x
|
Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
|
o
|
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
Delaware
|
77-0160744
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification No.)
|
|
|
3911 Sorrento Valley Boulevard, Suite 110
San Diego, CA
|
92121
(Zip Code)
|
(Address of principal executive offices)
|
|
Large Accelerated Filer
|
x
|
|
Accelerated Filer
|
o
|
Non-Accelerated Filer
|
o
|
(Do not check if a smaller reporting company)
|
Smaller Reporting Company
|
o
|
•
|
Decrease in deferred tax assets by
$27.5 million
as of June, 30 2016 and December 31, 2015
|
•
|
Increase in accumulated deficit by
$27.5 million
as of June 30, 2016 and December 31, 2015
|
•
|
Increase to current 2019 convertible senior notes, net and decrease to non-current 2019 convertible senior notes, net by $202.0 million as of December 31, 2015
|
•
|
Increase to temporary equity component of currently redeemable convertible notes and a decrease to additional paid-in capital by $39.6 million as of December 31, 2015
|
PART I. FINANCIAL INFORMATION
|
|
|
|
||
|
Condensed Consolidated Balance Sheets as of March 31, 2016 (restated) and December 31, 2015 (Unaudited)
|
|
|
||
|
||
|
||
|
||
|
||
|
||
|
||
PART II. OTHER INFORMATION
|
|
|
|
||
|
||
|
||
|
GLOSSARY OF TERMS AND ABBREVIATIONS
|
|
Abbreviation
|
Definition
|
2019 Convertible Senior Notes
|
$245.0 million aggregate principal amount of convertible senior unsecured notes due 2019
|
Amgen
|
Amgen, Inc.
|
AOCI
|
Accumulated Other Comprehensive Income
|
ASC
|
Accounting Standards Codification
|
ASU
|
Accounting Standards Update
|
Company
|
Ligand Pharmaceuticals Incorporated, including subsidiaries
|
CorMatrix
|
CorMatrix Cardiovascular, Inc.
|
CVR
|
Contingent value right
|
CyDex
|
CyDex Pharmaceuticals, Inc.
|
Amended ESPP
|
Employee Stock Purchase Plan, as amended and restated
|
Eisai
|
Eisai Incorporated
|
EMA
|
European Medicines Agency
|
FASB
|
Financial Accounting Standards Board
|
FDA
|
Food and Drug Administration
|
FSGS
|
Focal segmental glomerulosclerosis
|
GAAP
|
Generally accepted accounting principles in the United States
|
IPO
|
Initial public offering
|
IPR&D
|
In-Process Research and Development
|
Ligand
|
Ligand Pharmaceuticals Incorporated, including subsidiaries
|
LSA
|
Loan and Security Agreement
|
Metabasis
|
Metabasis Therapeutics, Inc.
|
MLA
|
Master License Agreement
|
NOLs
|
Net Operating Losses
|
OMT
|
OMT, Inc. or Open Monoclonal Technology, Inc.
|
Par
|
Par Pharmaceutical, Inc.
|
Pfizer
|
Pfizer Inc.
|
Retrophin
|
Retrophin Inc.
|
SEC
|
Securities and Exchange Commission
|
Selexis
|
Selexis, SA
|
TPE
|
Third-party evidence
|
VIE
|
Variable interest entity
|
Viking
|
Viking Therapeutics
|
Viking IPO
|
Viking's initial public offering
|
VSOE
|
Vendor-specific objective evidence
|
PART I.
|
FINANCIAL INFORMATION
|
ITEM 1.
