UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
MARK ONE
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____ TO _____. COMMISSION FILE NUMBER: 0-20720
LIGAND PHARMACEUTICALS INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 77-0160744
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
10275 SCIENCE CENTER DRIVE 92121-1117
SAN DIEGO, CA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (858) 550-7500
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
As of April 30, 2000, the registrant had 55,126,848 shares of common stock
outstanding.
LIGAND PHARMACEUTICALS INCORPORATED
QUARTERLY REPORT
FORM 10-Q
TABLE OF CONTENTS
COVER PAGE................................................................................................1
TABLE OF CONTENTS.........................................................................................2
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2000 (unaudited) and December 31, 1999.................3
Consolidated Statements of Operations for the three months ended
March 31, 2000 (unaudited) and 1999 (unaudited)....................................................4
Consolidated Statements of Cash Flows for the three months ended March
31, 2000 (unaudited) and 1999 (unaudited)..........................................................5
Notes to Consolidated Financial Statements(unaudited)..............................................6
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.....9
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk...............................17
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings........................................................................*
ITEM 2. Changes in Securities and Use of Proceeds................................................18
ITEM 3. Defaults upon Senior Securities..........................................................*
ITEM 4. Submission of Matters to a Vote of Security Holders......................................*
ITEM 5. Other Information........................................................................*
ITEM 6. Exhibits and Reports on Form 8-K.........................................................18
SIGNATURE................................................................................................20
* No information provided due to inapplicability of item.
2
PART I. FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
LIGAND PHARMACEUTICALS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
March 31, December 31,
2000 1999
------------------ ------------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 23,877 $ 29,903
Short-term investments 23,805 17,252
Accounts receivable, net 2,461 1,657
Inventories 5,908 5,732
Other current assets 2,360 2,135
------------------ ------------------
Total current assets 58,411 56,679
Restricted investments 1,724 2,011
Property and equipment, net 13,045 20,542
Acquired technology, net 43,207 38,969
Other assets 13,171 16,444
------------------ ------------------
$ 129,558 $ 134,645
================== ==================
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 4,822 $ 5,395
Accrued liabilities 10,966 8,173
Deferred revenue 2,381 3,028
Current portion of equipment financing obligations 4,222 4,105
------------------ ------------------
Total current liabilities 22,391 20,701
Long-term portion of equipment financing obligations 6,186 6,907
Accrued acquisition obligation 2,700 2,900
Convertible note 2,500 2,500
Convertible subordinated debentures 42,645 41,977
Zero coupon convertible senior notes 65,778 85,250
------------------ ------------------
Total liabilities 142,200 160,235
------------------ ------------------
Commitments (Note 5)
Stockholders' deficit:
Convertible preferred stock, $.001 par value; 5,000,000
shares authorized; none issued -- -- -- --
Common stock, $.001 par value; 80,000,000 shares
authorized; 55,112,707 shares and 53,018,248 shares issued
at March 31, 2000 and December 31, 1999, respectively 55 53
Paid-in capital 475,780 448,784
Deferred warrant expense (3,114) (3,460)
Accumulated other comprehensive loss (48) (607)
Accumulated deficit (485,304) (470,349)
------------------ ------------------
(12,631) (25,579)
Less treasury stock, at cost (1,114 shares) (11) (11)
------------------ ------------------
Total stockholders' deficit (12,642) (25,590)
------------------ ------------------
$ 129,558 $ 134,645
================== ==================
SEE ACCOMPANYING NOTES.
3
LIGAND PHARMACEUTICALS INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended
March 31,
2000 1999
--------------- ------------
Revenues:
Product sales $ 4,863 $4,366
Collaborative research and development
and other revenues 6,806 5,618
Contract manufacturing -- -- 297
--------------- ------------
Total revenues 11,669 10,281
--------------- ------------
Costs and expenses:
Cost of products sold 2,080 1,267
Contract manufacturing -- -- 1,316
Research and development 12,498 14,469
Selling, general and administrative 7,792 5,875
--------------- ------------
Total costs and expenses 22,370 22,927
--------------- ------------
Loss from operations (10,701) (12,646)
--------------- ------------
Other income (expense):
Interest income 741 750
Interest expense (3,461) (2,663)
Debt conversion expense (2,025) -- --
Other, net 491 -- --
--------------- ------------
Total other income (expense) (4,254) (1,913)
--------------- ------------
Net loss $(14,955) $(14,559)
=============== ============
Basic and diluted net loss per share $ (0.28) $ (0.32)
=============== ============
Shares used in computing net loss per share 53,804 45,794
=============== ============
SEE ACCOMPANYING NOTES.
4
LIGAND PHARMACEUTICALS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Three Months Ended
March 31,
2000 1999
------------------- --------------------
OPERATING ACTIVITIES
Net loss $ (14,955) $ (14,559)
Adjustments to reconcile net loss to net cash used by operating activities:
Accretion of debt discount and interest 2,218 1,401
Debt conversion expense 2,025 -- --
Depreciation and amortization of property and equipment 1,097 1,309
Amortization of acquired technology 762 336
Amortization of deferred warrant expense 346 -- --
Gain on sale of manufacturing assets (437) -- --
Gain on sale of investment security (426) -- --
Other 4 44
Change in operating assets and liabilities net of effects from sale of
manufacturing assets:
Accounts receivable (1,026) (3,497)
Inventories (176) (1)
Other current assets (22) (104)
Accounts payable and accrued liabilities (2,626) (5,917)
Deferred revenue (647) (1,005)
------------------- --------------------
Net cash used in operating activities (13,863) (21,993)
------------------- --------------------
INVESTING ACTIVITIES
Purchase of short-term investments (6,586) (9,364)
Proceeds from short-term investments 42 10,811
Increase in other assets (382) (3,549)
Decrease in other assets 861 3,102
Purchase of property and equipment (327) (518)
Net proceeds from sale of manufacturing assets 9,676 -- --
Proceeds from sale of investment security 1,119 -- --
Payment of accrued acquisition obligation (200) -- --
------------------- --------------------
Net cash provided by investing activities 4,203 482
------------------- --------------------
FINANCING ACTIVITIES
Principal payments on equipment financing obligations (1,007) (775)
Net proceeds from issuance of common stock 3,951 186
Proceeds from equipment financing arrangements 403 -- --
Net change in restricted investments 287 310
------------------- --------------------
Net cash provided by (used in) financing activities 3,634 (279)
------------------- --------------------
Net decrease in cash and cash equivalents (6,026) (21,790)
Cash and cash equivalents at beginning of period 29,903 32,801
------------------- --------------------
Cash and cash equivalents at end of period $ 23,877 $ 11,011
=================== ====================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $ 2,198 $ 2,242
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Conversion of zero coupon convertible senior note to common stock $ 21,022 $ -- --
Accrual of ONTAK obligation for acquired technology 5,000 -- --
Issuance of common stock for debt conversion incentive 2,025 -- --
Issuance of common stock to satisfy accrued acquisition obligation -- -- 10,000
SEE ACCOMPANYING NOTES.
