EXHIBIT 99.1
Contact: Paul V. Maier
Senior VP and CFO
(858) 550-7573
LIGAND REPORTS FINANCIAL RESULTS FOR SECOND QUARTER 2004:
NET PRODUCT SALES INCREASE 49% AND TOTAL REVENUES UP 39% OVER PRIOR YEAR
-- AVINZA AND ONTAK DEMAND GROWTH ACCELERATES --
-- MANAGEMENT UPDATES ANNUAL GUIDANCE --
SAN DIEGO, CA - AUGUST 3, 2004 - Ligand Pharmaceuticals Incorporated
(Nasdaq: LGND) today reported total net product sales for the second quarter
ended June 30, 2004, of $37.5 million, a 49% increase over the $25.2 million in
total net product sales in the second quarter of 2003. The increase was driven
by AVINZA(R) (morphine sulfate extended-release capsules) sales of $23.3 million
and solid oncology product revenues.
Ligand's total revenues for the second quarter of 2004 were $40.5 million,
compared to $29.1 million for the same period in 2003, an increase of 39%. Net
loss for the second quarter of 2004 was $14.2 million ($0.19 per share),
compared to a net loss of $12.0 million ($0.17 per share) for the same period in
2003.
For the first half of 2004, net product sales were $71.6 million, compared
to $44.1 million in the same period of 2003, an increase of 62%. Total revenues
for the first half of 2004 were $77.1 million, compared to $52.3 million in the
same period of 2003, an increase of 47%. Net loss for the first half of 2004 was
$27.4 million ($0.37 per share), compared to $32.3 million ($0.46 per share) in
the same period of 2003, a decrease of 15% (20% per share).
"We are pleased with the acceleration of demand growth during second
quarter for AVINZA and ONTAK(R) and believe that the AVINZA sales mix changes
and geographic demand changes that have impacted net product sales in the first
half of this year (increased rebates and returns) are now better understood and
built into our forward planning," said Paul V. Maier, Ligand's senior vice
president and chief financial officer.
In the second quarter and first half of 2004, net sales of individual
products were:
- ----------------------------------------- ------------------ ------------------- ----------------- ---------------------
2Q 2004 SALES 2Q 2003 SALES 1H 2004 1H 2003
(MILLION) (MILLION) SALES (MILLION) SALES (MILLION)
- ----------------------------------------- ------------------ ------------------- ----------------- ---------------------
AVINZA(R) $23.3 $11.6 $45.8 $18.3
- ----------------------------------------- ------------------ ------------------- ----------------- ---------------------
ONTAK(R)(denileukin diftitox) $8.7 $9.2 $16.0 $16.4
- ----------------------------------------- ------------------ ------------------- ----------------- ---------------------
Targretin(R)(bexarotene) capsules $4.2 $2.8 $7.7 $6.4
- ----------------------------------------- ------------------ ------------------- ----------------- ---------------------
Targretin gel and $1.3 $1.5 $2.1 $3.0
Panretin(R)(alitretinoin) gel
- ----------------------------------------- ------------------ ------------------- ----------------- ---------------------
TOTAL NET PRODUCT SALES $37.5 $25.2 $71.6 $44.1
- ----------------------------------------- ------------------ ------------------- ----------------- ---------------------
Gross margin on product sales was 74% in the second quarter of 2004,
compared to 69% in the same period of 2003. This increase in the margin in 2004
is due to the relative increase of sales of AVINZA and the impact of price
increases effective January 1, 2004, across key products. Cost of products sold
for second quarter 2004 and 2003 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 in the second half of 2004 as a
result of a price increase effective July 1, 2004. For the first half of 2004,
gross margin was 74%, compared to 67% for the same period of 2003.
Collaborative research and development and other revenues were $3.0 million
in the second quarter of 2004, compared to $3.9 million in the same period of
2003. For the first half of 2004, collaborative research and development and
other revenues were $5.5 million, compared to $8.1 million in the same period of
2003. "Given the timing of potential product milestones and other revenue items,
we expect other revenues to grow significantly with more than 80-85% occurring
in the third and fourth quarters," Maier said.
Research and development expenses were $18.2 million in the second quarter
of 2004, compared to $16.9 million in the same period of 2003, an increase of
8%. For the first half of 2004, R&D expenses were $35.0 million, compared to
$33.5 million in the same period of 2003, in line with Ligand's expectations.
