On August 3, 2020 Ligand Pharmaceuticals Incorporated (NASDAQ: LGND) reported financial results for the three and six months ending June 30, 2020 and provided an operating forecast and program updates (Press release, Ligand, AUG 3, 2020, View Source [SID1234562684]). Ligand management will host a conference call with slides today beginning at 8:30 a.m. Eastern time to discuss this announcement and answer questions.

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"Outstanding second quarter financial results and operating execution have laid the foundation for our strong outlook for the rest of 2020 and beyond. We are exceeding our plans and expectations across the board, despite the challenges created by the pandemic. Our role in supporting treatments for COVID-19 includes numerous OmniAb, Captisol and Vernalis-based product candidates. In particular, sales of Captisol to partners advancing remdesivir for the treatment of COVID-19 are driving upside to the business, and we expect Captisol demand to increase significantly over the next couple of years," said John Higgins, Chief Executive Officer of Ligand. "Given our outlook for Captisol, in early June we announced to all of our customers Ligand’s plans to deploy up to $60 million over the next year to increase our annual production capacity more than eight-fold."

Higgins continued, "Our partnered product portfolio continues to grow and advance toward major late-stage milestones marked in particular by successes with OmniAb, Ligand’s industry-leading antibody discovery platform. We now have more than 80 OmniAb-related partnered programs, representing over 40% of our pipeline and an active news flow of late-stage and regulatory events. We continue to be very active with new technology licensing, we closed the acquisition of our new ion-channel discovery unit, and we expanded the collaboration with Roche for CNS-related targets. Lastly, revenue performed well across all segments, and going forward we expect continued growth in our royalty revenue due to commercial expansion, increased use based on new clinical data and potential new product launches. With our high-quality portfolio of partnered programs and a strong balance sheet, Ligand looks to future growth with confidence and optimism. We anticipate hosting a major investor update and business outlook through a Virtual Analyst Day in the next few months."

Second Quarter 2020 Financial Results

Total revenues for the second quarter of 2020 were $41.4 million, compared with $25.0 million for the same period in 2019. Royalties for the second quarter of 2020 were $7.2 million, compared with $6.6 million for the same period in 2019. Royalties for the second quarter of 2020 and 2019 primarily consisted of royalties from Kyprolis and EVOMELA. Captisol sales were $24.5 million for the second quarter of 2020, compared with $8.5 million for the same period in 2019, primarily reflecting higher sales of Captisol for use with remdesivir. Service revenue was $4.6 million for both the second quarter of 2020 and 2019. Contract revenue was $5.2 million for the second quarter of 2020, compared with $5.3 million for the same period in 2019.

Cost of goods sold was $7.6 million for the second quarter of 2020, compared with $2.4 million for the same period in 2019, with the increase primarily attributable to higher sales of Captisol. Amortization of intangibles was $3.9 million for the second quarter of 2020, compared with $3.5 million for the same period in 2019, with the increase attributable to the Icagen acquisition in April 2020. Research and development expense was $12.7 million for the second quarter of 2020, compared with $12.2 million for the same period of 2019, with the increase primarily attributable to the Icagen acquisition in April 2020. General and administrative expense was $10.1 million for the second quarter of 2020, compared with $11.0 million for the same period in 2019, with the decrease primarily attributable to lower legal and travel expenses.

Net income for the second quarter of 2020 was $22.1 million, or $1.32 per diluted share, compared with net loss of $(14.4) million, or $(0.74) per share, for the same period in 2019. Net income for the second quarter of 2020 included a $23.5 million net non-cash gain from the value of Ligand’s short-term investments, while net loss for the second quarter of 2019 included a $(15.1) million net non-cash loss from the value of Ligand’s short-term investments. Adjusted net income for the second quarter of 2020 was $16.7 million, or $1.00 per diluted share, compared with $13.9 million, or $0.68 per diluted share, for the same period in 2019. Please see the table below for a reconciliation of net income/(loss) to adjusted net income.

As of June 30, 2020, Ligand had cash, cash equivalents and short-term investments of $810 million.

