first-line treatment in stage IV squamous and non-squamous non-small cell lung cancer.
Immunovant announced positive topline results from a multicenter, placebo-controlled Phase 2a trial (ASCEND MG) of IMVT-1401, a novel investigational anti-FcRn antibody delivered by subcutaneous injection, in patients with myasthenia gravis (MG). A registration-enabling Phase 3 MG trial is expected to initiate in the first half of 2021.
Captisol® Business Updates
To date in 2020, Ligand has entered into more than 120 Captisol research use agreements and eight clinical and/or commercial license agreements. This is the highest number of use agreements to be signed in a single year since the invention of Captisol.
Captisol is utilized in the formulation of Gilead Sciences’ Veklury® (remdesivir), which on October 22, 2020 received U.S. Food and Drug Administration (FDA) approval for the treatment of patients with COVID-19 requiring hospitalization. The product has regulatory approvals for the treatment of moderate or severe COVID-19 in over 50 countries and is included in more than 30 ongoing clinical trials. Ligand is supplying Captisol to Gilead under a recently signed 10-year supply agreement. Ligand is also supplying Captisol to Gilead’s voluntary licensing generic partners who are manufacturing remdesivir for 127 low- and middle-income countries.
Partner Marinus was recently awarded a BARDA contract by the U.S. government to develop Captisol-enabled IV ganaxolone for the treatment of refractory status epilepticus (RSE) caused by nerve agent exposure. Marinus also announced it had satisfied the FDA protocol-specific questions for the registrational Phase 3 trial (the RAISE trial) in RSE, allowing the company to begin patient enrollment in October. Topline data are anticipated in the first half of 2022.
Ligand plans to initiate a potentially pivotal trial for Captisol-enabled Iohexol (CE-Iohexol) in December 2020. CE-Iohexol is an iodine-based contrast agent for hospital-based imaging procedures.
Protein Expression Technology Platform Updates
On October 1, Ligand closed the previously announced acquisition of Pfenex, Inc. Pfenex brings to Ligand a proprietary protein expression technology, as well as major collaborations with Jazz Pharmaceuticals, Merck, Serum Institute of India and Alvogen, each of which has potential to contribute meaningfully to Ligand’s royalty revenue. Our partner Merck announced positive data from two Phase 3 studies with V114, which uses the protein expression technology, evaluating the safety, tolerability and immunogenicity of the investigational 15-valent pneumococcal conjugate vaccine with plans for global regulatory licensure applications in the fourth quarter 2020. Also using the platform, Jazz Pharmaceutical’s Erwinaze supply challenges due to issues with their manufacturer were solved, resulting in a robust process showing manufacturing consistency and efficiency. The program was completed from commencement to projected first BLA filing in approximately four years.
Ligand entered into a new 10-year CRM197 supply agreement with a global multi-national pharmaceutical partner focused on vaccine development.
Other Business Updates
Ligand announced the sale of its Vernalis research operations and internal programs to HitGen Inc. for $25 million in cash. Under the terms of the agreement, Ligand will retain economic rights on completed collaboration licenses as well as a share of the economic rights on current research collaboration contracts. The transaction is expected to close in the fourth quarter of 2020, subject to customary closing conditions.
Several partners also had significant regulatory, financing and business updates during the third quarter: Verona Pharma announced initiation of its ENHANCE Phase 3 trials, Retrophin announced enrollment of the first 280 patients in the pivotal Phase 3 PROTECT study of sparsentan in IgA nephropathy, and Sermonix Pharmaceuticals announced a collaboration with Eli Lilly to study lasofoxifene in combination with Lilly’s CDK 4 and 6 inhibitor abemaciclib in metastatic breast cancer.
Ligand provides regular updates on individual partner events through its Twitter account, @Ligand_LGND.
Adjusted Financial Measures
The Company reports adjusted net income and adjusted net income per diluted share in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. The Company’s financial measures under GAAP include share-based compensation expense, amortization of debt-related costs, amortization related to acquisitions and intangible assets, changes in contingent liabilities, mark-to-market adjustments for amounts relating to its equity investments in public companies, excess tax benefit from share-based compensation, gain on the sale of Promacta and others that are listed in the itemized reconciliations between GAAP and adjusted financial measures included at the end of this press release. However, other than with respect to total revenues, the Company only provides financial guidance on an adjusted basis and does not provide reconciliations of such forward-looking adjusted measures to GAAP due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation, including adjustments that could be made for changes in contingent liabilities, changes in the market value of its investments in public companies, stock-based compensation expense and effects of any discrete income tax items. Management has excluded the effects of these items in its adjusted measures to assist investors in analyzing and assessing the Company’s past and future core operating performance. Additionally, adjusted earnings per diluted share is a key component of the financial metrics utilized by the Company’s board of directors to measure, in part, management’s performance and determine significant elements of management’s compensation.
