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Ligand Pharmaceuticals Inc. Reports Operating Results (10-Q)

November 09, 2009 | About:
10qk

10qk

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Ligand Pharmaceuticals Inc. (LGND) filed Quarterly Report for the period ended 2009-09-30.

Ligand Pharmaceuticals Incorporated 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. Ligand Pharmaceuticals Inc. has a market cap of $226.01 million; its shares were traded at around $2 with and P/S ratio of 8.27.

Highlight of Business Operations:

Total revenues for the three and nine months ended September 30, 2009 were $7.9 million and $25.0 million, respectively, compared to $5.2 million and $14.9 million for the same 2008 periods. We reported income from continuing operations of $1.1 million and a loss from continuing operations of $10.9 million for the three and nine months ended September 30, 2009, respectively, compared to losses from continuing operations of $9.1 million and $23.7 million for the same 2008 periods.

General and administrative expenses were $2.4 million and $12.2 million for the three and nine months ended September 30, 2009, respectively, compared to $5.9 million and $20.6 million for the same periods in 2008. The decrease of $3.5 million for the three months ended September 30, 2009, compared to the same period in 2008, is primarily due to $2.9 million of reduced legal expenses as settlements were reached with Rockefeller University and the Securities and Exchange Commission (SEC) in the first quarter of 2009 and $0.8 million of lower headcount costs as a result of staff reductions. The decrease of $8.4 million for the nine months ended September 30, 2009, compared to the same period in 2008, is primarily due to $4.1 million of expenses incurred during the first quarter of 2008 as a result of exiting a facility, reduced legal expenses of $4.0 million, lower headcount costs of $1.0 million and $0.8 million of costs associated with asset disposals in the third quarter of 2008. These decreases were partially offset by $1.9 million of costs associated with operating our New Jersey facility incurred as a result of our acquisition of Pharmacopeia in December 2008.

In August 2009, we entered into a lease termination agreement for our corporate facility in San Diego. Under the terms of the agreement, we will pay a termination fee of $14.3 million as follows: $4.5 million was paid upon signing, $4.5 million in July 2010 and $5.3 million in April 2011. As a result, during the third quarter of 2009, we recorded lease termination costs of $15.2 million, which includes the net present value of the lease termination payments of $14.3 million and $0.9 million of other costs associated with the lease termination.

On November 9, 2006, we sold real property located in San Diego, California for a sale price of $47.6 million. This property includes our corporate headquarter building totaling approximately 82,500 square feet, the land on which the building is situated, and two adjacent vacant lots. As part of the sale transaction, we agreed to leaseback the building for a period of 15 years. We recognized an immediate pre-tax gain on the sale transaction of $3.1 million and deferred a gain of $29.5 million on the sale of the building. The deferred gain was being recognized on a straight-line basis over the 15 year term of the lease at a rate of approximately $2.0 million per year. In August 2009, we entered into a lease termination agreement for this building. As a result, we recognized $20.4 million of accretion of deferred gain during the quarter ended September 30, 2009, and will recognize the remaining balance of the deferred gain through the term of our new building lease, which expires in December 2011. The amount of the deferred gain recognized for the three and nine months ended September 30, 2009 was $20.4 million and $21.4 million, respectively, compared to $0.5 million and $1.0 million, respectively, for the same periods in 2008.

The use of cash for the nine months ended September 30, 2009 reflects a net loss of $5.0 million, adjusted by $5.9 million of gain from discontinued operations and $15.3 million of non-cash items to reconcile the net income to net cash used in operations. These reconciling items primarily reflect the accretion of deferred gain on the sale leaseback of the building of $21.4 million and non-cash development milestones of $0.9 million, partially offset by the recognition of $2.4 million of stock-based compensation expense, depreciation of assets of $2.4 million, realized loss on investment of $0.1 million, non-cash lease costs of $0.3 million, write-off of acquired in-process research and development of $0.4 million and the amortization of acquired intangible assets of $1.5 million. The use of cash during the nine months ended September 30, 2009 is further impacted by changes in operating assets and liabilities due primarily to decreases in accounts payable and accrued liabilities of $0.4 million, a decrease in accrued litigation settlement costs of $7.5 million, an increase in accounts receivable, net of $2.1 million and a decrease in deferred revenue of $7.0 million partially offset by the release of our $10.1 million restricted indemnity account as a result of the completion of the SEC investigation and a further decrease in other current and long term assets of $0.6 million and an increase in other liabilities of $3.4 million. Net cash used in operating activities of discontinued operations was $3.3 million for the nine months ended September 30, 2009.

The use of cash for the nine months ended September 30, 2008 reflects a net loss of $28.5 million, adjusted by $4.8 million of gain from discontinued operations and $9.3 million of non-cash items to reconcile the net loss to net cash used in operations. These reconciling items primarily reflect the recognition of $2.8 million of stock-based compensation expense, depreciation of assets of $0.8 million, realized loss on investment of $1.4 million, non-cash lease costs of $5.0 million and the write-off of assets of $0.8 million, partially offset by the accretion of deferred gain on the sale leaseback of the building of $1.5 million. The use of cash during the nine months ended September 30, 2008 is further impacted by changes in operating assets and liabilities due primarily to decreases in accounts payable and accrued liabilities of $13.2 million and other liabilities of $0.6 million, partially offset by decreases in other current assets of $1.0 million. Net cash used in operating activities of discontinued operations was $3.3 million for the nine months ended September 30, 2008.

Read the The complete ReportLGND is in the portfolios of Daniel Loeb of Third Point, LLC.

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