Ligand Pharmaceuticals Announces Third Quarter Results

http://www.businesswire.com/news/home/20091105006461/en

Conference call with slide presentation begins at 4:30 p.m. Eastern time today
SAN DIEGO--(Business Wire)--
Ligand Pharmaceuticals Incorporated (NASDAQ: LGND) (the "Company" or "Ligand")
today announced financial results for the three and nine months ended September
30, 2009 and provided a business update.

"Over the past few months, we announced agreements to acquire two companies that
upon closing will contribute promising new assets to Ligand. We also advanced
our internal pipeline, reported numerous positive developments from our partners
and took steps that will significantly reduce future expenses," said John L.
Higgins, President and Chief Executive Officer of Ligand Pharmaceuticals. "We
believe these activities are making Ligand a stronger and more valuable company
by diversifying our business, increasing our potential revenue and improving our
financial strength. We are very pleased with the progression of the partnerships
we gained from our acquisition of Pharmacopeia in December 2008, and look
forward to consolidating into Ligand the assets of both Neurogen and Metabasis."

Third Quarter Results

Total revenues from continuing operations for the three months ended September
30, 2009 were $7.9 million, compared with $5.2 million for the same period in
2008. The increase in revenues is due to $6.3 million in collaboration revenues
resulting from agreements acquired from Pharmacopeia, partially offset by a $3.6
million decrease in royalty revenues due to the change in the contractual
royalty rate on AVINZA from 15% to 5% that became effective in the fourth
quarter of 2008.

Operating costs and expenses from continuing operations in the third quarter of
2009 were $27.6 million and include $15.2 million of lease termination costs.
Excluding the lease termination costs, operating costs and expenses from
continuing operations were $12.3 million in the third quarter of 2009, compared
with $12.1 million in the third quarter of 2008. Research and development
expenses increased by $3.8 million for the third quarter of 2009, compared with
the same period in 2008, primarily due to costs of servicing the collaboration
agreements acquired from Pharmacopeia, partially offset by lower expenses
associated with internal research programs. Research and development expenses
for the third quarter of 2009 also include $1.1 million of asset impairment
charges related to the termination of our research collaboration with
Schering-Plough Corporation. General and administrative expenses decreased by
$3.5 million, compared with the same period in 2008, primarily due to reduced
legal expenses.

During the third quarter of 2009, the Company entered into a lease termination
agreement for its facility in San Diego, California. As a result, during the
third quarter of 2009, the Company recorded lease termination costs of $15.2
million, which include the net present value of the lease termination payments
of $14.3 million and $0.9 million of other costs associated with the lease
termination. Also as a result of the lease termination, during the third quarter
of 2009, the Company recognized $20.4 million of accretion of deferred gain on
sale leaseback.

Total net income in the third quarter of 2009 was $1.8 million, or $0.02 per
share. Excluding $15.2 million of lease termination costs and $20.4 million of
accretion of deferred gain on sale leaseback, the total net loss in the third
quarter of 2009 was $3.4 million, or $0.03 per share, compared with a net loss
of $18.1 million, or $0.19 per share, in the third quarter of 2008. Income from
continuing operations in the third quarter of 2009 was $1.1 million, or $0.01
per share, compared with a loss from continuing operations of $9.1 million, or
$0.10 per share, in the comparable 2008 quarter. Income from discontinued
operations in the third quarter of 2009 was $0.7 million, or $0.01 per share,
compared with a loss from discontinued operations of $9.0 million, or $0.09 per
share, in the comparable 2008 quarter.

As of September 30, 2009, Ligand had cash, cash equivalents, short-term
investments and restricted investments of $45.5 million.

Year-to-Date Results

Total revenues for the nine months ended September 30, 2009, were $25.0 million,
compared with $14.9 million for the same period in 2008. Operating costs and
expenses for the nine months ended September 30, 2009, including $15.2 million
of lease termination costs, were $57.6 million, compared with $40.3 million for
the same period in 2008. The net loss for the nine months ended September 30,
2009, was $5.0 million, or $0.04 per share, compared with a net loss of $28.5
million, or $0.30 per share, for the same period in 2008.

