PROSPECTUS FILED PURSUANT TO RULE 424(B)(3)
LIGAND PHARMACEUTICALS INCORPORATED
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-131029
Prospectus Supplement No. 14
(to Prospectus dated April 12, 2006, as supplemented and amended by that
Prospectus Supplement No. 1 dated May 15, 2006, that Prospectus Supplement
No. 2 dated June 12, 2006, that Prospectus Supplement No. 3 dated June 29, 2006,
that Prospectus Supplement No.4 dated August 4, 2006, that Prospectus Supplement
No. 5 dated August 9, 2006, that Prospectus Supplement No. 6 dated August 30,
2006, that Prospectus Supplement No. 7 dated September 11, 2006, that Prospectus
Supplement No. 8 dated September 12, 2006, that Prospectus Supplement No. 9
dated October 2, 2006, that Prospectus Supplement No. 10 dated October 17, 2006,
that Prospectus Supplement No. 11 dated October 20, 2006, that Prospectus
Supplement No. 12 dated October 31, 2006, and that Prospectus Supplement No. 13
dated November 14, 2006)
This Prospectus Supplement No. 14 supplements and amends the prospectus
dated April 12, 2006 (as supplemented and amended by that Prospectus Supplement
No. 1 dated May 15, 2006, that Prospectus Supplement No. 2 dated June 12, 2006,
that Prospectus Supplement No. 3 dated June 29, 2006, that Prospectus Supplement
No. 4 dated August 4, 2006, that Prospectus Supplement No. 5 dated August 9,
2006, that Prospectus Supplement No. 6 dated August 30, 2006, that Prospectus
Supplement No. 7 dated September 11, 2006, that Prospectus Supplement No. 8
dated September 12, 2006, that Prospectus Supplement No. 9 dated October 2,
2006, that Prospectus Supplement No. 10 dated October 17, 2006, that Prospectus
Supplement No. 11 dated October 20, 2006, that Prospectus Supplement No. 12
dated October 31, 2006, and that Prospectus Supplement No. 13 dated November 14,
2006), or the Prospectus, relating to the offer and sale of up to 7,790,974
shares of our common stock to be issued pursuant to awards granted or to be
granted under our 2002 Stock Incentive Plan, or our 2002 Plan, up to 147,510
shares of our common stock to be issued pursuant to our 2002 Employee Stock
Purchase Plan, or our 2002 ESPP, and up to 50,309 shares of our common stock
which may be offered from time to time by the selling stockholders identified on
page 110 of the Prospectus for their own accounts. Each of the selling
stockholders named in the Prospectus acquired the shares of common stock upon
exercise of options previously granted to them as an employee, director or
consultant of Ligand or as restricted stock granted to them as a director of
Ligand, in each case under the terms of our 2002 Plan.
We will not receive any of the proceeds from the sale of the shares of our
common stock by the selling stockholders under the Prospectus. We will receive
proceeds in connection with option exercises under the 2002 Plan and shares
issued under the 2002 ESPP which will be based upon each granted option exercise
price or purchase price, as applicable.
This Prospectus Supplement No. 14 includes the attached Current Report
on Form 8-K of Ligand Pharmaceuticals Incorporated dated November 15, 2006, as
filed by us with the Securities and Exchange Commission.
This Prospectus Supplement No. 14 should be read in conjunction with,
and delivered with, the Prospectus and is qualified by reference to the
Prospectus, except to the extent that the information in this Prospectus
Supplement No. 14 updates or supersedes the information contained in the
Prospectus.
Our common stock is quoted on the Nasdaq Global Market under the symbol
"LGND." On November 14, 2006, the last reported sale price of our common stock
on the Nasdaq Global Market was $11.19 per share.
Investing in our common stock involves risk. See "Risk Factors"
beginning on page 7 of the Prospectus and beginning on page 62 of Prospectus
Supplement No. 13.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if the
Prospectus or this Prospectus Supplement No. 14 is truthful or complete. Any
representation to the contrary is a criminal offense.
