Exhibit 99.1
Contact: Paul V. Maier
Senior VP and CFO
(858) 550-7573
LIGAND REPORTS RECORD PRODUCT SALES UP 59% FOR THIRD QUARTER 2004
-- BDO SEIDMAN HIRED AS NEW AUDITORS; 10Q FILED ON SCHEDULE --
-- MANAGEMENT UPDATES GUIDANCE, EXPECTS PROFITABILITY IN
FOURTH QUARTER AND FULL YEAR --
SAN DIEGO, CA - NOVEMBER 9, 2004 - Ligand Pharmaceuticals Incorporated
(Nasdaq: LGND) today reported record net product sales for the third quarter
ended September 30, 2004, of $44.7 million, compared to $28.1 million the third
quarter of 2003, an increase of 59% driven by strong AVINZA(R) (morphine
sulphate extended-release capsules) net sales of $28.3 million and Targretin
capsules and gel sales of $6.2 million.
Ligand's total revenues for the third quarter of 2004 were $49.5 million,
compared to $31.3 million for the same period in 2003, an increase of 58%. Net
loss for the third quarter of 2004 was $6.8 million ($0.09 per share), compared
to a net loss of $11.1 million ($0.16 per share) for the same period in 2003, an
improvement of 39% (44% per share).
For the first nine months of 2004, net product sales were $116.3 million,
compared to $72.2 million in the same period of 2003, an increase of 61%. Total
revenues for the first nine months of 2004 were $126.6 million, compared to
$83.5 million in the same period of 2003, an increase of 52%. Net loss for the
first nine months of 2004 was $34.1 million ($0.46 per share), compared to $43.4
million ($0.62 per share) in the same period of 2003, an improvement of 21% (26%
per share).
"We are encouraged with the continued demand growth during the third
quarter for AVINZA and ONTAK and that the AVINZA and ONTAK sales mix and
geographic demand changes that impacted net product sales in the first half of
this year (increased rebates and returns) have stabilized and provide a more
predictable foundation for our forward planning," said Paul V. Maier, Ligand's
senior vice president and chief financial officer. "We do believe that
additional measures are necessary to improve AVINZA results going forward and
together with our co-promotion partner have taken those actions as outlined in
the AVINZA update herein."
In the third quarter and first nine months of 2004, net sales of individual
products were:
- ------------------------------------ ------------------ ------------------- ----------------- ---------------------
3Q 2004 SALES 3Q 2003 SALES 9 MOS 2004 9 MOS 2003
(MILLION) (MILLION) SALES (MILLION) SALES (MILLION)
- ------------------------------------ ------------------ ------------------- ----------------- ---------------------
AVINZA(R) $28.3 $15.9 $74.1 $34.2
- ------------------------------------ ------------------ ------------------- ----------------- ---------------------
ONTAK(R) (denileukin diftitox) $9.9 $10.9 $25.9 $27.3
- ------------------------------------ ------------------ ------------------- ----------------- ---------------------
Targretin(R) (bexarotene) capsules $4.8 $1.1 $12.4 $7.5
- ------------------------------------ ------------------ ------------------- ----------------- ---------------------
Targretin gel and $1.7 $0.3 $3.9 $3.3
Panretin(R) (alitretinoin) gel
- ------------------------------------ ------------------ ------------------- ----------------- ---------------------
TOTAL NET PRODUCT SALES $44.7 $28.1 $116.3 $72.2
- ------------------------------------ ------------------ ------------------- ----------------- ---------------------
Gross margin on product sales was 75% in the third quarter of 2004,
compared to 70% in the same period of 2003. Cost of products sold for the
quarter includes approximately $2.7 million in non-cash expense primarily
related to amortization of license, royalty, and technology rights for AVINZA
and ONTAK. Because the amounts of these quarterly non-cash expenses are fixed
over AVINZA's and ONTAK's patent lives, the products' gross margins should
continue to improve in 2004 as sales volumes increase. AVINZA gross margin is
also expected to improve further for the remainder of 2004 as the result of a
price increase effective July 1, 2004, and the completion of wholesaler
distribution and service agreements (DSAs). For the first nine months of 2004,
gross margin was 74%, compared to 68% for the same period of 2003.
Collaborative research and development and other revenues were $4.8 million
in the third quarter of 2004, compared to $3.2 million in the same period of
2003, an increase of 50% that resulted primarily from the timing of milestones.
For the first nine months of 2004, collaborative research and development and
other revenues were $10.2 million, compared to $11.3 million in the same period
of 2003, a decrease of 10%, resulting from the timing of milestones.