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Selling, general, and administrative expenses were $16.6 million for the
second quarter of 2004, compared to $13.6 million in the same period of 2003, an
increase of 22%. Ligand's second quarter SG&A expenses include a 50/50 sharing
with Ligand's AVINZA co-promotion partner, Organon, of AVINZA's advertising,
medical affairs, and clinical trials costs. The increase in SG&A expenses was
primarily due to costs associated with additional Ligand sales representatives
hired to promote AVINZA, and higher advertising and promotion expenses for
AVINZA in connection with our arrangement with Organon. For the first half of
2004, SG&A expenses were $31.1 million, compared to $26.0 million in the same
period of 2003, an increase of 20%.
Co-promotion expense payable to Organon for the second quarter and first
half of 2004 amounted to $7.0 million and $13.7 million, respectively. No
co-promotion payments were recorded in the first half of 2003 due to the
contract exclusion of the first $35 million of AVINZA sales for 2003 only.
"Our SG&A expenses in the second quarter and first half were in line with
our expectations and are tracking within the range of our annual guidance,"
Maier said.
Loss from operations was $11.3 million in the second quarter of 2004,
compared to $9.1 million in the same period in 2003, an increase of 24%. For the
first half of 2004, loss from operations was $21.5 million, compared to $21.6
million in the same period of 2003. Loss from operations is expected to be
eliminated in the second half of 2004 as product sales and revenues grow, and as
expenses track within Ligand's guidance range.
As of June 30, 2004, Ligand had cash, cash equivalents, short-term
investments and restricted cash of $87.5 million, compared to $98.8 million at
the end of the first quarter. Operating cash burn in the first half of 2004 was
$15.3 million.
AVINZA UPDATE
"AVINZA accelerated growth and market share in the second quarter in spite
of an overall market growth slowdown and is poised for further acceleration in
the second half of the year based upon ongoing investments and share of voice
(tied for number one in second quarter) in the SRO chronic pain market," Maier
said. "Total prescriptions increased 21% 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 continued solid growth. In
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addition, our weekly prescription market share of 4.5% for the last week of June
2004 (4.7% in most recent July 23 data) continues in line with our previously
announced goal to achieve 6-7% weekly market share by December 2004. Monthly
prescription market share, increasingly a more accurate reflection of AVINZA
market share progress, increased from 3.5% for March 2004 to 4% for June 2004.
Quarterly prescription market share increased from 3.2% in first quarter 2004 to
3.8% in second quarter 2004."
AVINZA Growth/Market Share
- ----------------------------- --------------- -------------- -------------- ------------------ ------------------
1st Qtr April May Jun 2nd Qtr
- ----------------------------- --------------- -------------- -------------- ------------------ ------------------
% of Change vs. Prior 20 1.9 3.9 7.8 21
Month/Qtr
- ----------------------------- --------------- -------------- -------------- ------------------ ------------------
Market Share % 3.2 3.6 3.9 4.0 3.8
- ----------------------------- --------------- -------------- -------------- ------------------ ------------------
"We believe that the expansion of our sales force calls has begun to result
in further market penetration of the primary care physician segment and to
strengthen our foothold in the long-term care/hospice arena. We are pleased with
the achievement of the targeted monthly calls of approximately 45,000 to 50,000
during the second quarter. Further, the additional 36 Ligand specialty sales
representatives were hired and trained during the second quarter and are
expected to achieve an additional estimated 5,000 calls per month on top decile
primary care physicians during the third quarter. Coupled with the long-term
care/hospice calling program underway in the second quarter, we expect the above
activities to translate to accelerating AVINZA prescription trends, market
share, and sales during the second half of 2004," said Maier. "We also expect
second half 2004 sales to benefit substantially from a 9.0% price increase
effective July 1, 2004, and continued improvement in dosage mix resulting in
higher WAC per prescription."
Ligand estimates that AVINZA retail pharmacy stocking expanded to
approximately 26,000 to 27,000 pharmacies at the end of the second quarter, up
from 24,000 to 25,000 at the end of the first quarter and consistent with the
company's goal to have AVINZA available for patients in 30,000 pharmacies by
year end 2004. "We estimate greater than 135% of AVINZA's second quarter sales
of $23.3 million were covered by prescription demand across all segments, and
new retail pharmacy stocking. This is consistent with IMS NSP estimates of
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second quarter AVINZA demand of $31.5 million. Notwithstanding the price
increase July 1, 2004, we estimate no overall expansion of wholesale and chain
inventory during the quarter, consistent with our annual goal," Maier said.