The date of this Prospectus Supplement No. 14 is November 15, 2006.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,D.C. 20549
---------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):November 9, 2006
LIGAND PHARMACEUTICALS INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
000-20720
(Commission File Number)
10275 SCIENCE CENTER DRIVE,
SAN DIEGO, CALIFORNIA
(Address of principal executive offices)
(858) 550-7500
(Registrant's telephone number, including area code)
77-0160744
(I.R.S. Employer Identification No.)
92121-1117
(Zip Code)
ITEM 2.01. COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS.
On October 25, 2006, Ligand Pharmaceuticals Incorporated ("Ligand" or
the "Company") entered into a definitive agreement (the "Real Estate Purchase
Agreement") to sell its corporate headquarters building/land and two adjacent
undeveloped parcels of land in Torrey Pines Science Center to Slough Estates USA
Inc. ("Slough") for an aggregate consideration of $47.6 million and to lease the
building back from Slough. This sale transaction closed on November 9, 2006.
Under the terms of the Real Estate Purchase Agreement, Ligand received
cash consideration of approximately $35 million, net of fees, expenses, and
existing indebtedness. In addition, Ligand has entered into a 15 year lease
arrangement with Slough to lease back the building at a rate of approximately $3
million per year, subject to an annual fixed percentage increase In addition,
Ligand will have the right to extend the term of the lease for two five-year
periods under the same terms and conditions as the initial term.
The foregoing description of the Real Estate Purchase Agreement does
not purport to be complete and is qualified in its entirety by reference to such
agreement. The Real Estate Purchase Agreement was attached as Exhibit 10.1 to
the Company's Current Report on Form 8-K filed on October 31, 2006 and is
incorporated herein by reference.
ITEM 2.02 DISCLOSURE OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On November 14, 2006, the Company reported its financial results for
its second quarter ended September 30, 2006. A copy of the press release issued
by the registrant on November 14, 2006 concerning the foregoing results is
furnished herewith as Exhibit 99.1 and is incorporated herein by reference.
ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION
On October 25, 2006, the Company, along with its wholly-owned
subsidiary Nexus Equity VI LLC entered into the Real Estate Purchase Agreement
as described above. As part of the sale transaction, the Company agreed to
enter into a lease agreement (the "Lease") which provides that we will lease
back the building for a period of 15 years, as further described below. In
connection with the sale transaction, on November 6, 2006, the Company paid off
the existing mortgage on the building of approximately $11.6 million. The early
payment triggered a prepayment penalty of approximately $0.4 million. The sale
transaction subsequently closed on November 9, 2006 and we became obligated
under the Lease on that date.
Under the terms of the lease, the Company will pay a basic annual rent
of $3.0 million (subject to an annual fixed percentage increase, as set forth in
the agreement), plus a 1% annual management fee, property taxes and other normal
and necessary expenses associated with the lease such as utilities, repairs and
maintenance, etc. The Company will have the right to extend the lease for two
five-year terms and will have the first right of refusal to lease, at market
rates, any facilities built on the sold lots.
The foregoing description of the Real Estate Purchase Agreement and the
Lease does not purport to be complete and is qualified in its entirety by
reference to such agreements. The Real Estate Purchase Agreement, including the
form of the Lease containing all material terms thereof, was attached as Exhibit
10.1 to the Company's Current Report on Form 8-K filed on October 31, 2006 and
is incorporated herein by reference.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(d) Exhibits
EXHIBIT NO. DESCRIPTION
99.1 Press Release of the Company dated November 14, 2006
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has caused this report to be signed on its behalf by the
undersigned.