|
FINANCIAL STATEMENTS
|
|
March 31, 2016
|
|
December 31, 2015
|
||||
|
(unaudited)
(restated)
|
|
(a)
(restated)
|
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
31,293
|
|
|
$
|
97,428
|
|
Short-term investments
|
81,908
|
|
|
102,791
|
|
||
Accounts receivable
|
11,779
|
|
|
6,170
|
|
||
Note receivable from Viking Therapeutics
|
4,767
|
|
|
4,782
|
|
||
Inventory
|
1,750
|
|
|
1,633
|
|
||
Other current assets
|
1,562
|
|
|
1,908
|
|
||
Total current assets
|
133,059
|
|
|
214,712
|
|
||
Deferred income taxes
|
129,777
|
|
|
189,083
|
|
||
Investment in Viking Therapeutics
|
28,118
|
|
|
29,728
|
|
||
Intangible assets, net
|
212,823
|
|
|
48,347
|
|
||
Goodwill
|
72,997
|
|
|
12,238
|
|
||
Commercial license rights
|
8,546
|
|
|
8,554
|
|
||
Property and equipment, net
|
567
|
|
|
372
|
|
||
Other assets
|
70
|
|
|
27
|
|
||
Total assets
|
$
|
585,957
|
|
|
$
|
503,061
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
2,688
|
|
|
$
|
4,083
|
|
Accrued liabilities
|
3,669
|
|
|
5,397
|
|
||
Current contingent liabilities
|
5,285
|
|
|
10,414
|
|
||
Current lease exit obligations
|
577
|
|
|
934
|
|
||
2019 convertible senior notes, net
|
—
|
|
|
201,985
|
|
||
Other current liabilities
|
21
|
|
|
8
|
|
||
Total current liabilities
|
12,240
|
|
|
222,821
|
|
||
Long-term debt, net
|
204,653
|
|
|
—
|
|
||
Long-term contingent liabilities
|
4,022
|
|
|
3,033
|
|
||
Other long-term liabilities
|
446
|
|
|
297
|
|
||
Total liabilities
|
221,361
|
|
|
226,151
|
|
||
Commitments and Contingencies
|
|
|
|
||||
Equity component of currently redeemable convertible notes (Note 6)
|
—
|
|
|
39,628
|
|
||
Stockholders' equity:
|
|
|
|
||||
Common stock, $0.001 par value; 33,333,333 shares authorized; 20,815,636 and 19,949,012 shares issued and outstanding at March 31, 2016 and December 31, 2015, respectively
|
21
|
|
|
20
|
|
||
Additional paid-in capital
|
783,890
|
|
|
661,850
|
|
||
Accumulated other comprehensive income
|
3,568
|
|
|
4,903
|
|
||
Accumulated deficit
|
(422,883
|
)
|
|
(429,491
|
)
|
||
Total stockholders' equity attributable to Ligand Pharmaceuticals
|
364,596
|
|
|
237,282
|
|
||
Total liabilities and stockholders' equity
|
$
|
585,957
|
|
|
$
|
503,061
|
|
(a) See restatement discussion in footnote 1
|
|
|
|
|
Three months ended
|
||||||
|
March 31,
|
||||||
|
2016
|
|
2015
|
||||
Revenues:
|
|
|
|
||||
Royalties
|
$
|
14,390
|
|
|
$
|
10,287
|
|
Material sales
|
5,341
|
|
|
3,729
|
|
||
License fees, milestones and other revenues
|
9,917
|
|
|
586
|
|
||
Total revenues
|
29,648
|
|
|
14,602
|
|
||
Operating costs and expenses:
|
|
|
|
||||
Cost of sales
(1)
|
955
|
|
|
1,074
|
|
||
Amortization of intangibles
|
2,524
|
|
|
594
|
|
||
Research and development
|
4,004
|
|
|
3,368
|
|
||
General and administrative
|
6,825
|
|
|
5,994
|
|
||
Lease exit and termination costs
|
244
|
|
|
223
|
|
||
Total operating costs and expenses
|
14,552
|
|
|
11,253
|
|
||
Income from operations
|
15,096
|
|
|
3,349
|
|
||
Other (expense) income:
|
|
|
|
||||
Interest expense, net
|
(3,005
|
)
|
|
(2,973
|
)
|
||
Increase in contingent liabilities
|
(1,306
|
)
|
|
(3
|
)
|
||
Equity in net losses from Viking Therapeutics
|
(1,605
|
)
|
|
—
|
|
||
Other, net
|
391
|
|
|
(447
|
)
|
||
Total other (expense) income, net
|
(5,525
|
)
|
|
(3,423
|
)
|
||