Year-to-Date Financial Results

Total revenues for the six months ended June 30, 2020 were $74.6 million, compared with $68.5 million for the same period in 2019. Royalties for the six months ended June 30, 2020 were $13.7 million and primarily consisted of royalties from Kyprolis and EVOMELA. Royalties for the six months ended June 30, 2019 were $26.2 million and included $14.2 million in royalties from Promacta; Ligand sold its Promacta license to Royalty Pharma as of March 6, 2019. Captisol sales were $45.6 million for the six months ended June 30, 2020, compared with $17.5 million for the same period in 2019. Service revenue was $7.9 million for the six months ended June 30, 2020, compared with $8.4 million for the same period in 2019. Contract revenue was $7.3 million for the six months ended June 30, 2020, compared with $16.4 million for the same period in 2019, with the change driven by the timing of partner events.

Cost of goods sold was $12.3 million for the six months ended June 30, 2020, compared with $6.3 million for the same period in 2019, with the increase primarily attributable to higher sales of Captisol. Amortization of intangibles for the six months ended June 30, 2020 was $7.4 million, compared with $7.0 million for the same period in 2019, with the increase attributable to the Icagen acquisition. Research and development expense was $24.6 million for the six months ended June 30, 2020, compared with $23.5 million for the same period of 2019, with the increase primarily attributable to the Icagen acquisition. General and administrative expense was $19.3 million for the six months ended June 30, 2020, compared with $22.1 million for the same period in 2019, with the decrease primarily attributable to lower legal and travel expenses during the first half of 2020, and higher acquisition and integration costs associated with Vernalis during the same period last year.

Net loss for the six months ended June 30, 2020 was $(2.0) million, or $(0.13) per share, compared with net income of $651.9 million, or $31.34 per diluted share, for the same period in 2019. Net loss for the six months ended June 30, 2020 included a net non-cash loss in the value of Ligand’s short-term investments of $(6.2) million, while net income for the same period in 2019 was impacted by an after-tax gain of approximately $640 million on the sale of the Promacta license. Adjusted net income for the six months ended June 30, 2020 was $31.9 million, or $1.89 per diluted share, compared with $38.6 million, or $1.86 per diluted share, for the same period in 2019. Please see the table below for a reconciliation of net income/(loss) to adjusted net income.

2020 Financial Guidance

Ligand is raising its 2020 financial guidance. Ligand now expects 2020 total revenues to be approximately $165 million and adjusted diluted EPS to be $4.10, up from previous guidance for total revenues of approximately $140 million and adjusted diluted EPS of $3.65.

Second Quarter 2020 and Recent Business Highlights

Captisol Business Updates

Ligand’s Captisol business unit achieved its highest quarterly sales ever in the second quarter of 2020 and shipped Captisol to over 40 partners for R&D and commercial use during the quarter. Ligand’s Captisol network is currently served by cGMP manufacturing plants in two European countries and five distribution facilities around the globe, all of which have remained fully operational during the COVID-19 pandemic. Anticipating substantial continued demand for Captisol, Ligand announced to its customers in June that it is investing up to $60 million to significantly expand annual manufacturing capacity for Captisol. In recent years annual production capacity has been approximately 60 metric tons (MT). The currently planned and in-process investments are projected to increase Ligand’s annual Captisol production capacity to approximately 500 MT and expand sites for the final manufacturing step to additional geographies including the United States.

Gilead Sciences is an important Ligand partner given the need for Captisol to solubilize remdesivir (Veklury), an anti-viral agent made available as the first new treatment for severe COVID-19 in the U.S. under an Emergency Use Authorization granted on May 1st. The drug has now been authorized or approved for use in numerous countries around the world. Gilead announced the formation of a consortium of generic pharmaceutical companies to manufacture remdesivir for the developing world. Ligand has supplied, established initial agreements or is in supply discussions with those companies, and is prepared to meet the Captisol needs of all companies manufacturing remdesivir.