5
LIGAND PHARMACEUTICALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The consolidated financial statements of Ligand Pharmaceuticals
Incorporated ("Ligand" or the "Company") for the three months ended March 31,
2000 and 1999 are unaudited. These financial statements reflect all adjustments,
consisting of only normal recurring adjustments which, in the opinion of
management, are necessary to fairly present the consolidated financial position
as of March 31, 2000 and the consolidated results of operations for the three
months ended March 31, 2000 and 1999. The results of operations for the period
ended March 31, 2000 are not necessarily indicative of the results to be
expected for the year ending December 31, 2000. For more complete financial
information, these financial statements, and the notes thereto, should be read
in conjunction with the audited consolidated financial statements for the year
ended December 31, 1999 included in the Ligand Pharmaceuticals Incorporated Form
10-K filed with the Securities and Exchange Commission ("SEC").
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries, Ligand
Pharmaceuticals International, Inc., Glycomed Incorporated, Ligand
Pharmaceuticals (Canada) Incorporated, and Seragen, Inc. ("Seragen"). Seragen
includes Marathon Biopharmaceuticals, Inc. ("Marathon"), its wholly owned
subsidiary. The assets of Marathon were sold on January 7, 2000 (see note 2).
All significant intercompany accounts and transactions have been eliminated in
consolidation. Certain reclassifications have been made to amounts included in
the prior period financial statements to conform to the presentation for the
period ended March 31, 2000.
USE OF ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
disclosures made in the accompanying notes to the consolidated financial
statements. Actual results could differ from those estimates.
NEW ACCOUNTING PRONOUNCEMENT. In December 1999, the SEC issued Staff Accounting
Bulletin ("SAB") No. 101, REVENUE RECOGNITION IN FINANCIAL STATEMENTS. SAB No.
101 provides guidance in applying generally accepted accounting principles to
revenue recognition in financial statements, including the recognition of
nonrefundable up-front fees received in conjunction with a research and
development arrangement. SAB No. 101 requires that license and other up-front
fees received from research collaborators be recognized over the term of the
agreement unless the fee is in exchange for products delivered or services
performed that represent the culmination of a separate earnings process. In
March 2000, SAB No. 101 was amended to delay the implementation date to the
second quarter of 2000 to provide additional time to study the guidance. The
evaluation of the impact of SAB No. 101 on the current and prior years has not
been completed. However, to the extent SAB No. 101 would be applicable and have
a material impact, the Company would implement this new pronouncement beginning
with the second quarter of 2000.
NET LOSS PER SHARE. Net loss per share is computed using the weighted average
number of common shares outstanding. Basic and diluted net loss per share
amounts are equivalent for the periods presented as the inclusion of common
stock equivalents in the number of shares used for the diluted computation would
be anti-dilutive.
INVENTORIES. Inventories are stated at the lower of cost or market. Cost is
determined using the first-in-first-out method. Inventories comprise the
following ($,000):
March 31, December 31,
2000 1999
---------------- ---------------
Raw materials $ 717 $ 705
Work-in-process 3,668 3,645
Finished goods 1,523 1,382
--------------- ---------------
$ 5,908 $ 5,732
=============== ===============
6
OTHER ASSETS. Other assets comprise the following ($,000):
March 31, December 31,
2000 1999
---------------- ---------------
Investment in X-Ceptor $ 4,842 $ 5,246
Prepaid royalty buyout 3,876 3,944
Deferred rent 3,394 3,381
Intangible assets (Note 2) -- -- 2,651
Other 1,059 1,222
--------------- --------------
$ 13,171 $ 16,444
============== ==============
ACCRUED LIABILITIES. Accrued liabilities comprise the following ($,000):
March 31, December 31,
2000 1999
---------------- --------------
ONTAK obligation (Note 5) $ 5,000 $ -- --
Compensation 2,774 2,981
Interest 991 1,972
Royalties 929 411
Other 1,272 2,809
-------------- -------------
$ 10,966 $ 8,173
============= =============
COMPREHENSIVE INCOME. Comprehensive income represents the change during the
periods presented in unrealized gains and losses on available-for-sale
securities less reclassification adjustments for gains or losses included in net
income. The accumulated unrealized gains or losses are reported as accumulated
other comprehensive income (loss) as a separate component of stockholders'
deficit. Comprehensive income for the three month periods ended March 31, 2000
and 1999 is as follows ($,000):
Three Months Ended
March 31,
2000 1999
----------------- ------------------
Comprehensive income $ 9 $ 28
================= ==================
2. SALE OF CONTRACT MANUFACTURING ASSETS
In January 2000, Ligand sold the assets associated with the contract
manufacturing business of Marathon for approximately $10.2 million. In
connection with the sale, Seragen entered into a long-term supply agreement with
the acquirer of the assets for the manufacture of ONTAK and the performance of
certain process and production development work for Seragen's next-generation
ONTAK product. Seragen has minimal purchase commitments under the agreement and
the purchase commitments are consistent with Ligand's prior costs to manufacture
ONTAK. The assets sold consist primarily of property and equipment of $6.7
million and intangibles of $2.7 million. The Company recognized a gain of
$437,000 on this transaction which is included in other income.
3. CONVERSION OF ZERO COUPON CONVERTIBLE SENIOR NOTES
In March 2000, Elan Corporation, plc ("Elan") converted an additional $20
million in zero coupon convertible senior notes plus accrued interest,
convertible at $14 per share, into 1,501,543 shares of the Company's Common
Stock. The Company provided Elan a $2 million early conversion incentive through
the issuance of an additional 98,580 shares of the Company's Common Stock. The
incentive was recorded as debt conversion expense in other income (expense).