LIGAND PHARMACEUTICALS INCORPORATED
Date : November 15,2006 By: /s/ Warner Broaddus
Name: Warner Broaddus
Title: Vice President, General Counsel & Secretary
EXHIBIT 99.1
Contact: Paul V. Maier
Senior Vice President
and Chief Financial Officer
858-550-7573
LIGAND ANNOUNCES FINANCIAL RESULTS FOR THIRD QUARTER OF FISCAL 2006
SAN DIEGO, CA NOVEMBER 14, 2006---Ligand Pharmaceuticals Incorporated (NASDAQ:
LGND) (the "Company" or "Ligand") announced unaudited financial results for its
third quarter of fiscal year 2006.
NOTES REGARDING CONTINUING/DISCONTINUED OPERATIONS:
The Company sold its oncology products ("Oncology") effective
October 25, 2006. The operating results for Oncology for all periods presented
have been presented in the accompanying condensed consolidated financial
statements as "Discontinued operations." Likewise, assets and liabilities
associated with Oncology are presented as "Assets held for sale" and
"Liabilities related to assets held for sale" as of September 30, 2006.
Additionally on September 7, 2006, the Company announced that it had
executed an agreement to sell its AVINZA product, subject to shareholder
approval. Due to the requirement of stockholder approval which has not yet been
received, the operating results for the AVINZA product line are presented in the
accompanying condensed consolidated financial statements as continuing
operations.
FINANCIAL RESULTS:
Total revenues from continuing operations for the quarter ended
September 30, 2006 were $36.7 million compared to $32.0 million for the same
2005 period, an increase of 15%. Net product sales for the quarter ended
September 30, 2006 were $36.7 million compared to $29.9 million for the same
period in 2005, an increase of 23%. Operating loss from operations was $15.1
million for the three months ended September 30, 2006 compared to $4.6 million
for the same 2005 period. Loss from continuing operations was $16.1 million
($0.21 per share)for the three months ended September 30, 2006 compared to
$7.3 million ($0.10 per share) for the same 2005 period. Income from
discontinued operations for the quarter ended September 30, 2006 was $1.2
million ($0.02 per share) compared to $1.0 million ($0.02 per share) for the
same 2005 period. Net loss for the quarter ended September 30, 2006 was $14.9
million ($0.19 per share)compared to $6.3 million ($0.08 per share) for the same
2005 period.
Total revenues from continuing operations for the nine months ended
September 30, 2006 were $106.8 million compared to $87.3 million for the same
2005 period, an increase of 22%. Net product sales for the nine months ended
September 30, 2006 were $102.9 million compared to $79.4 million for the same
2005 period, an increase of 30%. Loss from continuing operations was $173.7
million for the nine months ended September 30, 2006 compared to $20.1 million
for the same 2005 period. Loss from operations for the nine months ended
September 30, 2006 included one-time termination charges
of $143.0 million relating to the termination of the Organon co-promotion
agreement. Loss from continuing operations for the nine months ended
September 30, 2006 was $176.5 million ($2.26 per share)compared to $27.8 million
($0.38 per share) for the same 2005 period. Income from discontinued operations
was $3.4 million ($0.05 per share) for the nine months ended September 30, 2006
compared to loss from discontinued operations of
$5.9 million ($0.08 per share) for the same 2005 period. Net loss for the nine
months ended September 30, 2006 was $173.1 million ($2.21 per share) compared to
$33.7 million ($0.46 per share) for the same 2005 period.
"Ligand's product sales growth in continuing operations (AVINZA) of 23%
in the third quarter and 30% in the nine months of 2006 compared to the same
periods in 2005 was driven primarily by price increases and lower rebate
trends." said Paul V. Maier, Ligand's Senior Vice President and Chief Financial
Officer. "As we approach the expected closing of our AVINZA asset sale, we are
pleased to have completed the sale of our oncology product line and corporate
real estate as part of a strategic process that we believe will enhance
shareholder value. With the anticipated upcoming conversion or redemption of our
outstanding convertible notes, we believe the Company's financial flexibility
will increase substantially while reducing our cash interest expense as we
transition to a dynamic and highly specialized R&D and royalty company."