Third Quarter and Recent Highlights

* Acquisition Announcements: In August and October, Ligand announced pending
acquisitions of Neurogen Corporation and Metabasis Therapeutics, Inc. Consistent
with Ligand`s business strategy to acquire quality partnered and pipeline
assets, management expects the acquisitions will provide Ligand with a rich
platform of development programs, drug discovery technologies and fully funded
pharmaceutical collaborations. Management believes these acquisitions will help
diversify Ligand`s business and contribute valuable programs that could
potentially generate additional revenues in the future. Neurogen and Metabasis
are publicly traded biotechnology companies, and the acquisitions are subject to
approval by each company`s stockholders and other customary closing conditions.
* PROMACTA Updates: In October 2009, GlaxoSmithKline(GSK) announced the filing
of an NDA for ITP in Japan. The Marketing Authorization for ITP is pending
review in Europe. GSK confirmed that it has fully enrolled one of its two Phase
III trials for hepatitis. In addition, GSK said it has suspended its Phase III
chronic liver disease study as it evaluates the intended patient population of
chronic liver diseases with severely compromised portal blood flow. Last month,
PROMACTA (eltrombopag), was recognized as "Best Biotechnology Product" by the
Prix Galien USA committee.
* In September 2009, GSK agreed to pay $500,000 to Ligand that would otherwise
have been required upon the identification of a new lead chemical series for
advancement in Ligand`s alliance with GSK.
* In August 2009, Ligand entered into a lease termination agreement for its
corporate facility in San Diego. In addition, Ligand entered into a new lease
for premises located in San Diego to serve as its new corporate headquarters. As
a result of the lease termination, Ligand will significantly reduce its annual
lease expenses as the Company would have been required to pay an estimated $65
million over the remaining life of that prior lease.
* In October 2009, Exelixis and Ligand amended an existing research
collaboration, whereby Ligand is entitled to receive potential future royalties
from a mineralocorticoid receptor program targeting metabolic diseases that is
partnered with Daiichi Sankyo. This is the third Exelixis program from which
Ligand will earn potential royalties.
* In October 2009, Pfizer notified Ligand that it is extending the research
collaboration with Ligand relating to the JAK3 research program by one year. The
original research collaboration was with Wyeth, which was acquired by Pfizer in
October 2009. By extending the collaboration, Ligand is entitled to receive $3.1
million in research funding in 2010.

Operating Forecast and Financial Outlook

Ligand expects 2009 total revenues of approximately $33 million to $34 million,
consisting of approximately $12.0 million of non-cash deferred revenue, royalty
payments from sales of AVINZA and PROMACTA, revenue from collaboration
agreements and potential milestone payments from existing corporate partners.
For the fourth quarter of 2009, the Company anticipates total operating expenses
will be between $12 million and $13 million, including non-cash expenses of
approximately $2.0 million.

The Company currently projects to finish 2009 with approximately $50 million in
cash, assuming the acquisition of Neurogen is completed before year end. For
2010, the Company currently forecasts that its operating expenses will be
approximately $30 million to $35 million and that revenues are projected to be
at approximately the same level as forecasted expenses for 2010. This revenue
outlook does not include license or milestone payments from any potential new
license agreements.

Conference Call

Ligand management will host a conference call today beginning at 4:30 p.m.
Eastern time (1:30 p.m. Pacific time) to discuss this announcement and answer
questions. To participate via telephone, please dial (877) 356-5578 from the
U.S. or (706) 679-0565 from outside the U.S. A replay of the call will be
available until December 6, 2009 at 5:30 p.m. Eastern time by dialing (800)
642-1687 from the U.S. or (706) 645-9291 from outside the U.S., and entering
passcode 36000073. Individual investors can access the live and archived Webcast
through Ligand`s web site at www.ligand.com.

The conference call and Webcast are accompanied by a slide presentation. The
slides are embedded in the Webcast; those listening by phone can access a PDF
version of the presentation in the Investor section of the Web site
www.ligand.com

About Ligand Pharmaceuticals

Ligand discovers and develops new drugs that address critical unmet medical
needs of patients with muscle wasting, frailty, hormone-related diseases,
osteoporosis, inflammatory diseases, anemia, asthma, rheumatoid arthritis and
psoriasis. Ligand's proprietary drug discovery and development programs are
based on advanced cell-based assays, gene-expression tools, ultra-high
throughput screening and one of the world's largest combinatorial chemical
libraries. Ligand has strategic alliances with major pharmaceutical and
biotechnology companies, including Bristol-Myers Squibb, Celgene, Cephalon,
GlaxoSmithKline, Schering-Plough, Pfizer and Wyeth Pharmaceuticals (now Pfizer).
With more than 20 molecules in various stages of development, Ligand utilizes
proprietary technologies for identifying drugs with novel receptor and enzyme
drug targets.