Income (loss) before income taxes
|
9,571
|
|
|
(74
|
)
|
||
Income tax expense
|
(3,694
|
)
|
|
(15
|
)
|
||
Income (loss) from operations
|
5,877
|
|
|
(89
|
)
|
||
Discontinued operations:
|
|
|
|
||||
Gain on sale of Oncology Product Line before income taxes
|
1,139
|
|
|
—
|
|
||
Income tax expense on discontinued operations
|
(408
|
)
|
|
—
|
|
||
Income from discontinued operations
|
731
|
|
|
—
|
|
||
Net income (loss) including noncontrolling interests:
|
6,608
|
|
|
(89
|
)
|
||
Less: Net loss attributable to noncontrolling interests
|
—
|
|
|
(843
|
)
|
||
Net income
|
$
|
6,608
|
|
|
$
|
754
|
|
Per share amounts attributable to Ligand common shareholders:
|
|
|
|
||||
Basic earnings per share data
|
|
|
|
||||
Income from continuing operations
|
$
|
0.28
|
|
|
$
|
0.04
|
|
Income from discontinued operations
|
0.04
|
|
|
—
|
|
||
Net income
|
$
|
0.32
|
|
|
$
|
0.04
|
|
|
|
|
|
||||
Diluted earnings per share data
(2)
|
|
|
|
|
|
||
Income from continuing operations
|
$
|
0.26
|
|
|
$
|
0.04
|
|
Income from discontinued operations
|
0.03
|
|
|
—
|
|
||
Net income
|
$
|
0.30
|
|
|
$
|
0.04
|
|
|
|
|
|
||||
Shares used for computation (in thousands)
|
|
|
|
||||
Basic
|
20,708
|
|
|
19,612
|
|
||
Diluted
|
22,284
|
|
|
20,631
|
|
|
Three months ended
|
|
||||||
|
March 31,
|
|
||||||
|
2016
|
|
2015
|
|
||||
Net income:
|
$
|
6,608
|
|
|
$
|
754
|
|
|
Unrealized net (loss) gain on available-for-sale securities, net of tax
|
(1,098
|
)
|
|
4,614
|
|
|
||
Less: Reclassification of net realized (gains) losses included in net income, net of tax
|
(236
|
)
|
|
(234
|
)
|
|
||
Comprehensive income (loss)
|
$
|
5,274
|
|
|
$
|
5,134
|
|
|
|
Three months ended
|
||||||
|
March 31,
|
||||||
|
2016
|
|
2015
|
||||
Operating activities
|
|
|
|
||||
Net income (loss) including noncontrolling interests
|
$
|
6,608
|
|
|
$
|
(89
|
)
|
Less: gain from discontinued operations
|
731
|
|
|
—
|
|
||
Income (loss) from continuing operations
|
5,877
|
|
|
(89
|
)
|
||
Adjustments to reconcile net income including noncontrolling interests to net cash provided by operating activities:
|
|
|
|
||||
Non-cash change in estimated fair value of contingent liabilities
|
1,306
|
|
|
3
|
|
||
Realized (gain) loss on sale of short-term investment
|
(406
|
)
|
|
447
|
|
||
Depreciation and amortization
|
2,575
|
|
|
650
|
|
||
Amortization of discount on investments, net
|
320
|
|
|
—
|
|
||
Amortization of debt discount and issuance fees
|
2,668
|
|
|
2,509
|
|
||
Stock-based compensation
|
4,118
|
|
|
2,914
|
|
||
Deferred income taxes
|
4,101
|
|
|
6
|
|
||
Accretion of note payable
|
—
|
|
|
14
|
|
||
Change in fair value of the convertible debt receivable from Viking
|
15
|
|
|
—
|
|
||
Loss on equity investment in Viking Therapeutics, Inc.
|
1,605
|
|
|
—
|
|
||
Other
|
|
|
|
(1
|
)
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
(5,604
|
)
|
|
5,211
|
|
||
Inventory
|
853
|
|
|
(150
|
)
|
||
Other current assets
|
16
|
|
|
445
|
|
||
Other long-term assets
|
(41
|
)
|
|
(291
|
)
|
||
Accounts payable and accrued liabilities
|
(4,302
|
)
|
|
(4,667
|
)
|
||
Restricted investments
|
—
|
|
|
661
|
|
||
Deferred revenue
|
13
|
|
|
(83
|
)
|
||
Net cash provided by operating activities
|
13,114
|
|
|
7,579
|
|
||
Investing activities
|
|
|
|
||||
Payments to CVR holders and other contingency payments