NET PRODUCT SALES (AVINZA):
AVINZA net product sales for the quarter ended September 30, 2006 were
$36.7 million compared to $29.9 million for the same 2005 period, an increase of
23%. AVINZA net product sales for the nine months ended September 30, 2006 were
$102.9 million compared to $79.4 million for the same 2005 period, an increase
of 30%.A comparison of AVINZA net product sales is as follows (in thousands):
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ ------------------------------
2006 2005 2006 2005
-------------- ------------- ------------ ------------
AVINZA(R) $ 36,707 $ 29,908 $ 102,853 $ 79,367
============== ============== =============== ==============
The increase in sales of AVINZA for the quarter and nine months ended
September 30, 2006 reflects the impact of a 7% price increase effective April 1,
2005 as well as a shift in the mix of prescriptions to the higher doses of
AVINZA. Net sales for the third quarter and nine months of 2006 also benefited
from the release of a $1.5 million accrual previously recorded for billings
received under the Department of Defense TriCare Retail Pharmacy refund program
which was struck down in September 2006 by the U.S. Court of Appeals for the
Federal circuit. The increase in AVINZA net sales further reflects a reduction
in Medicaid rebates of approximately $4.3 million for the third quarter 2006.
The increases in AVINZA net sales for these periods were partially offset by
decreases in prescriptions of 8% in the third quarter of 2006 and 2% in the nine
months of 2006, compared to the same 2005 periods. According to IMS data,
quarterly prescription market share of AVINZA for the third quarter 2006 was
3.7% compared to 4.5% for the same 2005 period. These trends reflect an expected
continuing decrease in prescriptions under Medicaid contracts as marginal
Medicaid contracts are terminated, partially offset by increases in
prescriptions under managed care contracts and Medicare Part D. We also believe
that the decrease in prescriptions is due in part to a lower level of co-promote
activity in the third quarter of 2006, as our co-promotion arrangement with
Organon reached its conclusion effective September 30, 2006.
AVINZA net sales for the nine months ended September 30, 2006 reflect
an approximate charge of $2.1 million for losses expected to be incurred on
product returns resulting from a 6% price increase effective July 1, 2006. This
compares to a charge of $3.5 million recorded for the quarter ended
March 31, 2005. This decrease in the charge for the 2006 period is primarily due
to lower rates of return on lots that closed out in 2006. AVINZA net sales for
the quarter and nine months ended September 30, 2006 also benefited from a
reduction in the existing allowance for return losses of $0.5 million and $3.5
million, respectively, due to the lower rates of return on lots that closed in
2006.
GROSS MARGIN:
Gross margin on AVINZA product sales was 84.2% for the quarter ended
September 30, 2006 compared to 78.5% for the same 2005 period. For the nine
months ended September 30, 2006, gross margin on product sales was 83.7%
compared to 77.3% for the same 2005 period. The improvement in gross margin
percentages in 2006 is primarily attributed to price increases, lower AVINZA
Medicaid rebates, lower allowances for return losses, the release of the TriCare
accrual of $1.5 million and higher AVINZA net sales to cover the fixed
amortization of intangible assets.
COLLABORATIVE R&D/OTHER REVENUES:
The Company earned no collaborative research, development and other
revenues for the quarter ended September 30, 2006 compared to $2.1 million for
the same 2005 period. For the nine months ended September 30, 2006,
collaborative research, development and other revenues were $4.0 million
compared to $7.9 million for the same 2005 period. The decrease in collaborative
research and development revenue for thequarter ended September 30, 2006 is due
to the completion of the research phase of our collaborative arrangement with
TAP, which concluded in June 2006.
R&D:
Research and development expenses were $10.5 million and $29.0 million,
respectively, for the quarter and nine months ended September 30, 2006 compared
to $7.9 million and $23.8 million for the same 2005 periods. Spending for new
product development partially offset by a lower level of expense in existing
product support was the major contributor to increased research and development
expense. This increase was primarily due to the increase in LGD4665
thrombopoietin (TPO) and LGD5552 (glucocorticoid agonists) expenses as our lead
drug candidates were moved to IND track. We expect an IND for LGD4665 to be
filed by year end 2006 and for LGD5552 to be filed in 2007.