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. Actual events or results may differ from Ligand's expectations.
For example, we may not receive expected royalties on AVINZA from King
Pharmaceuticals, PROMACTA from GSK or any other partnered products or from
research and development milestones, and we may not be able to timely or
successfully advance any product(s) in Ligand's pipeline. In addition, there can
be no assurance that Ligand will achieve its guidance for 2009 or 2010, that
Ligand will deliver strong cash flow over the long term, that the proposed
acquisitions of Neurogen and Metabasis will close or that Ligand will realize
the expected benefits of the acquisitions, Ligand's 2009 revenues will be driven
by royalty payments related to AVINZA and PROMACTA sales, that results of any
clinical study will be timely, favorable or confirmed by later studies, that
products under development by Ligand or its partners will receive regulatory
approval, or that there will be a market for the product(s) if successfully
developed and approved. Also, Ligand may experience delays in the commencement,
enrollment, completion or analysis of clinical testing for its product
candidates, or significant issues regarding the adequacy of its clinical trial
designs or the execution of its clinical trials, which could result in increased
costs and delays, or limit Ligand's ability to obtain regulatory approval.
Further, unexpected adverse side effects or inadequate therapeutic efficacy of
Ligand's product(s) could delay or prevent regulatory approval or
commercialization. Ligand may also have indemnification obligations to King
Pharmaceuticals or Eisai in connection with the sales of the AVINZA and oncology
product lines. In addition, Ligand may not be able to successfully implement its
strategic growth plan and continue the development of its proprietary programs.
The failure to meet expectations with respect to any of the foregoing matters
may reduce Ligand's stock price. Additional information concerning these and
other risk factors affecting Ligand's business can be found in prior press
releases available via www.ligand.com as well as in Ligand's public periodic
filings with the Securities and Exchange Commission at www.sec.gov. 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

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share data)

Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Revenues:
Royalties $ 1,651 $ 5,248 $ 6,386 $ 14,926
Collaborative research and development and other revenues 6,250 - 18,577 -
Total revenues 7,901 5,248 24,963 14,926
Operating costs and expenses:
Research and development 9,921 6,165 29,744 19,707
General and administrative 2,415 5,929 12,190 20,579
Lease termination costs 15,235 - 15,235 -
Write-off of acquired in-process research and development - - 442 -
Total operating costs and expenses 27,571 12,094 57,611 40,286
Accretion of deferred gain on sale leaseback (20,444 ) (491 ) (21,426 ) (1,473 )
Income (loss) from operations 774 (6,355 ) (11,222 ) (23,887 )
Other income 281 221 316 336
Income (loss) before income taxes 1,055 (6,134 ) (10,906 ) (23,551 )
Income tax (expense) benefit - (2,990 ) - (179 )
Income (loss) from continuing operations 1,055 (9,124 ) (10,906 ) (23,730 )
Discontinued operations:
Gain on sale of AVINZA Product Line before income taxes 608 122 5,331 7,287
Gain (loss) on sale of Oncology Product Line before income taxes 140 (12,799 ) 591 (12,569 )
Income tax benefit (expense) on discontinued operations - 3,676 - 525
Discontinued operations 748 (9,001 ) 5,922 (4,757 )
Net income (loss) $ 1,803 $ (18,125 ) $ (4,984 ) $ (28,487 )

Basic and diluted per share amounts:
Income (loss) from continuing operations $ 0.01 $ (0.10 ) $ (0.09 ) $ (0.25 )
Discontinued operations 0.01 (0.09 ) 0.05 (0.05 )
Net income (loss) $ 0.02 $ (0.19 ) $ (0.04 ) $ (0.30 )
Weighted average number of common shares - basic 113,006,842 95,068,102 113,102,455 95,059,166
Weighted average number of common shares - diluted 113,139,102 95,068,102 113,102,455 95,059,166

LIGAND PHARMACEUTICALS INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

September 30, 2009 December 31, 2008
Assets (unaudited)
Current assets:
Cash, cash equivalents and short-term investments $ 44,193 $ 80,671
Accounts receivable, net 2,110 -
Other current assets 1,667 2,300
Current portion of co-promote termination asset 11,925 10,958
Total current assets 59,895 93,929

Property and equipment, net 9,893 12,903
Goodwill and other identifiable intangible assets 482 5,375
Long-term portion of co-promote termination asset 45,374 47,524
Restricted indemnity account - 10,232
Other assets 1,442 1,485
$ 117,086 $ 171,448

Liabilities and Stockholders' Equity
Accounts payable and accrued liabilities $ 27,970 $ 35,972
Allowance for loss on returns, rebates and chargebacks 354 9,590
Current portion of deferred gain 1,702 1,964
Current portion of co-promote termination liability 11,925 10,958
Current portion of equipment financing obligations 172 1,829
Current portion of deferred revenue 10,924 10,301
Total current liabilities 53,047 70,614
Long-term portion of equipment financing obligations - 2,178
Long-term portion of co-promote termination liability 45,374 47,524
Long-term portion of deferred revenue 4,866 16,819
Long-term portion of deferred gain 2,128 23,292
Other long-term liabilities 12,824 9,041
Total liabilities 118,239 169,468
Common stock subject to conditional redemption 8,344 12,345
Stockholders' equity (9,497 ) (10,365 )
$ 117,086 $ 171,448

Ligand Pharmaceuticals Incorporated
John L. Higgins, President and CEO
Erika Luib, Investor Relations
858-550-7896
or
Lippert/Heilshorn & Associates
Don Markley
310-691-7100
dmarkley@lhai.com

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