"The Royalty Pharma option exercise of $32.5 million on November 5, 2004,
eliminates uncertainty and, together with other milestone revenues, is expected
to drive substantial growth in other revenues in the fourth quarter," Maier
said.
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Research and development expenses were $18.0 million in the third quarter
of 2004, compared to $17.7 million in the same period of 2003, an increase of
2%. For the first nine months of 2004, R&D expenses were $53.0 million, compared
to $51.2 million in the same period of 2003, an increase of 4% and in line with
the low end of Ligand's expectations.
Selling, general, and administrative expenses were $15.9 million for the
third quarter of 2004, compared to $13.2 million in the same period of 2003, an
increase of 20%. The increase in 2004 is primarily due to costs associated with
36 additional Ligand sales representatives hired to promote AVINZA, and higher
advertising and promotion expenses for AVINZA. For the first nine months of
2004, SG&A expenses were $47.0 million compared to $39.2 million in the same
period of 2003, an increase of 20%.
Co-promotion expense payable to Organon for the third quarter and fist nine
months of 2004 amounted to $8.5 and $22.2 million, respectively. No co-promotion
payments were recorded in the first nine months of 2003 due to contract
exclusion of the first $35.0 million of AVINZA sales for 2003 only.
"Our SG&A expenses in the third quarter and first nine months of 2004 were
in line with our expectations and are tracking toward the lower end of our
annual guidance," Maier said.
Loss from operations was $3.9 million in the third quarter of 2004,
compared to $8.2 million in the same period in 2003, an improvement of 52%. For
the first nine months of 2004, loss from operations was $25.4 million, compared
to $29.8 million in the same period of 2003, a decrease of 15%. Loss from
operations is expected to be eliminated in the fourth quarter of 2004 as product
sales, other revenues, and expenses track within Ligand's revised guidance range
discussed below.
As of September 30, 2004, Ligand had cash, cash equivalents, short-term
investments and restricted cash of $82.1 million, compared to $87.5 million at
the end of the second quarter. Operating cash burn in the third quarter was $7.0
million.
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AVINZA UPDATE
"AVINZA demand and market share growth continued in the third quarter, but
did not further accelerate impacted by an overall market growth slowdown, and a
slower impact on demand than expected from the increased sales calls to primary
care physicians (PCPs) and the long-term care and hospice plans," Maier said.
"Total prescriptions increased 11% over the prior quarter (based on IMS NPA
monthly data, which does not include institutional use in hospitals, federal
facilities and other non-retail outlets) reflecting that continued growth. In
addition, our weekly prescription market share increased to 4.8% for the last
week of September 2004 and continues tracking now more closely to a year-end
5.3%-5.8% weekly market share. Monthly prescription market share, increasingly a
more accurate reflection of AVINZA market share progress, increased from 4% in
June 2004 to 4.3% for September 2004. Quarterly prescription market share
increased from 3.8% in second quarter 2004 to 4.2% in the third quarter 2004."
AVINZA Growth/Market Share
2004
- --------------------------- ----------- -------------- ------------- -------------- -------------- -------------
1st Qtr 2nd Qtr July Aug Sep 3rd Qtr
- --------------------------- ----------- -------------- ------------- -------------- -------------- -------------
% of Change vs. Prior 20% 21% 0.9% 3.7% 2.3% 11%
Month/Qtr
- --------------------------- ----------- -------------- ------------- -------------- -------------- -------------
Market Share % 3.2% 3.8% 4.0% 4.2% 4.3% 4.2%
- --------------------------- ----------- -------------- ------------- -------------- -------------- -------------
Source: IMS NPA (National Prescription Audit; pharmacy prescriptions; includes
retail, mail order and long-term care)
AVINZA $ Value/Growth
2004
- ------------------------------- ----------------------- --------------------- ----------------------
1st Qtr 2nd Qtr 3rd Qtr
- ------------------------------- ----------------------- --------------------- ----------------------
Wholesaler Out-Movement ($ $26.2 $31.5 $38.1
millions)
- ------------------------------- ----------------------- --------------------- ----------------------
% of Change vs. Prior Qtr 19% 20% 21%
- ------------------------------- ----------------------- --------------------- ----------------------
Source: IMS NSP (National Sales Perspective; wholesaler out-movement at
wholesaler-to-outlet invoiced prices; includes retail, non-retail and mail
order, as projected by IMS)
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"The productivity increase expected from the expanded AVINZA sales call
plan on PCPs in the third quarter was slowed by imbalances of AVINZA target
physicians at the territory level (range of 20-120 physicians per territory),
making consistent quality reach and frequency goals difficult to sustain. This
substantially impacted the prescription response to the expanded PCP call plans
of Organon and Ligand. As a part of a larger corporate sales force restructuring
of all of Organon's sales representatives, a restructuring and territory
rebalancing was implemented in November, which results in new balanced PCP
territories now built around AVINZA targets of around 60 physicians per
territory, rather than AVINZA targets added to existing territorial boundaries.