SG&A:
Selling, general and administrative expense was $20.1 million and $58.1
million, respectively, for the quarter and nine months ended September 30, 2006
compared to $14.5 million and $43.1 million for the same 2005 periods. The
increase is due primarily to legal costs(incurred in connection with the ongoing
SEC investigation; shareholder litigation and our strategic alternatives
process) which increased by approximately $2.0 million and $6.0 million,
respectively, for the quarter andnine months ended
September 30, 2006 compared to the prior year periods. In addition, G&A expenses
for the quarter ended September 30, 2006 include expenses of approximately $1.6
million for investment banker fees related to the Oncology and AVINZA product
line sales transactions as well as approximately $1.9 million of expenses in
connection with the resignation of the Company's CEO.
G&A expenses were also higher for the quarter and nine months ended
September 30, 2006 due to higher audit and consultantfees in connection with our
2005 and 2006 SOX compliance programs. In addition, AVINZA advertising and
promotion expenses increased in the quarter and nine months ended September 30,
2006 compared to the prior year periods when Ligand and Organon shared equally
all AVINZA promotion expenses. We expect SG&A expenses to continue to be higher
through the remainder of 2006 compared to the prior year due to the ongoing cost
of compliance with the Sarbanes-Oxley Act, legal expenses in connection with the
SEC investigation and strategic alternatives process and the expense to be
recognized in connection with the employee retention agreements previously
disclosed.
CO-PROMOTION:
Co-promotion expense due to Organon amounted to $11.8 million and $33.8
million, respectively, for the quarter and nine months ended September 30, 2006
compared to $7.8 million and $22.5 million for the same 2005 periods. The 2006
co-promotion expense is based on an agreement to pay Organon 23% of net AVINZA
product sales in connection with the AVINZA termination and return of co-promote
rights agreement with Organon compared to co-promote expense in the prior year
period based on 30% of net AVINZA product sales per the original co-promotion
agreement. Co-promotion expense for the quarter and nine months ended September
30, 2006 also includes $3.3 million and $10.0 million, respectively, which
represents the pro-rata accrual of a $10.0 million payment we agreed to make to
Organon in January 2007 provided that Organon achieves the required level of
sales calls during the transition period.
CO-PROMOTE TERMINATION CHARGES AND ACCOUNTING IMPACT:
In January 2006, the Company signed an agreement with Organon that
terminated the AVINZA co-promotion agreement between the two companies and
returned AVINZA co-promotion rights to Ligand. The co-promotion termination
charges were recognized as liabilities and expensed as costs of termination.
Co-promote termination charges recorded in the nine months ended September 30,
2006 represent the cost associated with the termination agreement totaling
$143.0 million, and is primarily comprised of a $37.8 million payment the
Company agreed to make to Organon in October 2006 and the fair value of
subsequent quarterly payments, estimated at approximately $95.2 million as of
January 1, 2006, that the Company will make to Organon based on net product
sales of AVINZA through November 2017. The co-promote termination liability as
of September 30, 2006 also includes approximately $10.4 million of accretion
expense to reflect the fair value of the liability as of that date.