4. RESEARCH AND DEVELOPMENT COLLABORATION
In February 2000, the Company and Organon Company ("Organon") entered into
a research and development collaboration to focus on small molecule compounds
with potential effects for the treatment and prevention of gynecological
diseases mediated through the progesterone receptor. Under the terms of the
collaboration, Ligand received an up-front payment and receives funding during
the research phase of the arrangement. In addition, if the collaboration is
successful, the Company may receive milestone and royalty payments on a
product-by-product basis. Organon was granted exclusive worldwide rights to
manufacture and sell any products resulting from the collaboration.
7
5. COMMITMENTS
Under the terms of the Development, License and Supply Agreement with Elan
related to its product Morphelan(TM), Elan could receive up to $4.5 million from
Ligand upon submission of the Morphelan new drug application and another $5
million from Ligand upon approval of Morphelan for marketing by the U.S. Food
and Drug Administration.
In connection with the agreement between Seragen and Eli Lilly and Company
("Lilly") under which Lilly assigned to Seragen its sales and marketing rights
to ONTAK, Lilly will receive $5 million from Ligand upon cumulative net sales of
ONTAK reaching $20 million. Cumulative net sales of ONTAK were approximately
$11.9 million through March 31, 2000. The Company has accrued the ONTAK
obligation with a related increase to acquired technology.
8
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This quarterly report may contain predictions, estimates and other
forward-looking statements that involve a number of risks and uncertainties,
including those discussed below at "Risks and Uncertainties" below. This outlook
represents our current judgment on the future direction of our business. Such
risks and uncertainties could cause actual results to differ materially from any
future performance suggested below. We undertake no obligation to release
publicly the results of any revisions to these forward-looking statements to
reflect events or circumstances arising after the date of this quarterly report.
Panretin(R) and Targretin(R) are registered trademarks of Ligand
Pharmaceuticals Incorporated, and ONTAK(R) is a registered trademark of Seragen,
Inc., our wholly owned subsidiary.
OVERVIEW
We develop and market drugs that address critical unmet medical needs of
patients in the areas of cancer, skin diseases, and men's and women's
hormone-related diseases, as well as osteoporosis, metabolic disorders and
cardiovascular and inflammatory diseases. Our drug discovery and development
programs are based on gene transcription technology, primarily related to
Intracellular Receptors, also known as IRs, and Signal Transducers and
Activators of Transcription, also know as STATs.
In February 1999, we were granted U.S. Food and Drug Administration ("FDA")
marketing approval for our first two products, Panretin gel for the treatment of
Kaposi's sarcoma in AIDS patients and ONTAK for the treatment of patients with
persistent or recurrent cutaneous T-cell lymphoma or CTCL. In December 1999, the
FDA approved Targretin capsules for the treatment of CTCL in patients who are
refractory to at least one prior systemic therapy. We also submitted a New Drug
Application ("NDA") to the FDA in December 1999 for Targretin gel for the
treatment of patients with early stage CTCL.
We have been unprofitable since our inception. We expect to incur
substantial additional operating losses until the commercialization of our
products generates sufficient revenues to cover our expenses. We expect that our
operating results will fluctuate from quarter to quarter as a result of
differences in the timing of expenses incurred and revenues earned from product
sales, collaborative research and development, and other arrangements. Some of
these fluctuations may be significant.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 ("2000"), AS COMPARED WITH THREE MONTHS ENDED
MARCH 31, 1999 ("1999")
Total revenues for 2000 were $11.7 million, an increase of $1.4 million as
compared to 1999 revenues of $10.3 million. Net loss for 2000 was $14.9 million
or $(0.28) per share, an increase of $300,000 as compared to the 1999 net loss
of $14.6 million or $(0.32) per share. The principal factors causing these
changes are discussed below.
Product sales for 2000 were $4.9 million, as compared to $4.4 million in
1999. The change is due to $3.7 million in 2000 revenues from sales of ONTAK,
approved by the FDA in February 1999, up from $500,000 in 1999, $798,000 in 2000
revenues from sales of Targretin capsules, approved by the FDA in December 1999,
offset by a decrease of $3.5 million on sales of Panretin gel. Demand for
Panretin gel during 2000 was largely satisfied by wholesaler purchases made in
1999.
Collaborative research and development and other revenues for 2000 were
$6.8 million, an increase of $1.2 million over 1999. The increase was primarily
due to a $2 million nonrefundable up-front fee received in connection with a
research and development collaboration entered into in February 2000. This
up-front fee could be subject to the new accounting pronouncement discussed on
pages six and eleven herein. In addition, we earned $1.4 million of revenue in
2000 under a research and development collaboration entered into in September
1999, offset by $1.5 million of revenue earned in 1999 related to marketing and
distribution agreements. The quarter-to-quarter comparison of collaborative
research and development and other revenues is as follows ($,000):
9
Three Months Ended March 31,
2000 1999
----------------- --------------
Collaborative research and development $ 6,806 $ 3,943
Milestone revenues -- -- 175
Marketing and distribution agreements -- --
1,500
---------------- --------------
$ 6,806 $ 5,618
================= ==============
Contract manufacturing revenues for 1999 were $297,000. These revenues were
generated under contract manufacturing agreements performed at Marathon
Biopharmaceuticals, Inc. ("Marathon"), a subsidiary of Seragen. The assets of
Marathon were sold on January 7, 2000. For additional details, please see note 2
of the notes to consolidated financial statements.
Cost of products sold increased from $1.3 million in 1999 to $2.1 million
in 2000. The increase is due to the increased sales of ONTAK in 2000, which
resulted in greater manufacturing costs, technology amortization, and royalty
expenses as compared to Panretin gel, which accounted for the majority of sales
in 1999.
In 1999, contract manufacturing costs of $1.3 million were incurred at the
Marathon facility. No such costs were incurred in 2000 as a result of the sale
of the Marathon assets.
Research and development expenses were $12.5 million in 2000, compared to
$14.5 million in 1999. The decrease is due to a general reduction of research
and development activities with an increased focus on commercialization of our
new products. Specifically, research and development costs were incurred in 1999
related to Targretin capsules, submitted as a NDA in June 1999 and approved by
the FDA in December 1999, and Targretin gel, submitted as a NDA in December
1999.
Selling, general and administrative expenses were $7.8 million in 2000, up
from $5.9 million in 1999. The increase was due primarily to increased selling
and marketing costs associated with the expansion of our sales force from 20 to
40 representatives in late 1999, marketing activities related to the launch of
Targretin capsules in January 2000, and continued promotion of ONTAK and
Panretin gel.