This rebalancing and increased focus on AVINZA is expected to substantially
improve the prescription responsiveness to the expanded PCP sales call plans of
Ligand and Organon going forward. In a similar manner, the reorganization is
expected to improve the response to the long-term care and hospice plan which
has progressed well at the contracting level, but has lagged in pull-through
from physician and consulting pharmacist calls. The overall co-promotion plans
for PCP, specialist and long-term care/hospice will allow us to deliver
consistently quality calls of 850,000 or more per year and compete effectively
for number one share of voice for 2004 and 2005," said Maier.
Ligand estimates that AVINZA retail pharmacy stocking expanded to
approximately 29,000 to 30,000 pharmacies at the end of the third quarter, up
from 26,000 to 27,000 at the end of the second quarter and consistent with the
company's goal to have AVINZA available for patients in 30,000 pharmacies by
year end 2004. "We estimate no significant overall expansion or reduction of
wholesale and chain inventory during the quarter, consistent with our annual
goal and with the parameters of the major wholesaler distribution service
agreements (DSAs)," Maier said. "Third quarter sales mix was impacted by the
expansion of business under certain commercial contracts entered into in late
2003 and early 2004 with pharmacy benefit managers (PBMs), group purchasing
organizations (GPOs), and health maintenance organizations (HMOs). The expansion
of business under these discount-based contracts is essential for future retail
demand growth as they expand national and regional formulary access for AVINZA,
but near term, increases the deductions from gross to net sales. Medicaid
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prescription activity as a percent of our overall business began to slow during
the third quarter and we expect the current proportion of rebates will remain
consistent throughout the remainder of 2004. We also note that product returns
normalized to a more predictable level across all geographic territories as
AVINZA prescriptions continued to increase and the positive effect of DSAs
entered into during the third quarter of 2004 with certain wholesale customers
was realized. We entered into DSAs or fee-for-service agreements for each of our
products, including AVINZA, during the third quarter of 2004 with our three
largest wholesale customers. We no longer offer these wholesalers promotional
discounts or incentives and, as a result, we expect a net improvement in product
gross margins as volumes grow over time. Additionally, we believe these
arrangements will provide lower variability in wholesale inventory levels,
improved management of the inventories that we believe will result in a lower
level of product returns compared to prior periods, as well as improved customer
service. We have entered discussions and expect to complete DSAs with additional
smaller wholesaler customers during the fourth quarter of 2004."
UPDATE ON IN-LINE ONCOLOGY PRODUCTS
"In-line oncology product sales increased 34% to record levels in the third
quarter 2004 compared to prior year and 15% compared to the second quarter 2004,
led by Targretin capsules and gel" Maier said. "ONTAK unit demand shipments grew
19% and 25% for the third quarter and nine months of 2004, respectively,
compared to the same period in 2003. However, net sales declined due to
increased chargebacks and net rebates resulting from the changing mix of
patients treated in hospitals versus private physician offices, in large part a
result of reimbursement changes put into effect for 2004."
"Targretin capsule net sales in the U.S. and Europe increased 336% in the
third quarter 2004, compared to prior year, and 14% compared to the prior
quarter in 2004. The continued growth in sales of Targretin capsules in 2004
compared to 2003 reflects both volume increases and a 7% price increase in the
U.S. effective January 1, 2004. In June 2004, the Centers for Medicare and
Medicaid Services (CMS) announced formal implementation of the Section 641
demonstration program under the Medicare Modernization Act of 2003, including
reimbursement under Medicare for Targretin capsules and gel for patients with
cutaneous T-cell lymphoma. As a result, we continue to expect improved patient
access for Targretin CTCL patients in the second half of 2004 and 2005, prior to
SPIRIT I and II data availability," said Maier.