"Second quarter AVINZA sales were adversely affected by the continued impact of
Medicaid rebates (estimated at $2.6 million, including price increase effect)
resulting from significantly higher Medicaid prescriptions in one state where
AVINZA obtained preferred formulary status. Review of actual advance Medicaid
data available through mid-second quarter for that state indicates that Medicaid
prescriptions as a percent of total prescriptions have ceased to grow, and with
six months of data experience in hand we expect Medicaid rebates will normalize
for the second half of 2004," said Maier. AVINZA sales were also negatively
impacted by increased provision (accruals) of approximately $3.9 million
(including higher actual and expected future product returns) resulting
primarily from development-stage batches with shorter than normal expiry dates
as well as local excess wholesaler inventories in certain sales geographies
where demand and inventories were not well matched," explained Maier. "We expect
that as AVINZA prescriptions continue to increase and given that there are no
more development-stage batches in the wholesale channel, product returns will
normalize to a more predictable level across all geographic territories."
UPDATE ON IN-LINE ONCOLOGY PRODUCTS
"In-line oncology product sales increased 5% compared to prior year and 21%
compared to the first quarter 2004," Maier said. "Demand for ONTAK (as measured
by unit shipments to end users) demonstrated dramatic growth, increasing 37% in
the second quarter 2004, compared to the same period in 2003, with record
shipments in June 2004. ONTAK shipments increased 29% in the first half of 2004
compared to prior year. We expect third and fourth quarter sales of ONTAK to
increasingly reflect the continued strong demand experienced over the past two
quarters as our customers in hospitals and physician offices have adjusted to
the 2004 CMS reimbursement rates."
Distribution Services Agreements (DSAs) or fee-for-service agreements on
ONTAK are in contract-signature stage with several major wholesalers and are
expected to result in a more direct translation of demand to purchases and
improved average prices for the second half of 2004. Similar agreements are in
negotiations and are expected to be in place on Ligand's other products during
third quarter providing similar improvements for AVINZA and Targretin capsules
and gel.
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"Targretin capsule net sales in the U.S. and Europe increased 50% in the
second quarter 2004, compared to prior year. The increase 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 in the second half of 2004," said Maier.
UPDATE ON SPIRIT I AND II FIRST-LINE NSCLC REGISTRATION TRIALS
SPRIRT 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.
Case report form collection in both studies is on schedule, with more than
150,000 forms received and processed. Several Phase I and II studies designed to
support the supplemental NDA submission have been completed. The demographic
profiles of the patient populations in SPIRIT I and II are well balanced between
both arms in each study and also compares well with the patient demographics in
several recent large Phase III registration studies using similar
chemotherapeutic regimens.
Ligand will be presenting an update on progress being made toward
understanding Targretin's mechanism of action in NSCLC and recent data from
Phase II studies at an IASLC/ASCO/ESMO lung cancer conference in Lisbon,
Portugal, September 1-5, 2004.
FINANCIAL OUTLOOK FOR 2004
"We believe Ligand's net product sales will continue to accelerate in 2004,
based on solid end-user demand for our in-line oncology products and full-year
benefit of greatly increased sales and marketing capabilities and investments
behind AVINZA," Maier said. "We continue to believe 2004 will be the transition
year to a high growth, profitable biopharmaceutical business with tremendous
strength of product assets to drive that growth going forward."
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For the year, Ligand updates its previous guidance, expecting:
o Total revenues between $235 and $255 million.
o Net product sales between $195 and $210 million, with AVINZA product sales
approximately two-thirds. AVINZA weekly retail Rx market share exiting 2004
between 6-7%. Gross margin on overall product sales estimated at 79-80%.
o Slower growth in expenses with total operating expenses between $170 and
$184 million (excluding cost of products sold but including co-promotion
expenses).
o Full year operating income between $20 and $24 million.
o Basic EPS of $.12 to $.17 per share, with trend toward mid-range.
"We believe that our financial goals for the year can be achieved through
reasonable expense discipline, continued strong product sales growth and
improved other revenue offsetting AVINZA higher rebates/returns and remain
focused on achieving those goals for 2004," Maier said.
RECENT LIGAND HIGHLIGHTS
o LIGAND EARNS $1.0 MILLION MILESTONE PAYMENT AS TAP DECLARES A SECOND SARM
CLINICAL CANDIDATE. TAP selected an additional selective androgen receptor
modulator (SARM) clinical candidate for development for the treatment of
major androgen-related diseases. The first clinical candidate, LGD122941
continues toward IND filing.
o LIGAND UPDATES NAVEGLITAZAR DEVELOPMENT PLAN FOLLOWING POSITIVE PHASE II
DATA PRESENTATION AT ADA MEETING AND NEW FDA GUIDANCE FOR PPAR DRUG
DEVELOPMENT. Naveglitazar (formerly LY519818) Phase II data presented at
the annual ADA meeting demonstrated positive efficacy and tolerance.