Interest expense in 2000 was $3.5 million, an increase of $798,000 over
1999. The increase is due to the accretion related to the zero coupon
convertible senior notes issued to entities affiliated with Elan Corporation,
plc ("Elan") in the fourth quarter of 1998 ($40 million) and the third quarter
of 1999 ($60 million) offset by conversions of a portion of the notes by Elan in
the fourth quarter of 1999 ($20 million) and the first quarter of 2000 ($20
million).
The debt conversion expense of $2 million relates to the incentive provided
to Elan for their conversion of the $20 million of notes in March 2000. For
additional details regarding the note conversion, please see note 3 of the notes
to consolidated financial statements.
Other income in 2000 includes a gain of $437,000 on the sale of the
Marathon assets, a gain of $426,000 on the sale of an investment security,
offset by our equity in the losses of X-Ceptor Therapeutics, Inc. of $372,000.
We have federal, state, and foreign income tax net operating loss
carryforwards and federal and state research tax credit carryforwards which are
available subject to Internal Revenue Code 382 and 383 carryforward limitations.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations through private and public offerings of our
equity securities, collaborative research and development and other revenues,
issuance of convertible notes, capital and operating lease transactions,
equipment financing arrangements, investment income and product sales.
As of March 31, 2000, we had acquired a total of $36.5 million in property,
laboratory and office equipment, and tenant leasehold improvements.
Substantially all of the balance has been funded through capital lease and
equipment financing arrangements. Our equipment financing arrangements extend
through September 30, 2000 with $1.9 million of financing currently available
under those arrangements. We lease our office and research facilities under
operating lease arrangements with varying terms through August 2015.
10
Working capital was $36 million as of March 31, 2000, unchanged from the
end of 1999. Cash and cash equivalents, short-term investments and restricted
investments totaled $49.4 million at March 31, 2000 as compared to $49.2 million
at December 31, 1999. We primarily invest our cash in United States government
and investment grade corporate debt securities.
In January 2000, we sold the contract manufacturing assets of Marathon for
$10.2 million, resulting in net cash proceeds as of March 31, 2000 of $9.7
million. Significant cash in flows also included $3.9 million of cash received
from the issuance of common stock upon the exercise of outstanding stock options
and warrants and $1.1 million from the sale of an investment security.
Significant cash out flows included $13.9 million of net cash used to finance
operating activities and $1 million of payments under equipment financing
obligations.
In March 2000, Elan converted a total of $20 million of zero coupon
convertible senior notes plus accrued interest into common stock. We may issue
an additional $10 million in such notes to Elan under the terms of our
agreements with Elan.
We may be required to make milestone payments of up to $9.5 million to Elan
under the Morphelan license agreement and $5 million to Lilly upon cumulative
sales of ONTAK reaching $20 million. These payments may be made in cash or our
common stock. For additional details, please see note 5 of the notes to
consolidated financial statements. In addition, as of April 30, 2000, warrants
to purchase approximately 1.1 million shares of our common stock, with an
exercise price of $7.12 per share, were outstanding and expire on June 3, 2000.
We believe our available cash, cash equivalents, marketable securities and
existing sources of funding will be adequate to satisfy our anticipated
operating and capital requirements through 2000. Our future operating and
capital requirements will depend on many factors, including: the effectiveness
of our commercialization activities; the pace of scientific progress in our
research and development programs; the magnitude of these programs; the scope
and results of preclinical testing and clinical trials; the time and costs
involved in obtaining regulatory approvals; the costs involved in preparing,
filing, prosecuting, maintaining and enforcing patent claims; competing
technological and market developments; the ability to establish additional
collaborations or changes in existing collaborations; and the cost of
manufacturing.
NEW ACCOUNTING PRONOUNCEMENT
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin ("SAB") No. 101, REVENUE RECOGNITION IN FINANCIAL
STATEMENTS. SAB No. 101 provides guidance in applying generally accepted
accounting principles to revenue recognition in financial statements, including
the recognition of nonrefundable up-front fees received in conjunction with a
research and development arrangement. SAB No. 101 requires that license and
other up-front fees received from research collaborators be recognized over the
term of the agreement unless the fee is in exchange for products delivered or
services performed that represent the culmination of a separate earnings
process. In March 2000, SAB No. 101 was amended to delay the implementation date
to the second quarter of 2000 to provide additional time to study the guidance.
The evaluation of the impact of SAB No. 101 on the current and prior years has
not been completed. However, to the extent SAB No. 101 would be applicable and
have a material impact, we would implement this new pronouncement beginning with
the second quarter of 2000.
RISKS AND UNCERTAINTIES
The following is a summary description of some of the many risks we face in
our business. You should carefully review these risks in evaluating our
business, including the businesses of our subsidiaries. You should also consider
the other information described in this report.
OUR PRODUCT DEVELOPMENT AND COMMERCIALIZATION INVOLVES A NUMBER OF UNCERTAINTIES
AND WE MAY NEVER GENERATE SUFFICIENT REVENUES FROM THE SALE OF PRODUCTS TO
BECOME PROFITABLE.
We were founded in 1987. We have incurred significant losses since our
inception. At March 31, 2000, our accumulated deficit was $485.3 million. To
date, we have received the majority of our revenues from our collaborative
arrangements and only recently have begun receiving revenues from the sale of
pharmaceutical products. To become profitable, we must successfully develop,
clinically test, market and sell our products. Even if we achieve profitability,
we cannot predict the level of that profitability or whether we will be able to
sustain profitability. We expect that our operating results will fluctuate from
period to period as a result of differences in when we incur expenses and
receive revenues from product sales, collaborative arrangements and other
sources. Some of these fluctuations may be significant.
11
Most of our products will require extensive additional development,
including preclinical testing and human studies, as well as regulatory
approvals, before we can market them. We do not expect that any products
resulting from our product development efforts or the efforts of our
collaborative partners, other than those for which marketing approval has been
received, will be available for sale until the first half of the 2000 calendar
year at the earliest, if at all. There are many reasons that we may fail in our
efforts to develop our other potential products, including the possibility that:
o we may discover during preclinical testing or human studies that our
potential products are ineffective or cause harmful side effects,
o the products may fail to receive necessary regulatory approvals from the
FDA or foreign authorities in a timely manner or at all,
o we may fail to produce the products, if approved, in commercial quantities
or at reasonable costs,
o the products once approved, may not achieve commercial acceptance, or
o the proprietary rights of other parties may prevent us from marketing the
products.