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UPDATE ON SPIRIT I AND II FIRST-LINE NSCLC REGISTRATION TRIALS
SPIRIT I and SPIRIT II, the two large Phase III studies evaluating the
survival benefit of adding Targretin capsules to two different chemotherapy
regimens in first-line non-small cell lung cancer (NSCLC), are on schedule for
final data analysis at the end of first quarter 2005. An update on recent Phase
II data and data supporting Targretin's mechanism of action in NSCLC was
presented September 3rd at the meeting of the International Association for the
Study of Lung Cancer (IASLC) jointly sponsored with the American Society of
Clinical Oncology (ASCO) and European Society of Medical Oncology (ESMO) held in
Portugal. Data from a Phase II study of Targretin in combination with
gemcitabine/cisplatin in 1st line NSCLC patients conducted at the University of
Maryland. showed a median survival of 12.7 months for those patients, data that
compares very favorably to that of controls from other studies at the same
institution and with large scale trials using the same chemo agents. Additional
data showed that both in NSCLC human explants and biopsy samples taken from
NSCLC patients treated with Targretin, a clear change in gene expression
occurred in the tumor, with a pattern towards normalization of genes that were
altered in untreated tumors. The data supports and expands earlier studies
showing that RXR receptor levels are a predictor of survival in NSCLC patients.
UPDATED FULL YEAR FINANCIAL GUIDANCE
"Given the revenue and product sales trends of the third quarter, and the
certainty of other revenue items covered in Recent Highlights below, we continue
to expect to break through to operational profitability and a strong quarter of
positive EPS in the fourth quarter of 2004, bringing us to our first full year
of profitability," Maier said. "We are adjusting our full-year revenue guidance,
and expect a record fourth quarter of growth with both product sales and
revenue, including:
o total revenues between $216 and $231 million,
o net product sales between $170 and $180 million,
o gross margin on overall product sales estimated at 76% to 77%,
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o slower growth in expenses with total operating expenses between $166 and
$170 million (excluding cost of products sold but including co-promotion
expenses),
o operating income between $11.0 and $16.0 million,
o basic EPS of $.03 to $.09 per share, with the upper range most sensitive to
timing of product milestones. "We believe that our financial goals for this
transition year to profitability can be achieved through reasonable expense
discipline, continued product sales growth, and significantly higher other
revenue, partially offsetting the AVINZA and ONTAK sales mix changes, and
remain focused on achieving these goals for 2004. We expect our business
going forward to be driven by the growth of our product sales and milestone
and other revenue variability to be a less important component of overall
revenue," Maier said.
RECENT LIGAND HIGHLIGHTS
o LIGAND, ROYALTY PHARMA AMEND SERM ROYALTY AGREEMENT Under the revised
agreement, announced November 9, 2004, Royalty Pharma will purchase for
$32.5 million an additional 1.625% of the three SERM products' net sales.
This reflects an acceleration of the previous option timetable and an
increase in the royalty amount and aggregate purchase price. As a result of
this transaction, Royalty Pharma increased its rights to a total of 3.0125%
of the SERM products' net sales for a period of ten years following first
commercial sale of each product. Ligand retains an approximately equal
portion of lasofoxifene and other SERMs' net sales going forward and for
periods that may exceed ten years. No further Royalty Pharma options
remain.
o LIGAND RESTRUCTURES ONTAK ROYALTY STREAM WITH LILLY Under the revised
agreement, announced November 9, 2004, Ligand will have two options, in
January and April 2005, to buy down a portion of the ONTAK royalty payable
to Lilly on net sales in the United States for a total consideration of $33
.0 million. Lilly will have options in 2005 to trigger the same royalty
buydown for a total consideration of up to $37.0 million, dependent upon
whether Ligand has exercised its options and ONTAK has achieved certain
sales levels. If both Ligand options are exercised, all royalty payments
due on U.S. sales through year end 2006 and all royalties on U.S. sales of
$38.0 million or less would be eliminated. Thereafter, beginning in 2007,
Ligand would pay royalties to Lilly on a reverse tiered scale (from 20% to
10%) only on sales in excess of $38.0 million for the minimum tier and in
excess of $72.0 million for the maximum tier. The reduced royalty
obligations if any options are exercised are expected to be accretive to
earnings beginning in 2005.
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o LIGAND ANNOUNCES APPOINTMENT OF NEW INDEPENDENT AUDITORS. Ligand engaged
BDO Seidman, LLP, as the company's independent registered public accounting
firm, effective in September 2004, and completed its third quarter 10Q
filing on schedule.
o LIGAND AGREES TO SELL X-CEPTOR INTEREST AND TO VOTE ITS X-CEPTOR SHARES IN
FAVOR OR RECENTLY ANNOUNCED MERGER OF EXELIXIS AND X-CEPTOR. Ligand agreed
to exchange its X-Ceptor shares for Exelixis common stock in the merger of
Exelixis and X-Ceptor, which subsequently closed in October 2004. Ligand
expects to record a gain in the fourth quarter 2004 based upon a
determination of the fair market value of the consideration received,
subsequently estimated to be $2.9 million and expected to be recorded in
fourth quarter other income.
o LIGAND EARNS MILESTONE AS PFIZER SUBMITS NDA FOR LASOFOXIFENE FOR
OSTEOPOROSIS. Ligand earned a milestone payment from Pfizer of
approximately $2.0 million payable in 181,818 shares of Ligand stock held
by Pfizer. Pfizer submitted the first Ligand Corporate Partner NDA in
August 2004 for lasofoxifene for the prevention of osteoporosis.