SALE OF AVINZA PRODUCT LINE:
As previously disclosed, on September 6, 2006, the Company and King
Pharmaceuticals, Inc. ("King"), entered into a purchase agreement pursuant to
which King agreed to acquire all of the Company's
rights in and to AVINZA and to assume certain liabilities, including the
product-related liabilities owed by the Company to Organon of approximately
$47.8 million and all other existing product royalty obligations. Pursuant to
the AVINZA purchase agreement, at closing, the Company will be paid a $265.0
million cash payment, $15.0 million of which will be funded into an escrow
account to support any indemnification claims made by King following the
closing. The closing payment is subject to adjustment based on the Company's
ability to reduce wholesaler and retail inventory levels of AVINZA to certain
targeted levels by closing. In addition to the assumption of existing royalty
obligations, King will pay Ligand a 15%royalty on AVINZA net sales during the
first 20 months after closing. Subsequent royalty payments will be based upon
calendar year net sales. If calendar year net sales are less than $200 million,
the royalty payment will be 5% of all net sales. If calendar year net sales are
greater than $200 million, the royalty payment will be 10% of all net sales less
than $250 million, plus 15% of net sales greater than $250 million.
In connection with the transaction, King committed to loan the Company,
at the Company's option, $37.8 million to be used to pay the Company's
co-promote termination obligation to Organon due October 15, 2006. This loan was
drawn, and the $37.8 million co-promote liability settled in October 2006. In
addition, and as a condition of the $37.8 million loan received from King, $38.6
million of the funds received in connection with the sale of Oncology to Eisai
was deposited into a restricted account to be used to repay the loan to King,
plus interest, due January 1, 2007. If the transaction with King closes as
contemplated by the AVINZA purchase agreement, the interest and the principal
will be forgiven. If the closing of the asset sale does not occur, then the
principal of the loan plus accrued interest will become due on January 1, 2007.
Also on September 6, 2006, the Company entered into a contract sales
force agreement, pursuant to which King agreed to perform certain minimum
monthly product details which commenced October 1, 2006 and will continue for a
period of six months or until the closing or earlier termination of the AVINZA
purchase agreement. The Company estimates that, assuming the closing were to
occur at the end of December 2006, the amount due to King under the sales
agreement would be approximately $4.0 million. A preliminary proxy statement
was filed with the SEC on November 6, 2006.
LIQUIDITY:
Cash, cash equivalents, short term investments, and restricted
investments totaled $33.7 million at September 30, 2006 compared to $62.6
million at June 30, 2006. Operating activities used cash of $28.1 million for
the quarter ended September 30, 2006, primarily as a result of reduced AVINZA
shipments to wholesalers consistent with the Company's goal to achieve certain
targeted levels of wholesaler and retail inventory in accordance with the King
purchase agreement.
As previously reported, the sale of Oncology was completed on
October 25, 2006. The Company received approximately $205 million in cash at
closing, of which $20 million was funded into an escrow account to support any
indemnification claims made by the purchaser and $38.6 million was deposited
into a restricted account to be used to repay the loan plus interest due to King
as described above. On November 9, 2006, the Company completed the sale of its
real property located in San Diego for $47.6 million which
is reflective of the payoff of the secured loan (including interest and
prepayment fees) of $12.0 million and $0.8 million in selling costs. The Company
received net cash proceeds of approximately $34.8 million.
On October 30, 2006, the Company announced that it had given notice of
redemption to the noteholders of its 6% convertible subordinated notes due
November 2007. The redemption date of the notes has been set for
November 29, 2006. As of September 30, 2006, approximately $128.2 million of
principal amount of the notes remained outstanding. The conversion price of the
notes is approximately $6.17 per share. The Company will pay the holders of
those notes that are not converted into shares a redemption price equal to
101.2% of the outstanding principal amount plus accrued and unpaid interest. The
Company expects that the majority of the notes will convert into shares of
Ligand common stock.
DISCONTINUED OPERATIONS:
Income (loss) from operations was $1.2 million and $3.4 million for the
quarter and nine months ended September 30, 2006 compared to $1.0 million and
$(5.9) million, respectively, for the same 2005 periods.