WE NEED TO BUILD MARKETING AND SALES FORCES IN THE UNITED STATES AND EUROPE
WHICH WILL BE AN EXPENSIVE AND TIME-CONSUMING PROCESS.
Developing the sales force to market and sell products is a difficult,
expensive and time-consuming process. We recently developed a sales force for
the U.S. market and currently rely on another company to distribute our
products. The distributor is responsible for providing many marketing support
services, including customer service, order entry, shipping and billing, and
customer reimbursement assistance. In Europe, we will rely initially on other
companies to distribute and market our products. In 1999, we entered into
agreements for the marketing and distribution of our products in Spain,
Portugal, Greece, Italy, and Central and South America and we established a
subsidiary, Ligand Pharmaceuticals International, Inc., with a branch in London,
England, to manage our European marketing and operations. We may not be able to
continue to establish and maintain the sales and marketing capabilities
necessary to successfully commercialize our products. To the extent we enter
into co-promotion or other licensing arrangements, any revenues we receive will
depend on the marketing efforts of others, which may or may not be successful.
SOME OF OUR KEY TECHNOLOGIES HAVE NOT BEEN USED TO PRODUCE MARKETED PRODUCTS AND
MAY NOT BE CAPABLE OF PRODUCING SUCH PRODUCTS.
To date, we have dedicated most of our resources to the research and
development of potential drugs based upon our expertise in our IR and STATs
technologies. Even though there are marketed drugs that act through IRs, some
aspects of our IR technologies have not been used to produce marketed products.
In addition, we are not aware of any drugs that have been developed and
successfully commercialized that interact directly with STATs. Much remains to
be learned about the location and function of IRs and STATs. If we are unable to
apply our IR and STAT technologies to the development of our potential products,
we will not be successful in developing new products.
OUR DRUG DEVELOPMENT PROGRAMS WILL REQUIRE SUBSTANTIAL ADDITIONAL FUTURE
CAPITAL.
Our drug development programs require substantial additional capital,
arising from costs to:
o conduct research, preclinical testing and human studies,
o establish pilot scale and commercial scale manufacturing processes and
facilities, and
o establish and develop quality control, regulatory, marketing, sales and
administrative capabilities to support these programs.
Our future operating and capital needs will depend on many factors,
including:
o the pace of scientific progress in our research and development programs
and the magnitude of these programs,
o the scope and results of preclinical testing and human studies,
o the time and costs involved in obtaining regulatory approvals,
o the time and costs involved in preparing, filing, prosecuting, maintaining
and enforcing patent claims,
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o competing technological and market developments,
o our ability to establish additional collaborations,
o changes in our existing collaborations,
o the cost of manufacturing scale-up, and
o the effectiveness of our commercialization activities.
If additional funds are required and we are unable to obtain them on terms
favorable to us, we may be required to cease or reduce further commercialization
of our products, to sell some or all of our technology or assets or to merge
with another entity.
OUR PRODUCTS MUST CLEAR SIGNIFICANT REGULATORY HURDLES PRIOR TO MARKETING.
Before we obtain the approvals necessary to sell any of our potential
products, we must show through preclinical studies and clinical trials or human
testing that each product is safe and effective. Our failure to show any
product's safety and effectiveness would delay or prevent regulatory approval of
the product and could adversely affect our business. The clinical trials process
is complex and uncertain. The results of preclinical studies and initial
clinical trials may not necessarily predict the results from later large-scale
clinical trials. In addition, clinical trials may not demonstrate a product's
safety and effectiveness to the satisfaction of the regulatory authorities. A
number of companies have suffered significant setbacks in advanced clinical
trials or in seeking regulatory approvals, despite promising results in earlier
trials. The FDA may also require additional clinical trials after regulatory
approvals are received, which could be expensive and time-consuming, and failure
to successfully conduct those trials could jeopardize continued
commercialization.
The rate at which we complete our clinical trials depends on many factors,
including our ability to obtain adequate supplies of the products to be tested
and patient enrollment. Patient enrollment is a function of many factors,
including the size of the patient population, the proximity of patients to
clinical sites and the eligibility criteria for the trial. Delays in patient
enrollment may result in increased costs and longer development times. In
addition, some of our collaborative partners have rights to control product
development and clinical programs for products developed under the
collaborations. As a result, these collaborators may conduct these programs more
slowly or in a different manner than we had expected. Even if clinical trials
are completed, we or our collaborative partners still may not apply for FDA
approval in a timely manner or the FDA still may not grant approval.
WE MAY NOT BE ABLE TO PAY AMOUNTS DUE ON OUR OUTSTANDING INDEBTEDNESS.
We and our subsidiaries may not have sufficient funds to make required
payments due under existing debt. If we or our subsidiaries do not have adequate
funds, we will be forced to refinance the existing debt and may not be
successful in doing so. Our subsidiary, Glycomed, is obligated to make payments
under convertible subordinated debentures in the total principal amount of $50
million. The debentures pay interest semi-annually at a rate of 7 1/2% per
annum, are due in 2003 and convertible into our common stock at $26.52 per
share. In addition, at March 31, 2000, we had outstanding a $2.5 million
convertible note to SmithKline Beecham Corporation due in 2002 with interest at
prime and convertible at $13.56 per share. We also had outstanding $65.8 million
in zero coupon convertible senior notes to Elan, due 2008 with an 8% per annum
yield to maturity and convertible at $14 per share. Glycomed's failure to make
payments when due under its debentures would cause us to default under the
outstanding notes to Elan or other notes we may issue to Elan.
WE MAY REQUIRE ADDITIONAL STOCK OR DEBT FINANCINGS TO FUND OUR OPERATIONS WHICH
MAY NOT BE AVAILABLE ON ACCEPTABLE TERMS.
We have incurred losses since our inception and do not expect to generate
positive cash flow to fund our operations for one or more years. As a result, we
may need to complete additional equity or debt financings to fund our
operations. Our inability to obtain additional financing could adversely affect
our business. Financings may not be available on acceptable terms. In addition,
these financings, if completed, still may not meet our capital needs and could
result in substantial dilution to our stockholders. For instance, the zero
coupon convertible senior notes outstanding to Elan are convertible into common
stock at the option of Elan, subject to some limitations. In addition, we may
issue additional notes to Elan with up to a total issue price of $10 million,
which also would be convertible into common stock. If adequate funds are not
available, we may be required to delay, reduce the scope of or eliminate one or
more of our drug development programs. Alternatively, we may be forced to
attempt to continue development by entering into arrangements with collaborative
partners or others that require us to relinquish some or all of our rights to
technologies or drug candidates that we would not otherwise relinquish.