|
(5,446
|
)
|
|
(3,247
|
)
|
||
Purchases of property and equipment
|
(238
|
)
|
|
(10
|
)
|
||
Cash paid for acquisition, net of cash acquired
|
(92,855
|
)
|
|
—
|
|
||
Purchase of short-term investments
|
(49,892
|
)
|
|
—
|
|
||
Proceeds from sale of property and equipment
|
—
|
|
|
1
|
|
||
Proceeds from sale of short-term investments
|
20,270
|
|
|
459
|
|
||
Proceeds from maturity of short-term investments
|
48,401
|
|
|
—
|
|
||
Net cash used in investing activities
|
(79,760
|
)
|
|
(2,797
|
)
|
||
Financing activities
|
|
|
|
||||
Net proceeds from stock option exercises and ESPP
|
1,013
|
|
|
781
|
|
||
Purchase of common stock for RSU vesting
|
(502
|
)
|
|
—
|
|
||
Net cash provided by financing activities
|
511
|
|
|
781
|
|
||
Net (decrease) increase in cash and cash equivalents
|
(66,135
|
)
|
|
5,563
|
|
||
Cash and cash equivalents at beginning of period
|
97,428
|
|
|
160,203
|
|
||
Cash and cash equivalents at end of period
|
$
|
31,293
|
|
|
$
|
165,766
|
|
Supplemental disclosure of cash flow information
|
|
|
|
||||
Interest paid
|
$
|
919
|
|
|
$
|
903
|
|
Taxes paid
|
1
|
|
|
11
|
|
||
Supplemental schedule of non-cash activity
|
|
|
|
||||
Stock issued for acquisition, net of issuance cost
|
(77,615
|
)
|
|
—
|
|
||
Accrued inventory purchases
|
600
|
|
|
2,402
|
|
||
Unrealized gain (loss) on AFS investments
|
(1,834
|
)
|
|
4,614
|
|
|
As of March 31, 2016
|
|||||||||
|
As Reported
|
|
Adjustments
|
|
As Restated
|
|||||
Deferred income taxes
|
$
|
157,258
|
|
|
(27,481
|
)
|
|
$
|
129,777
|
|
Total assets
|
613,438
|
|
|
(27,481
|
)
|
|
585,957
|
|
||
Accumulated deficit
|
(395,402
|
)
|
|
(27,481
|
)
|
|
(422,883
|
)
|
||
Total stockholders' equity
|
392,077
|
|
|
(27,481
|
)
|
|
364,596
|
|
||
Total liabilities and stockholders' equity
|
613,438
|
|
|
(27,481
|
)
|
|
585,957
|
|
|
Three months ended
|
||||||
|
March 31,
|
||||||
|
2016
|
|
2015
|
||||
Net income from continuing operations
|
$
|
5,877
|
|
|
$
|
754
|
|
Net income from discontinued operations
|
731
|
|
|
—
|
|
||
Net income
|
$
|
6,608
|
|
|
$
|
754
|
|
|
|
|
|
||||
Shares used to compute basic income per share
|
20,707,926
|
|
|
19,611,881
|
|
||
Dilutive potential common shares:
|
|
|
|
||||
Restricted stock
|
66,736
|
|
|
61,538
|
|
||
Stock options
|
759,581
|
|
|
957,369
|
|
||
0.75% Convertible Senior Notes, Due 2019
|
749,736
|
|
|
—
|
|
||
Shares used to compute diluted income per share
|
22,283,979
|
|
|
20,630,788
|
|
||
|
|
|
|
||||
Basic per share amounts:
|
|
|
|
||||
Income from continuing operations
|
$
|
0.28
|
|
|
$
|
0.04
|
|
Income from discontinued operations
|
0.04
|
|
|
—
|
|
||
Basic net income per share
|
$
|
0.32
|
|
|
$
|
0.04
|
|
|
|
|
|
||||
Diluted per share amounts:
|
|
|
|
||||
Income from continuing operations
|
$
|
0.26
|
|
|
$
|
0.04
|
|
Income from discontinued operations
|
0.03
|
|
|
—
|
|
||
Diluted net income per share
|
$
|
0.30
|
|
|
$
|
0.04
|
|
|
Amortized cost
|
|
Gross unrealized
gains
|
|
Gross unrealized
losses
|
|
Estimated
fair value
|
||||||||
March 31, 2016
|
|
|
|
|
|
|
|
||||||||
Short-term investments
|
|
|
|
|
|
|
|
|
|||||||
Bank deposits
|
$
|
42,376
|
|
|
$
|
87
|
|
|
$
|
—
|
|
|
$
|
42,463
|
|
Corporate bonds
|
24,268
|
|
|
84
|
|
|
(2
|
)
|
|
24,350
|
|
||||
Commercial paper
|
8,401
|