WEB CAST CONFERENCE CALL
Ligand will host a live web cast, open to all interested parties, of a
conference call during which Ligand management will discuss this news release.
The web cast will be available at HTTP://WWW.LIGAND.COM (investor relations
page) and at HTTP://WWW.STREETEVENTS.COM on November 9, 2004, at 4:30 p.m.
Eastern time (1:30 p.m. Pacific), and will be archived for 30 days.
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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 (IRs) and
Signal Transducers and Activators of Transcription (STATs). For more
information, go to WWW.LIGAND.COM.
CAUTION REGARDING 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. These statements include those related to planning,
outlook and guidance for future financial performance; demand, sales and revenue
growth; loss from operations; profitability; earnings, inventory and inventory
management; AVINZA acceleration, market share, sales, sales calls, sales force
changes, prescription responsiveness, pharmacy stocking and rebates; ONTAK
demand and accretiveness of the ONTAK royalty buydown options; improved patient
access; clinical trial plans and timetables and Medicare and other
reimbursement. Actual events or results may differ from Ligand's expectations.
There can be no assurance that Ligand will achieve its guidance for 2004 or grow
revenues, demand or sales, or eliminate losses and achieve future profitability;
nor 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 marketing approval; that there will be a market for the drugs if
successfully developed and approved; that expanded or refocused sales force
efforts will be successful, that AVINZA or any of our oncology products will
achieve expected sales or continue to grow, or that our products will achieve
expected margins, rebates or reimbursement rates. Additional information
concerning these and 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
Securities and Exchange Commission, available via Ligand's web site at
http://www.ligand.com. 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.
# # #
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LIGAND PHARMACEUTICALS INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except share data)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------------ -----------------------------------
2004 2003 2004 2003
---------------- --------------- ----------------- ----------------
REVENUES:
Product sales $ 44,726 $ 28,123 $ 116,347 $ 72,238
Collaborative research and development
and other revenues 4,771 3,160 10,222 11,294
---------------- --------------- ----------------- ----------------
Total revenues 49,497 31,283 126,569 83,532
---------------- --------------- ----------------- ----------------
OPERATING COSTS AND EXPENSES:
Cost of products sold 11,011 8,565 29,759 22,951
Research and development 17,980 17,696 53,006 51,196
Selling, general and administrative 15,890 13,216 46,988 39,213
Co-promotion 8,501 -- 22,232 --
---------------- --------------- ----------------- ----------------
Total operating costs and expenses 53,382 39,477 151,985 113,360
---------------- --------------- ----------------- ----------------
Loss from operations (3,885) (8,194) (25,416) (29,828)
Other expense, net (2,904) (2,893) (8,728) (13,577)
---------------- --------------- ----------------- ----------------
Net loss $ (6,789) $ (11,087) $ (34,144) $ (43,405)
================ =============== ================= ================
BASIC AND DILUTED PER SHARE AMOUNTS:
Net loss $ (0.09) $ (0.16) $ (0.46) $ (0.62)
================ =============== ================= ================
Weighted average number of common shares outstanding 73,845,613 70,100,280 73,635,562 69,870,785
================ =============== ================= ================
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LIGAND PHARMACEUTICALS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
SEPTEMBER 30, 2004 DECEMBER 31, 2003
----------------------- -----------------------
ASSETS
Current assets:
Cash, cash equivalents and short-term investments $ 80,407 $ 99,034
($4,646 and $9,204 restricted at September 30,
2004 and December 31, 2003, respectively)
Other current assets 44,923 31,123
----------------------- -----------------------
Total current assets 125,330 130,157
Restricted investments 1,656 1,656
Property and equipment, net 23,844 23,501
Acquired technology and product rights, net 129,852 137,857
Other assets 7,977 8,084
----------------------- -----------------------
$ 288,659 $ 301,255
======================= =======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 71,529 $ 54,049
Long-term debt 167,171 167,408
Other long-term liabilities 9,000 9,070
Stockholders' equity 40,959 70,728
----------------------- -----------------------
$ 288,659 $ 301,255
======================= =======================
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