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WE FACE SUBSTANTIAL COMPETITION.
Some of the drugs that we are developing and marketing will compete with
existing treatments. In addition, several companies are developing new drugs
that target the same diseases that we are targeting and are taking IR-related
and STAT-related approaches to drug development. Many of our existing or
potential competitors, particularly large drug companies, have greater
financial, technical and human resources than us and may be better equipped to
develop, manufacture and market products. Many of these companies also have
extensive experience in preclinical testing and human clinical trials, obtaining
FDA and other regulatory approvals and manufacturing and marketing
pharmaceutical products. In addition, academic institutions, governmental
agencies and other public and private research organizations are developing
products that may compete with the products we are developing. These
institutions are becoming more aware of the commercial value of their findings
and are seeking patent protection and licensing arrangements to collect payments
for the use of their technologies. These institutions also may market
competitive products on their own or through joint ventures and will compete
with us in recruiting highly qualified scientific personnel. Any of these
companies, academic institutions, government agencies or research organizations
may develop and introduce products and processes that compete with or are better
than ours. As a result, our products may become noncompetitive or obsolete.
OUR SUCCESS WILL DEPEND ON THIRD-PARTY REIMBURSEMENT AND MAY BE IMPACTED BY
HEALTH CARE REFORM.
Sales of prescription drugs depend significantly on the availability of
reimbursement to the consumer from third party payors, such as government and
private insurance plans. These third party payors frequently require drug
companies to provide predetermined discounts from list prices, and they are
increasingly challenging the prices charged for medical products and services.
Our current and potential products may not be considered cost-effective and
reimbursement to the consumer may not be available or sufficient to allow us to
sell our products on a competitive basis.
In addition, the efforts of governments and third party payors to contain
or reduce the cost of health care will continue to affect the business and
financial condition of drug companies. A number of legislative and regulatory
proposals to change the health care system have been discussed in recent years.
In addition, an increasing emphasis on managed care in the United States has and
will continue to increase pressure on drug pricing. We cannot predict whether
legislative or regulatory proposals will be adopted or what effect those
proposals or managed care efforts may have on our business. The announcement
and/or adoption of such proposals or efforts could adversely affect our profit
margins and business.
WE RELY HEAVILY ON COLLABORATIVE RELATIONSHIPS AND TERMINATION OF ANY OF THESE
PROGRAMS COULD REDUCE THE FINANCIAL RESOURCES AVAILABLE TO US.
Our strategy for developing and commercializing many of our potential
products includes entering into collaborations with corporate partners,
licensors, licensees and others. To date, we have entered into collaborations
with Organon, Warner-Lambert Company, Eli Lilly and Company, SmithKline Beecham
Corporation, American Home Products, Abbott Laboratories, Sankyo Company Ltd.,
Glaxo-Wellcome plc, Allergan, Inc., and Pfizer Inc. These collaborations provide
us with funding and research and development resources for potential products
for the treatment or control of metabolic diseases, hematopoiesis, women's
health disorders, inflammation, cardiovascular disease, cancer and skin disease,
and osteoporosis. These agreements also give our collaborative partners
significant discretion when deciding whether or not to pursue any development
program. We cannot be certain that our collaborations will continue or be
successful.
In addition, our collaborators may develop drugs, either alone or with
others, that compete with the types of drugs they currently are developing with
us. This would result in less support and increased competition for our
programs. If products are approved for marketing under our collaborative
programs, any revenues we receive will depend on the manufacturing, marketing
and sales efforts of our collaborators, who generally retain commercialization
rights under the collaborative agreements. Our current collaborators also
generally have the right to terminate their collaborations under specified
circumstances. If any of our collaborative partners breach or terminate their
agreements with us or otherwise fail to conduct their collaborative activities
successfully, our product development under these agreements will be delayed or
terminated.
We may have disputes in the future with our collaborators, including
disputes concerning which of us owns the rights to any technology developed. For
instance, we were involved in litigation with Pfizer, which we settled in April
1996, concerning our right to milestones and royalties based on the development
and commercialization of droloxifene. These and other possible disagreements
between us and our collaborators could delay our ability and the ability of our
collaborators to achieve milestones or our receipt of other payments. In
addition, any disagreements could delay, interrupt or terminate the
collaborative research, development and commercialization of certain potential
products, or could result in litigation or
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arbitration. The occurrence of any of these problems could be time-consuming
and expensive and could adversely affect our business.
OUR SUCCESS DEPENDS ON OUR ABILITY TO OBTAIN AND MAINTAIN OUR PATENTS AND OTHER
PROPRIETARY RIGHTS.
Our success will depend on our ability and the ability of our licensors to
obtain and maintain patents and proprietary rights for our potential products
and to avoid infringing the proprietary rights of others, both in the United
States and in foreign countries. Patents may not be issued from any of these
applications currently on file or, if issued, may not provide sufficient
protection. In addition, if we breach our licenses, we may lose rights to
important technology and potential products.
Our patent position, like that of many pharmaceutical companies, is
uncertain and involves complex legal and technical questions for which important
legal principles are unresolved. We may not develop or obtain rights to products
or processes that are patentable. Even if we do obtain patents, they may not
adequately protect the technology we own or have licensed. In addition, others
may challenge, seek to invalidate, infringe or circumvent any patents we own or
license, and rights we receive under those patents may not provide competitive
advantages to us. Further, the manufacture, use or sale of our products may
infringe the patent rights of others.
Several drug companies and research and academic institutions have
developed technologies, filed patent applications or received patents for
technologies that may be related to our business. Others have filed patent
applications and received patents that conflict with patents or patent
applications we have licensed for our use, either by claiming the same methods
or compounds or by claiming methods or compounds that could dominate those
licensed to us. In addition, we may not be aware of all patents or patent
applications that may impact our ability to make, use or sell any of our
potential products. For example, United States patent applications may be kept
confidential while pending in the Patent and Trademark Office, and patent
applications filed in foreign countries are often first published six months or
more after filing. Any conflicts resulting from the patent rights of others
could significantly reduce the coverage of our patents and limit our ability to
obtain meaningful patent protection. If other companies obtain patents with
conflicting claims, we may be required to obtain licenses to those patents or to
develop or obtain alternative technology. We may not be able to obtain any such
license on acceptable terms or at all. Any failure to obtain such licenses could
delay or prevent us from pursuing the development or commercialization of our
potential products.