|
|
2
|
|
|
—
|
|
|
8,403
|
|
||||
Asset backed securities
|
2,067
|
|
|
1
|
|
|
(1
|
)
|
|
2,067
|
|
||||
Corporate equity securities
|
1,811
|
|
|
2,814
|
|
|
—
|
|
|
4,625
|
|
||||
|
$
|
78,923
|
|
|
$
|
2,988
|
|
|
$
|
(3
|
)
|
|
$
|
81,908
|
|
December 31, 2015
|
|
|
|
|
|
|
|
||||||||
Short-term investments
|
|
|
|
|
|
|
|
||||||||
Bank deposits
|
$
|
43,043
|
|
|
$
|
—
|
|
|
$
|
(4
|
)
|
|
$
|
43,039
|
|
Corporate bonds
|
41,238
|
|
|
$
|
—
|
|
|
(35
|
)
|
|
41,203
|
|
|||
Commercial paper
|
1,747
|
|
|
$
|
—
|
|
|
—
|
|
|
1,747
|
|
|||
Asset backed securities
|
10,020
|
|
|
$
|
—
|
|
|
(5
|
)
|
|
10,015
|
|
|||
Corporate equity securities
|
1,843
|
|
|
$
|
4,944
|
|
|
—
|
|
|
6,787
|
|
|||
|
$
|
97,891
|
|
|
$
|
4,944
|
|
|
$
|
(44
|
)
|
|
$
|
102,791
|
|
|
March 31,
|
|
December 31,
|
||||
|
2016
|
|
2015
|
||||
Indefinite lived intangible assets
|
|
|
|
||||
Acquired IPR&D
|
$
|
12,556
|
|
|
$
|
12,556
|
|
Goodwill
|
72,997
|
|
|
12,238
|
|
||
Definite lived intangible assets
|
|
|
|
||||
Complete technology
|
182,267
|
|
|
15,267
|
|
||
Less: Accumulated amortization
|
(5,883
|
)
|
|
(3,762
|
)
|
||
Trade name
|
2,642
|
|
|
2,642
|
|
||
Less: Accumulated amortization
|
(685
|
)
|
|
(652
|
)
|
||
Customer relationships
|
29,600
|
|
|
29,600
|
|
||
Less: Accumulated amortization
|
(7,674
|
)
|
|
(7,304
|
)
|
||
Total goodwill and other identifiable intangible assets, net
|
$
|
285,820
|
|
|
$
|
60,585
|
|
|
March 31,
|
|
December 31,
|
||||
|
2016
|
|
2015
|
||||
Lab and office equipment
|
$
|
2,482
|
|
|
$
|
2,248
|
|
Leasehold improvements
|
273
|
|
|
273
|
|
||
Computer equipment and software
|
636
|
|
|
632
|
|
||
|
3,391
|
|
|
3,153
|
|
||
Less accumulated depreciation and amortization
|
(2,824
|
)
|
|
(2,781
|
)
|
||
Total property and equipment, net
|
$
|
567
|
|
|
$
|
372
|
|
|
March 31,
|
|
December 31,
|
||||
|
2016
|
|
2015
|
||||
Prepaid expenses
|
$
|
1,087
|
|
|
$
|
1,177
|
|
Other receivables
|
475
|
|
|
731
|
|
||
Total other current assets
|
$
|
1,562
|
|
|
$
|
1,908
|
|
|
March 31,
|
|
December 31,
|
||||
|
2016
|
|
2015
|
||||
Compensation
|
$
|
854
|
|
|
$
|
1,711
|
|
Professional fees
|
754
|
|
|
726
|
|
||
Amounts owed to former licensees
|
695
|
|
|
915
|
|
||
Royalties owed to third parties
|
937
|
|
|
823
|
|
||
Other
|
429
|
|
|
1,222
|
|
||
Total accrued liabilities
|
$
|
3,669
|
|
|
$
|
5,397
|
|
|
March 31,
|
|
December 31,
|
||||
|
2016
|
|
2015
|
||||
Deposits
|
$
|
298
|
|
|
$
|
268
|
|
Deferred rent
|
107
|
|
|
—
|
|
||
Other
|
41
|
|
|
29
|
|
||
Total other long-term liabilities
|
$
|
446
|
|
|
$
|
297
|
|
|
Three months ended
|
|
||||||
|
March 31,
|
|
||||||
|
2016
|
|
2015
|
|
||||
Stock-based compensation expense as a component of:
|
|
|
|
|
||||
Research and development expenses
|
$
|
1,585
|
|
|
$
|
920
|
|
|
General and administrative expenses
|
2,533
|
|
|
1,994
|
|
|
||
|
$
|
4,118
|
|
|
$
|
2,914
|
|
|
|
Three months ended
|
|
||
|
March 31,
|
|
||
|
2016
|
|
2015
|
|
Risk-free interest rate
|
1.5%
|
|
1.8%
|
|
Dividend yield
|
—
|
|
—
|
|
Expected volatility
|
50%
|
|
58%
|
|
Expected term
|
6.6
|
|
6.6
|
|
Forfeiture rate
|
5.0%
|
|
8.5%
|
|
Cash consideration
|
$
|
96,359
|
|
Total share consideration:
|
|
||
Actual number of shares issued
|
793
|
|
|
Multiplied by: Ligand closing share price on January 8, 2016