The following table summarizes results from discontinued operations for
the quarter and nine months ended September 30, 2006 and 2005 included in the
consolidated statements of operations (in thousands):
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
2006 2005 2006 2005
----- ------ -------- ------
(UNAUDITED)
Product sales...................... $ 13,292 $ 12,676 $ 42,457 $ 39,997
Collaborative research and development and
other revenues.............. 75 77 188 232
----- ---- ----- ------
Total revenues............. 13,367 12,753 42,645 40,229
------- ------- -------- -------
Operating costs and expenses:
Cost of products sold............. 3,410 3,385 12,448 13,552
Research and development........... 4,166 4,991 11,734 18,383
Selling, general and administrative 3,722 3,303 12,688 14,018
-------- ---------- ---------- -------
Total operating costs and expenses 11,298 11,679 36,870 45,953
-------- -------- -------- ------
Income (loss) from operations.......... 2,069 1,074 5,775 (5,724)
Interest expense...................... ( 1) (54) (51) (82)
------ ------ ------ ------
Income (loss) before income taxes... 2,068 1,020 5,724 (5,806)
Income tax expense ...... (845) (17) (2,342) (54)
-------- ------ ------ --------
Net income (loss)................... 1,223 1,003 3,382 (5,860)
======== ======= ====== ========
Product sales were $13.3 million and $42.5 million for the quarter and
nine months ended September 30, 2006 compared to $12.7 million and $40.0
million, respectively, for the same 2005 periods. The increase in product sales
for each period is primarily due to increases in sales of Targretin capsules
from increased demand and the effect of price increases. These increases are
partially offset by lower net product sales of ONTAK due to lower demand.
Total operating costs and expenses were $11.3 million and $36.9 million
for the quarter and nine months ended September 30, 2006 compared to $11.7
million and $46.0 million, respectively, for the same 2005 periods. These
decreases are primarily due to decreased research expenses across several
Oncology research programs, decreased development expenses for existing Oncology
product support (primarily a reduced level of spending on Phase III clinical
trials for Targretin Capsules in NSCLC), and lower advertising and promotion
expenses for Oncology products compared to the prior year periods. The net loss
from discontinued operations for the nine months ended September 30, 2005
reflects the significant development costs incurred on the NSCLC trials
for Targretin capsules which concluded in early 2005.
WEBCAST CONFERENCE CALL
Ligand will host a webcast, open to all interested parties, of a conference
call during which Ligand management will discuss this news release. The
conference call is scheduled for 11:00 am eastern time on
November 15, 2006. The webcast will be available at http://www.ligand.com
(investor relations page) and at HTTP://WWW.STREETEVENTS.COM and will be
archived for 30 days.
ABOUT LIGAND
Ligand discovers, develops and markets new drugs that address critical
unmet medical needs of patients in the areas of cancer, pain, 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. For more
information, go to http://www.ligand.com.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended, that
reflect Ligand's judgment and involve risks and uncertainties as of the date of
this release. The statements include those related to financial results and
data, including revenues sales growth and demand, estimates, future payments,
management's expectations and trend analyses, improvements in gross margins,
stockholder approval relating to the closing of the AVINZA transaction,
conversion or redemption of notes and increased financial flexibility and
transition to an R&D and royalty company. Actual events or results may differ
from Ligand's expectations, judgments and beliefs. For example, there can be no
assurance that financial results are indicative of future GAAP financial
results; that sales growth or demand will continue, that our estimates or trend
analyses will be accurate and will not require or result in future adjustments,
that gross margins will continue at current levels or improve; that our
stockholders will approve the AVINZA transaction, that we will be able to close
that transaction timely or at all that we do not face any indemnification
obligations under our purchase agreements for the Oncology and AVINZA product
lines, that the notes will convert as expected, that we will have increased
financial flexibility or that we will successfully transition to a restructured
company.
Moreover, current and future financial results depend on estimates and
the proper operation of highly-complex accounting models, all of which are
subject to change and errors. The Company has reported material weaknesses in
its internal control over financial reporting which could have a material
adverse effect in our ability to accurately and timely report financial
information. Changes and/or efforts in our financial data may be material either
individually or in the aggregate. Any change, error or delay in preparing
financial statements or filings could adversely affect our financial results,
timeliness of SEC filings, NASDAQ listing and stock price.