We have had and will continue to have discussions with our current and
potential collaborators regarding the scope and validity of our patent and other
proprietary rights. If a collaborator or other party successfully establishes
that our patent rights are invalid, we may not be able to continue our existing
collaborations beyond their expiration. Any determination that our patent rights
are invalid also could encourage our collaborators to terminate their agreements
where contractually permitted. Such a determination could also adversely affect
our ability to enter into new collaborations.
We may also need to initiate litigation, which could be time-consuming and
expensive, to enforce our proprietary rights or to determine the scope and
validity of others' rights. If litigation results, a court may find our patents
or those of our licensors invalid or may find that we have infringed on a
competitor's rights. If any of our competitors have filed patent applications in
the United States which claim technology we also have invented, the Patent and
Trademark Office may require us to participate in expensive interference
proceedings to determine who has the right to a patent for the technology.
We have learned that Hoffmann-La Roche Inc. has received a United States
patent and has made patent filings in foreign countries that relate to our
Panretin(R) capsules and gel products. We filed a patent application with an
earlier filing date than Hoffmann-La Roche's patent, which we believe is broader
than, but overlaps in part with, Hoffmann-La Roche's patent. We currently are
investigating the scope and validity of Hoffmann-La Roche's patent to determine
its impact upon our products. The Patent and Trademark Office has informed us
that the overlapping claims are patentable to us and has initiated a proceeding
to determine whether we or Hoffmann-La Roche are entitled to a patent. We may
not receive a favorable outcome in the proceeding. In addition, the proceeding
may delay the Patent and Trademark Office's decision regarding our earlier
application. If we do not prevail, the Hoffmann-La Roche patent might block our
use of Panretin(R) capsules and gel in certain cancers.
We also rely on unpatented trade secrets and know-how to protect and
maintain our competitive position. We require our employees, consultants,
collaborators and others to sign confidentiality agreements when they begin
their relationship with us. These agreements may be breached and we may not have
adequate remedies for any breach. In addition, our competitors may independently
discover our trade secrets. Any of these actions might adversely affect our
business.
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WE RELY ON THIRD-PARTY MANUFACTURERS.
We currently have no manufacturing facilities and we rely on others for
clinical or commercial production of our marketed and potential products. To be
successful, we will need to manufacture our products, either directly or through
others, in commercial quantities, in compliance with regulatory requirements and
at acceptable cost. Any extended and unplanned manufacturing shutdowns could be
expensive and could result in inventory and product shortages. If we are unable
to develop our own facilities or contract with others for manufacturing
services, our ability to conduct preclinical testing and human clinical trials
will be adversely affected. In addition, our revenues could be adversely
affected if we are unable to supply currently marketed products. This in turn
could delay our submission of products for regulatory approval and our
initiation of new development programs. In addition, although other companies
have manufactured drugs acting through IRs and STATs on a commercial scale, we
may not be able to do so at costs or in quantities to make marketable products.
The manufacturing process also may be susceptible to contamination, which
could cause the affected manufacturing facility to close until the contamination
is identified and fixed. In addition, problems with equipment failure or
operator error also could cause delays.
OUR BUSINESS EXPOSES US TO PRODUCT LIABILITY RISKS AND WE MAY NOT HAVE
SUFFICIENT INSURANCE TO COVER ANY CLAIMS.
Our business exposes us to potential product liability risks. A successful
product liability claim or series of claims brought against us could result in
payment of significant amounts of money and divert management's attention from
running the business. Some of the compounds we are investigating may be harmful
to humans. For example, retinoids as a class are known to contain compounds,
which can cause birth defects. We may not be able to maintain our insurance on
acceptable terms, or our insurance may not provide adequate protection in the
case of a product liability claim. To the extent that product liability
insurance, if available, does not cover potential claims, we will be required to
self-insure the risks associated with such claims.
WE ARE DEPENDENT ON OUR KEY EMPLOYEES, THE LOSS OF WHOSE SERVICES COULD
ADVERSELY AFFECT US.
We depend on our key scientific and management staff, the loss of whose
services could adversely affect our business. Furthermore, we are currently
experiencing a period of rapid growth, which requires us to hire many new
scientific, management and operational personnel. Recruiting and retaining
qualified management, operations and scientific personnel to perform research
and development work also is critical to our success. We may not be able to
attract and retain such personnel on acceptable terms given the competition
among numerous drug companies, universities and other research institutions for
such personnel.
WE USE HAZARDOUS MATERIALS WHICH REQUIRES US TO INCUR SUBSTANTIAL COSTS TO
COMPLY WITH ENVIRONMENTAL REGULATIONS.
In connection with our research and development activities, we handle
hazardous materials, chemicals and various radioactive compounds. We cannot
completely eliminate the risk of accidental contamination or injury from the
handling and disposing of hazardous materials. In the event of any accident, we
could be held liable for any damages that result, which could be significant. In
addition, we may incur substantial costs to comply with environmental
regulations.
OUR STOCK PRICE MAY BE ADVERSELY AFFECTED BY VOLATILITY IN THE MARKETS.
The market prices and trading volumes for our securities, and the
securities of emerging companies like us, have historically been highly volatile
and have experienced significant fluctuations unrelated to operating
performance. Future announcements concerning us or our competitors may impact
the market price of our common stock. These announcements might include:
o the results of research or development testing,
o technological innovations,
o new commercial products,
o government regulation,
o receipt of regulatory approvals by competitors,
o our failure to receive regulatory approvals,
16
o developments concerning proprietary rights, or
o litigation or public concern about the safety of the products.
YOU MAY NOT RECEIVE A RETURN ON YOUR SHARES OTHER THAN THROUGH THE SALE OF YOUR
SHARES OF COMMON STOCK.
We have not paid any cash dividends on our common stock to date, and we do
not anticipate paying cash dividends in the foreseeable future. Accordingly,
other than through a sale of your shares, you may not receive a return.
OUR SHAREHOLDER RIGHTS PLAN AND CHARTER DOCUMENTS MAY PREVENT TRANSACTIONS THAT
COULD BE BENEFICIAL TO YOU.