|
$
|
97.92
|
|
Total share consideration
|
77,658
|
|
|
Total consideration
|
$
|
174,017
|
|
Cash and cash equivalents
|
$
|
3,504
|
|
Accounts receivable
|
5
|
|
|
Income tax receivable
|
140
|
|
|
Prepaid expenses and other current assets
|
2
|
|
|
Deferred tax liabilities, net
|
(56,114
|
)
|
|
Intangible asset with finite life - core technology
|
167,000
|
|
|
Liabilities assumed
|
(1,279
|
)
|
|
Goodwill
|
60,759
|
|
|
Total consideration
|
$
|
174,017
|
|
|
March 31,
|
March 31,
|
||||
|
2016
|
2015
|
||||
Revenue
|
$
|
32,124
|
|
$
|
17,152
|
|
Net income
|
$
|
8,877
|
|
$
|
(474
|
)
|
|
|
|
||||
Basic earnings per share:
|
$
|
0.43
|
|
$
|
(0.02
|
)
|
Diluted earnings per share:
|
$
|
0.40
|
|
$
|
(0.02
|
)
|
Fair Value Measurements at Reporting Date Using
|
|||||||||||||||
|
|
|
Quoted Prices in
Active Markets
for Identical
Assets
|
|
Significant
Other
Observable
Inputs
|
|
Significant
Unobservable
Inputs
|
||||||||
|
Total
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Cash equivalents
(1)
|
$
|
5,316
|
|
|
$
|
—
|
|
|
$
|
5,316
|
|
|
$
|
—
|
|
Short-term investments
(2)
|
81,908
|
|
|
4,625
|
|
|
77,283
|
|
|
—
|
|
||||
Note receivable Viking
(3)
|
4,767
|
|
|
—
|
|
|
—
|
|
|
4,767
|
|
||||
Total assets
|
$
|
91,991
|
|
|
$
|
4,625
|
|
|
$
|
82,599
|
|
|
$
|
4,767
|
|
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Current contingent liabilities-CyDex
(4)
|
$
|
5,285
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,285
|
|
Long-term contingent liabilities-CyDex
(4)
|
1,578
|
|
|
—
|
|
|
—
|
|
|
1,578
|
|
||||
Long-term contingent liabilities-Metabasis
(5)
|
2,444
|
|
|
—
|
|
|
2,444
|
|
|
—
|
|
||||
Liability for amounts owed to former licensees
(6)
|
534
|
|
|
534
|
|
|
—
|
|
|
—
|
|
||||
Total liabilities
|
$
|
9,841
|
|
|
$
|
534
|
|
|
$
|
2,444
|
|
|
$
|
6,863
|
|
Fair Value Measurements at Reporting Date Using
|
|||||||||||||||
|
|
|
Quoted Prices in
Active Markets
for Identical
Assets
|
|
Significant
Other
Observable
Inputs *
|
|
Significant
Unobservable
Inputs
|
||||||||
|
Total
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Cash equivalents
(1)
|
$
|
3,015
|
|
|
$
|
—
|
|
|
$
|
3,015
|
|
|
$
|
—
|
|
Short-term investments
(2)
|
92,775
|
|
|
6,786
|
|
|
85,989
|
|
|
—
|
|
||||
Viking note receivable
(3)
|
4,782
|
|
|
—
|
|
|
—
|
|
|
4,782
|
|
||||
Total assets
|
$
|
100,572
|
|
|
$
|
6,786
|
|
|
$
|
89,004
|
|
|
$
|
4,782
|
|
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Current contingent liabilities-CyDex
(4)
|
$
|
7,812
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,812
|
|
Current contingent liabilities-Metabasis
(5)
|
$
|
2,602
|
|
|
—
|
|
|
2,602
|
|
|
—
|
|
|||
Long-term contingent liabilities-Metabasis
(5)
|
1,355
|
|
|
—
|
|
|
1,355
|
|
|
—
|
|
||||
Long-term contingent liabilities-CyDex
(4)
|
1,678
|
|
|
—
|
|
|
—
|
|
|
1,678
|
|
||||
Liability for amounts owed to former licensees
(6)
|
794
|
|
|
794
|
|
|
—
|
|
|
—
|
|
||||
Total liabilities
|
$
|
14,241
|
|
|
$
|
794
|
|
|
$
|
3,957
|
|
|
$
|
9,490
|
|
(1)
|
Highly liquid investments with maturities less than 90 days from the purchase date are recorded as cash equivalents that are classified as Level 2 of the fair value hierarchy, as these investment securities are valued based upon quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.