Additional information concerning these or 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 SEC, available via Ligand's web site at
www.ligand.com. Ligand disclaims any intent or obligation to update these
forward-looking statements beyond the date of this release.
AVINZA, Targretin, ONTAK and Panretin were registered trademarks of
Ligand Pharmaceuticals Incorporated as of September 30, 2006. Each other
trademark, trade name or service mark appearing in this news release belongs to
its holder.
###
LIGAND PHARMACEUTICALS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except share data)
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- -------------------------------
2006 2005 2006 2005
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----------------- ------------------ --------------------------------------
REVENUES:
Product sales $ 36,707 $ 29,908 $ 102,853 $ 79,367
Collaborative research and development and
other revenues -- 2,095 3,977 7,944
----------------- ------------------ ----------------- -------------------
----------------- ------------------ ----------------- -------------------
Total revenues 36,707 32,003 106,830 87,311
----------------- ------------------ ----------------- -------------------
----------------- ------------------ ----------------- -------------------
OPERATING COSTS AND EXPENSES:
Cost of products sold 5,800 6,422 16,768 17,987
Research and development 10,468 7,920 29,013 23,787
Selling, general and administrative 20,085 14,484 58,107 43,133
Co-promotion 11,776 7,766 33,656 22,472
Co-promote termination charges 3,643 -- 142,950 --
----------------- ------------------ ----------------- -------------------
----------------- ------------------ ----------------- -------------------
Total operating costs and expenses 51,772 36,592 280,494 107,379
----------------- ------------------ ----------------- -------------------
----------------- ------------------ ----------------- -------------------
Loss from operations (15,065) (4,589) (173,664) (20,068)
Other expense, net (1,076) (2,695) (2,825) (7,749)
----------------- ------------------ ----------------- -------------------
----------------- ------------------ ----------------- -------------------
Loss from continuing operations (16,141) (7,284) (176,489) (27,817)
Income (loss) from discontinued operations 1,223 1,003 3,382 (5,860)
----------- ------------ ---------- ------------
Net loss $ (14,918) $ (6,281) $ (173,107) $ (33,677)
BASIC AND DILUTED PER SHARE AMOUNTS:
Loss from continuing operations $ (0.21) $ (0.10) $ (2.26) $ (0.38)
Income (loss) from discontinued operations 0.02 0.02 0.05 (0.08)
Net loss $ (0.19) $ (0.08) $ (2.21) (0.46)
Weighted average number of common shares 78,670,137 74,041,204 78,239,868 73,998,594
LIGAND PHARMACEUTICALS INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
ASSETS September 30, 2006 December 31, 2005
----------------------- -----------------------
----------------------- -----------------------
Current assets:
Cash, cash equivalents and short-term investments $ 31,891 $ 86,930
Other current assets 24,581 46,037
Current portion of assets held for sale 8,055 --
----------------------- -----------------------
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Total current assets 64,527 132,967
Restricted investments 1,826 1,826
Property and equipment, net 21,453 22,483
Acquired technology and product rights 84,990 146,770
Long-term portion of assets held for sale 57,807 --
Other assets 1,264 10,573
----------------------- -----------------------
----------------------- -----------------------
$ 231,867 $ 314,619
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LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities, excluding deferred revenue, co-promote termination
liability and liabilities related to assets held
for sale $ 71,495 $ 77,692
Current portion of deferred revenue, net 80,395 157,519
Current portion of co-promote termination liability 47,722 --
Current portion of liabilities related to assets held for sale 26,803 --
Long-term debt 139,371 166,745
Long-term portion of co-promote termination liability 95,258 --
Long-term portion of liabilities related to assets held for sale 2,017 --
Other long-term liabilities 7,651 10,737
Common stock subject to conditional redemption 12,345 12,345
Stockholders' deficit (251,190) (110,419)
----------------------- -----------------------
----------------------- -----------------------
$ 231,867 $ 314,619
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