Our shareholder rights plan and provisions contained in our certificate of
incorporation and bylaws may discourage transactions involving an actual or
potential change in our ownership, including transactions in which you might
otherwise receive a premium for your shares over then-current market prices.
These provisions also may limit your ability to approve transactions that you
deem to be in your best interests. In addition, our board of directors may issue
shares of preferred stock without any further action by you. Such issuances may
have the effect of delaying or preventing a change in our ownership.
PART I. FINANCIAL INFORMATION
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
At March 31, 2000 our investment portfolio includes fixed-income securities
of $21.7 million. These securities are subject to interest rate risk and will
decline in value if interest rates increase. However, due to the short duration
of our investment portfolio, an immediate 10% change in interest rates would
have no material impact on our financial condition, results of operations or
cash flows.
We generally conduct business including sales to foreign customers, in U.S.
dollars and as a result we have very limited foreign currency exchange rate
risk. The effect of an immediate 10% change in foreign exchange rates would not
have a material impact on our financial condition, results of operations or cash
flows.
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PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On March 1, 2000, we issued to Elan International Services, Ltd. ("EIS"), a
subsidiary of Elan Corporation, plc 1,600,123 shares of our common stock related
to the conversion of $20 million in zero coupon convertible senior notes plus
accrued interest. The shares of common stock were issued to a single entity,
EIS, under a claim of exemption under Regulation S promulgated by the Securities
and Exchange Commission or, alternatively, under Section 4(2) of the Securities
Act of 1933, as amended.
ITEM 6 (A) EXHIBITS
Exhibit 2.1 (1) Agreement and Plan of Reorganization dated May 11, 1998, by and among the Company, Knight
Acquisition Corp. and Seragen, Inc. (Exhibit 2.1).
Exhibit 2.2 (1) Option and Asset Purchase Agreement, dated May 11, 1998, by and among the Company, Marathon
Biopharmaceuticals, LLC, 520 Commonwealth Avenue Real Estate Corp. and 660 Corporation (Exhibit 10.3).
Exhibit 2.3 * Asset Purchase Agreement among CoPharma, Inc., Marathon Biopharmaceuticals, Inc., Seragen, Inc. and
Ligand Pharmaceuticals Incorporated dated January 7, 2000. (The schedules referenced in this
agreement have not been included because they are either disclosed in such agreement or do not
contain information which is material to an investment decision. The Company agrees to furnish a
copy of such schedules to the Commission upon request.)
Exhibit 3.1 (1) Amended and Restated Certificate of Incorporation of the Company (Exhibit 3.2).
Exhibit 3.2 (1) Bylaws of the Company, as amended (Exhibit 3.3).
Exhibit 3.3 (2) Amended Certificate of Designation of Rights, Preferences and Privileges of Series A Participating
Preferred Stock of Ligand Pharmaceuticals Incorporated.
Exhibit 4.1 (3) Preferred Shares Rights Agreement, dated as of September 13, 1996, by and between Ligand
Pharmaceuticals Incorporated and Wells Fargo Bank, N.A. (Exhibit 10.1)
Exhibit 4.2 (4) Amendment to Preferred Shares Rights Agreement, dated as of November 9, 1998, between the Company
and ChaseMellon Shareholder Services, L.L.C., as Rights Agent (Exhibit 99.1).
Exhibit 4.3 (5) Second Amendment to the Preferred shares Rights Agreement, dated as of December 23, 1998, between
the Company and ChaseMellon Shareholder Services, L.L.C., as Rights Agent (Exhibit 1).
Exhibit 10.219 * Supply and Development Agreement among Ligand Pharmaceuticals Incorporated, Seragen, Inc. and
CoPharma, Inc. dated January 7, 2000.
Exhibit 10.220 * Research, Development and License Agreement by and between Organon Company and Ligand Pharmaceuticals
Incorporated dated February 11, 2000.
Exhibit 10.221 Seventeenth Addendum to Amended Registration Rights Agreement dated June 24, 1994 between Ligand
Pharmaceuticals Incorporated and Elan International Services, Ltd., effective March 1, 2000.
Exhibit 10.222 Incentive Agreement dated March 1, 2000 among Ligand Pharmaceuticals Incorporated, Elan
International Services, Ltd. and Monksland Holdings, BV. (The schedules referenced in this
agreement have not been included because they are either disclosed in such agreement or do not
contain information which is material to an investment decision. The Company agrees to furnish a
copy of such schedules to the Commission upon request.)
Exhibit 10.223 Zero Coupon Convertible Senior Note Due 2008 dated July 14, 1999 and amended March 1, 2000 between
Ligand Pharmaceuticals Incorporated and Monksland Holdings, BV, No. R-3A.
Exhibit 27.1 Financial Data Schedule
(1) This exhibit was previously filed as part of, and is hereby incorporated by
reference to the numbered exhibit filed with the Company's Registration
Statement on Form S-4 (No. 333-58823) filed on July 9, 1998.
(2) This exhibit was previously filed as part of, and is hereby incorporated by
reference to the same numbered exhibit filed with the Company's Quarterly
Report on Form 10-Q for the period ended March 31, 1999.
(3) This exhibit was previously filed as part of, and is hereby incorporated by
reference to the numbered exhibit filed with the Company's Registration
Statement on Form S-3 (No. 333-12603) filed on September 25, 1996, as
amended.
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(4) This exhibit was previously filed as part of, and is hereby incorporated by
reference to the numbered exhibit filed with, the Registration Statement on
Form 8-A/A Amendment No. 1 (No. 0-20720) filed on November 10, 1998.
(5) This exhibit was previously filed as part of, and is hereby incorporated by
reference to the numbered exhibit filed with, the Registration Statement on
Form 8-A/A Amendment No. 2 (No. 0-20720) filed on December 24, 1998.
* Certain confidential portions of this Exhibit were omitted by means of
marking such portions with an asterisk (the "Mark"). This Exhibit has been
filed separately with the Secretary of the Commission without the Mark
pursuant to the Company's Application Requesting Confidential Treatment
under Rule 246-2 of the Securities Exchange Act of 1934.
ITEM 6 (B) REPORTS ON FORMS 8-K
No reports on Form 8-K were filed during the quarter ended March 31, 2000.
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LIGAND PHARMACEUTICALS INCORPORATED
March 31, 2000
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Ligand Pharmaceuticals Incorporated
Date: MAY 15, 2000 By /S/PAUL V. MAIER
------------ ---------------------------------
Paul V. Maier
Senior Vice President and Chief Financial Officer
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