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Ligand Pharmaceuticals: Ligand Reports Third Quarter 2015 Financial Results

The following excerpt is from the company's SEC filing.

SAN DIEGO (November 9, 2015) - Ligand Pharmaceuticals Incorporated (NASDAQ: LGND)

today reported financial results for the three and nine months ended September 30, 2015, and provided an operating forecast and program updates.

Financial highlights for the third quarter of 2015 include:

Total revenues were $17.7 million and royalty revenues were $9.8 million, an increase of 18% and 30%, respectively, compared with the third quarter of 2014.

Adjusted EPS was $0.56 and GAAP EPS was $10.46.

Cash flow from operations was $10.4 million, a significant increase over $3.7 million of operating cash flow generated in the third quarter of 2014.

The majority of the valuation allowance for our net operating loss carryforwards was released, creating a net income tax benefit that increased GAAP net income by $217.3 million.

A description of adjusted calculations and reconciliation to comparable GAAP financial measures is provided in the accompanying table titled “Adjusted Financial Measures.”

“Our third quarter financial results feature continued strong gains in royalty revenues, earnings and operating cash flow. Novartis and Amgen are doing an outstanding job with managing Promacta

and Kyprolis

, respectively, including expanding into new indications and patient populations and entering new geographies,” said John Higgins, Chief Executive Officer of Ligand. “Given our continued sustained profitability and financial outlook, this quarter we released our valuation allowance, which is the recognition in our financial statements of our significant accumulated tax assets. This tax asset is now reflected in our balance sheet, and we project continuing to have effective cash tax rates below 5% for the next few years. We are proud of the regular flow of positive news and developments with our partnered programs and further expansion of our portfolio of license agreements. We look forward to discussing our business in more detail at our analyst day later this month.”

Third Quarter 2015 Financial Results

Total revenues for the third quarter of 2015 were $17.7 million, compared with $15.0 million for the same period in 2014. Royalty revenues increased 30% to $9.8 million from $7.5 million for the same period in 2014 primarily due to higher royalties from Promacta and Kyprolis. Material sales were $6.0 million compared with $6.3 million for the same period in 2014 due to timing of Captisol

purchases for use in clinical trials and commercial products. Collaborative and other revenues were $1.9 million compared with $1.2 million for the same period in 2014 due primarily to the timing of milestones and upfront fees earned.

Cost of goods sold was $1.3 million for the third quarter of 2015 compared with $1.5 million for the same period in 2014 due to the mix of Captisol sales and slightly lower cost of goods sold overall. Research and development expenses were $2.5 million compared with $3.0 million for the same period of 2014 as a result of timing of spending on internal development programs. General and administrative expenses for the third quarter of 2015 were $5.0 million compared with $6.7 million for the same period in 2014 due to costs associated with lower business development activities and lower non-cash stock-based compensation expense.

Net income for the third quarter of 2015 was $224.5 million, or $10.46 per diluted share, compared with net income for the third quarter of 2014 of $1.3 million, or $0.06 per diluted share. The increase is primarily attributable to a net income tax benefit of $217.3 million, or $10.12 per diluted share, from the release of valuation allowance (see Release of Valuation Allowance below). Adjusted net income for the third quarter of 2015 was $12.0 million, or $0.56 per diluted share, compared with adjusted net income for the third quarter of 2014 of $7.6 million, or $0.36 per diluted share.

As of September 30, 2015, Ligand had cash, cash equivalents and short-term and restricted investments of $187.9 million.

Year-to-Date Financial Results

Total revenues for the nine months ended September 30, 2015 increased 22% to $50.7 million compared with $41.5 million for the same period in 2014. Royalty revenues increased 30% to $26.6 million from $20.6 million for the same period in 2014 primarily due to higher royalties from Promacta and Kyprolis. Material sales increased to $20.5 million from $15.5 million for the same period of 2014 due to increased customer purchases of Captisol for use in clinical trials and commercial products. Collaborative research and development and other revenues were $3.6 million compared with $5.4 million for the same period in 2014 primarily due to timing of upfront fees and milestone payments.

Cost of goods sold was $4.9 million for the first nine months of 2015 compared with $5.1 million for the same period in 2014 due to the mix of Captisol sales and slightly lower cost of goods sold overall. Research and development expenses for the first nine months of 2015 were $10.5 million compared with $8.8 million for the same period in 2014 due to spending on internal development programs and non-cash stock-based compensation expense. General and administrative expenses for the first nine months of 2015 were $18.2 million compared with $17.1 million for the same period of 2014 due to costs associated with business development activities and non-cash stock-based compensation expense.

Net income for the first nine months of 2015 was $248.9 million, or $11.78 per diluted share, compared with net income for the first nine months of 2014 of $5.0 million, or $0.23 per diluted share. The increase is primarily attributable to a net income tax benefit of $217.3 million, or $10.29 per diluted share, from the release of valuation allowance (see Release of Valuation Allowance below). Adjusted net income for the first nine months of 2015 was $57.3 million, or $2.71 per diluted share, compared with adjusted net income of $20.1 million, or $0.93 per diluted share, for the same period of 2014.

Ligand has accumulated a usable portfolio of net operating loss carryforwards (NOLs) and other tax assets of more than $700 million, through a combination of operations and acquisitions. Through the interim financial statements dated June 30, 2015, Ligand has maintained a valuation allowance offsetting the entire balance of the NOLs due to the uncertainty of future use prior to expiration. After an analysis of our recent history of cumulative earnings and forecasted future taxable income, we have determined it is more likely than not that we will utilize substantially all of the NOL balance prior to expiration and therefore are releasing substantially all of the valuation allowance effective September 30, 2015. The net income tax benefit from valuation allowance release increased our GAAP net income by $217.3 million or $10.12 per diluted share for the third quarter of 2015 and $10.29 per diluted share for the first nine

months of 2015. $217.3 million is the estimated tax benefit Ligand will have by utilizing its more than $700 million of NOLs.

Full-Year and Fourth Quarter 2015 Financial Forecast

Ligand is adjusting full-year 2015 guidance primarily to reflect an expected delay in the timing of receipt of the $6 million milestone payment due from Spectrum Pharmaceuticals upon FDA approval of EVOMELA. Spectrum recently received a Complete Response Letter from the FDA requiring additional information regarding its contract manufacturers. As such, Ligand expects that milestone to be earned...


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