|
(2)
|
Investments in equity securities, which the Company received as a result of event-based and upfront payments from licensees, are classified as level 1 as the fair value is determined using quoted market prices in active markets for the same securities. Short-term investments in marketable securities with maturities greater than 90 days are classified as level 2 of the fair value hierarchy, as these investment securities are valued based upon quoted prices for identical or
|
(3)
|
The fair value of the convertible note receivable from Viking was determined using a probability weighted option pricing model using a lattice methodology. The fair value is subjective and is affected by certain significant input to the valuation model such as the estimated volatility of the common stock, which was estimated to be
50%
at
March 31, 2016
. Changes in these assumptions may materially affect the fair value estimate.
|
(4)
|
The fair value of the liabilities for CyDex contingent liabilities were determined based on the income approach using a Monte Carlo analysis. The fair value is subjective and is affected by changes in inputs to the valuation model including management’s assumptions regarding revenue volatility, probability of commercialization of products, estimates of timing and probability of achievement of certain revenue thresholds and developmental and regulatory milestones which may be achieved and affect amounts owed to former license holders and CVR holders. Changes in these assumptions can materially affect the fair value estimate.
|
(5)
|
The liability for CVRs for Metabasis are determined using quoted market prices in an inactive market for the underlying CVR.
|
(6)
|
The liability for amounts owed to former licensees are determined using quoted market prices in active markets for the underlying investment received from a partner, a portion of which is owed to former licensees.
|
(7)
|
The co-promote termination payments receivable represents a receivable for future payments to be made by Pfizer related to product sales and is recorded at its fair value. The receivable and liability will remain equal. The fair value is determined based on a valuation model using an income approach.
|
|
March 31, 2016
|
|
December 31, 2015
|
Range of annual revenue subject to revenue sharing
(1)
|
$23.5 million
|
|
$22.5 million
|
Revenue volatility
|
25%
|
|
25%
|
Average probability of commercialization
|
78%
|
|
73%
|
Sales beta
|
0.30
|
|
0.40
|
Credit rating
|
BB
|
|
BB
|
Equity risk premium
|
6%
|
|
6%
|
(1)
|
Revenue subject to revenue sharing represent management’s estimate of the range of total annual revenue subject to revenue sharing (i.e. annual revenues in excess of
$15 million
) through
December 31, 2016
, which is the term of the CVR agreement.
|
Assets:
|
|
||
Fair value of level 3 financial instrument assets as of December 31, 2015
|
$
|
4,782
|
|
Viking note receivable fair market value adjustment
|
(15
|
)
|
|
Fair value of level 3 financial instrument assets as of March 31, 2016
|
$
|
4,767
|
|
|
|
||
Liabilities:
|
|
||
Fair value of level 3 financial instrument liabilities as of December 31, 2015
|
$
|
9,490
|
|
Payments to CVR and other former license holders
|
(2,828
|
)
|
|
Fair value adjustments to contingent liabilities
|
201
|
|
|
Fair value of level 3 financial instrument liabilities as of March 31, 2016
|
$
|
6,863
|
|
Operating lease obligations:
|
|
Lease
Termination
Date
|
|
Less than 1
year
|
1-2 years
|
3-4 years
|
Thereafter
|
Total
|
||||||||||
Corporate headquarters-
La Jolla, CA
|
|
June 2019
|
|
$
|
704
|
|
$
|
1,465
|
|
$
|
187
|
|
$
|
—
|
|
$
|
2,356
|
|
Corporate headquarters-San Diego, CA
|
|
April 2023
|
|
52
|
|
261
|
|
277
|
|
306
|
|
896
|
|
|||||
Bioscience and Technology Business Center-
Lawrence, KS
|
|
December 2017
|
|
54
|
|
41
|
|
—
|
|
—
|
|
95
|
|
|||||
Vacated office and research facility-
Cranbury, NJ
|
|
August 2016
|
|
1,089
|
|
—
|
|
—
|
|
—
|
|
1,089
|
|
|||||
Total operating lease obligations
|
|
|
|
$
|
1,899
|
|
$
|
1,767
|
|
$
|
464
|
|
$
|
306
|
|
$