As Ligand ramps up production of Captisol, it has made the decision to conduct a pivotal trial for Captisol-enabled Iohexol (CE-Iohexol) that Ligand believes could serve as the basis for potential registration of the product candidate. CE-Iohexol is an iodine-based contrast agent for hospital-based imaging procedures. Ligand has the operating and financial resources to advance this program and expects to initiate the trial by the end of this year. The market for iodinated contrast agents is substantial, with approximately 20 million imaging procedures per year in the U.S., representing an estimated $1.5 billion in sales. The objective of the CE-Iohexol clinical trial will be to demonstrate a reduction in the incidence of contrast-induced acute kidney injury and an equivalent image quality compared to GE’s Omnipaque.

OmniAb Platform Updates

OmniAb is Ligand’s three species antibody platform for the discovery of mono- and bi-specific therapeutic human antibodies. As of the second quarter of 2020, there were more than 80 OmniAb-related Shots on Goal in our partnered portfolio, representing over 40% of our pipeline. OmniAb users have filed or been issued more than 35 U.S. and international patents or patent applications claiming OmniAb-derived antibodies as the primary invention, including Merck KGaA, Genmab, Janssen, Roche, Celgene and others. There are 47 active or recently completed clinical trials that include an OmniAb-derived antibody, including a number of new clinical trial starts in the first half of 2020 at all phases of development.

Multiple partners reported clinical or regulatory progression of OmniAb-derived antibodies in the second quarter including Immunovant, CStone Pharmaceuticals, Arcus Biosciences, Harbour BioMed and Gloria Biosciences, which submitted a marketing application for OmniAb-derived zimberelimab. At the ASCO (Free ASCO Whitepaper) annual meeting in June, clinical data from OmniAb programs were highlighted by Genentech, Janssen and Gloria. Additionally, three Ligand partners (Takeda, Immunoprecise and Aldevron) are currently pursuing development of therapeutic antibodies that were discovered with OmniAb for the treatment of COVID-19. Ligand continues to innovate and invest in the OmniAb platform with internal R&D efforts, academic collaborations and through corporate acquisitions.

Other Business Updates

Ligand completed its acquisition of the core assets of Icagen’s North Carolina operations, adding two significant partnered programs – one each with Roche and the Cystic Fibrosis Foundation – proprietary ion channel screening and assay platforms, x-ray fluorescence capabilities, custom screening technologies and six preclinical internal programs. In addition, following the completion of the transaction Ligand expanded its collaboration with Roche, adding a second major partnered program to the collaboration. Also during the quarter, Vernalis expanded its oncology research collaboration with Servier to jointly identify and enable new therapeutic targets, extending to a new three-year research collaboration.

Several partners also had significant regulatory, financing and business updates during the second quarter including Verona Pharma confirming with the FDA its Phase 3 plans for its nebulized ensifentrine.

Ligand provides regular updates on individual partner events through its Twitter account, @Ligand_LGND.

Adjusted Financial Measures

The Company reports adjusted net income and adjusted net income per diluted share in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. The Company’s financial measures under GAAP include share-based compensation expense, amortization of debt-related costs, amortization related to acquisitions and intangible assets, changes in contingent liabilities, mark-to-market adjustments for amounts relating to its equity investments in public companies, excess tax benefit from share-based compensation, gain on the sale of Promacta and others that are listed in the itemized reconciliations between GAAP and adjusted financial measures included at the end of this press release. However, other than with respect to total revenues, the Company only provides financial guidance on an adjusted basis and does not provide reconciliations of such forward-looking adjusted measures to GAAP due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation, including adjustments that could be made for changes in contingent liabilities, changes in the market value of its investments in public companies, stock-based compensation expense and effects of any discrete income tax items. Management has excluded the effects of these items in its adjusted measures to assist investors in analyzing and assessing the Company’s past and future core operating performance. Additionally, adjusted earnings per diluted share is a key component of the financial metrics utilized by the Company’s board of directors to measure, in part, management’s performance and determine significant elements of management’s compensation.

Conference Call

Ligand management will host a conference call with slides today beginning at 8:30 a.m. Eastern time (5:30 a.m. Pacific time) to discuss this announcement and answer questions. To participate via telephone, please dial (833) 325-0071 from the U.S. or (720) 405-1612 from outside the U.S., using the conference ID 1697855. To participate via live or replay webcast, a link is available at www.ligand.com. Slides to accompany the conference call are available here.