Naveglitazar is a novel, potent, oral once-daily peroxisome
proliferators-activated receptor (PPAR) modulator. New FDA divisional
guidance will delay naveglitazar development plans 18-24 months until
two-year rodent toxicity is completed and reviewed by the agency.
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o LIGAND'S TARGRETIN IS INCLUDED ON CMS LIST OF NEWLY COVERED MEDICARE
PRODUCTS UNDER SECTION 641. The CMS recently-announced implementation of
Section 641 demonstration program includes reimbursement under Medicare for
Targretin capsules and gel for patients with CTCL.
o LIGAND EARNS $1.0 MILLION MILESTONE PAYMENT AS GLAXOSMITHKLINE ADVANCES
DEVELOPMENT OF GW501516. GSK is continuing Phase II development of
GW501516, a novel PPAR modulator for the treatment of dyslipidemias.
o LIGAND AND INVESTIGATORS PRESENT EXCITING SCIENTIFIC AND CLINICAL DATA
UPDATES FOR ONCOLOGY PRODUCTS TARGRETIN AND ONTAK AT ASCO MEETING. Several
clinical trials and IN VITRO studies were presented at the annual meeting
of the American Society of Clinical Oncology (ASCO). New evidence of
synergy between Targretin and EGF receptor inhibitors was demonstrated on
human non-small cell lung cancer lines. Improved event-free survival was
indicated with Targretin in combination with chemotherapy in a Phase II
study.
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 August 3, 2004, at 8:30 a.m. Eastern
time (5:30 a.m. Pacific), and will be archived for 30 days.
ABOUT LIGAND
Ligand discovers, develops and markets new drugs that address critical
unmet medical needs of patients in the areas of cancer, pain, skin diseases,
men's and women's hormone-related diseases, osteoporosis, metabolic disorders,
and cardiovascular and inflammatory diseases. Ligand's proprietary drug
discovery and development programs are based on its leadership position in gene
transcription technology, primarily related to Intracellular Receptors (IRs) and
Signal Transducers and Activators of Transcription (STATs). For more
information, go to WWW.LIGAND.COM.
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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 the outlook and
guidance for future financial performance; demand, sales and revenue growth;
forward planning; loss from operations; profitability; AVINZA acceleration,
market share, sales, sales calls, prescription trends, and rebates; ONTAK
demand, completion of agreements; improved patient access; clinical trial plans
and timetables. 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 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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------------ -----------------------------------
2004 2003 2004 2003
---------------- --------------- ----------------- ----------------
REVENUES:
Product sales $ 37,485 $ 25,187 $ 71,621 $ 44,115
Collaborative research and development
and other revenues 2,975 3,939 5,451 8,135
---------------- --------------- ----------------- ----------------
Total revenues 40,460 29,126 77,072 52,250
---------------- --------------- ----------------- ----------------
OPERATING COSTS AND EXPENSES:
Cost of products sold 9,926 7,766 18,749 14,386
Research and development 18,174 16,859 35,026 33,499
Selling, general and administrative 16,625 13,571 31,097 25,998
Co-promotion 7,000 -- 13,731 --
---------------- --------------- ----------------- ----------------
Total operating costs and expenses 51,725 38,196 98,603 73,883
---------------- --------------- ----------------- ----------------
Loss from operations (11,265) (9,070) (21,531) (21,633)
Other expense, net (2,951) (2,927) (5,824) (10,684)
---------------- --------------- ----------------- ----------------
Net loss $ (14,216) $ (11,997) $ (27,355) $ (32,317)
================ =============== ================= ================
BASIC AND DILUTED PER SHARE AMOUNTS:
Net loss $ (0.19) $ (0.17) $ (0.37) $ (0.46)
================ =============== ================= ================
Weighted average number of common shares outstanding 73,754,146 69,275,323 73,528,581 69,754,200
================ =============== ================= ================
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LIGAND PHARMACEUTICALS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
JUNE 30, 2004 DECEMBER 31, 2003
----------------------- -----------------------
ASSETS
Current assets:
Cash, cash equivalents and short-term investments $ 85,878 $ 99,034
($4,623 and $9,204 restricted at June 30,
2004 and December 31, 2003, respectively)
Other current assets 32,933 31,123
----------------------- -----------------------
Total current assets 118,811 130,157
Restricted investments 1,656 1,656
Property and equipment, net 23,910 23,501
Acquired technology and product rights, net 132,520 137,857
Other assets 8,420 8,084
----------------------- -----------------------
$ 285,317 $ 301,255
======================= =======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 61,470 $ 54,049
Long-term debt 167,256 167,408
Other long-term liabilities 8,592 9,070
Stockholders' equity 47,999 70,728
----------------------- -----------------------
$ 285,317 $ 301,255
======================= =======================
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