|
4,436
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Sublease payments expected to be received:
|
|
|
|
|
|
|
|
|
||||||||||
Corporate headquarters-
La Jolla, CA |
|
June 2019
|
|
$
|
443
|
|
$
|
920
|
|
$
|
116
|
|
$
|
—
|
|
$
|
1,479
|
|
Office and research facility-
Cranbury, NJ
|
|
August 2016
|
|
88
|
|
—
|
|
—
|
|
—
|
|
88
|
|
|||||
Net operating lease obligations
|
|
|
|
$
|
1,368
|
|
$
|
847
|
|
$
|
348
|
|
$
|
306
|
|
$
|
2,869
|
|
|
March 31, 2016
|
|
December 31, 2015
|
||||
2019 Convertible Senior Notes
|
|
|
|
||||
Principal amount outstanding
|
$
|
245,000
|
|
|
$
|
245,000
|
|
Unamortized discount
|
(37,169
|
)
|
|
(39,628
|
)
|
||
Net carrying amount
|
207,831
|
|
|
205,372
|
|
||
Less: Unamortized deferred financing costs
|
3,178
|
|
|
3,387
|
|
||
Total notes payable
|
$
|
204,653
|
|
|
$
|
201,985
|
|
|
Stock Options
|
|
Restricted Stock Award
|
||||||||||
|
Shares
|
|
Weighted-
Average
Exercise
Price
|
|
Shares
|
|
Weighted-
Average Grant
Date Fair Value
|
||||||
Balance as of December 31, 2015
|
1,683,341
|
|
|
$
|
34.23
|
|
|
130,749
|
|
|
$
|
60.36
|
|
Granted
|
241,015
|
|
|
88.84
|
|
|
229,847
|
|
|
94.76
|
|
||
Exercised
|
(44,029
|
)
|
|
23.00
|
|
|
(34,649
|
)
|
|
52.18
|
|
||
Balance as of March 31, 2016
|
1,880,327
|
|
|
41.50
|
|
|
325,947
|
|
|
72.88
|
|
ITEM 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
•
|
In May 2016, Ligand acquired the economic rights to multiple programs owned by CorMatrix. Ligand paid $17.5 million and in return will receive a portion of revenue (synthetic royalty) from CorMatrix’s existing marketed products and will have the right to receive future synthetic royalties from potential future products. CorMatrix’s products are medical devices that are designed to permit the development and regrowth of human tissue. This transaction will be immediately accretive to Ligand and represents Ligand’s entry into the field of medical devices.
|
•
|
In January 2016, Ligand acquired OMT, Inc. and its OmniAb™ platform for consideration valued at the time of the acquisition at approximately $178 million. OmniAb license agreements existing at the time of acquisition initially added 16 shots on goal, with the potential for additional compounds to be generated from these partnerships. Partners at the time of acquisition included Amgen, Celgene, Genmab, Janssen, Merck KGaA, Pfizer, Seattle Genetics, Five Prime, Symphogen and various other biotechnology and pharmaceutical companies.
|
•
|
The European Commission approved Revolade
®
(eltrombopag), a Novartis product, for the treatment of pediatric (age 1 and above) chronic immune (idiopathic) thrombocytopenic purpura (ITP) patients who are refractory to other treatments (e.g., corticosteroids, immunoglobulins). The approval includes the use of tablets as well as a new oral suspension formulation of Revolade
®
, which is designed for younger children who may not be able to swallow tablets.
|
•
|
On January 21, 2016, Amgen announced that FDA approved Kyprolis
®
(carfilzomib) in combination with dexamethasone for the treatment of patients with relapsed or refractory multiple myeloma who have received one to three lines of therapy. The FDA also approved Kyprolis
®
as a single agent for the treatment of patients with relapsed or refractory multiple myeloma who have received one or more lines of therapy, converting to full approval the initial accelerated approval Kyprolis
®
received in July 2012 as a single agent.
|
•
|
On January 28, 2016, Amgen announced Health Canada approval of Kyprolis
®
(carfilzomib) in combination with lenalidomide and dexamethasone for the treatment of patients with relapsed multiple myeloma who have received one to three lines of therapy.
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Spectrum Pharmaceuticals received FDA approval of EVOMELA™ (melphalan) for use as a high-dose conditioning treatment prior to hematopoietic progenitor (stem) cell transplantation in patients with multiple myeloma, and for the palliative treatment of patients with multiple myeloma for whom oral therapy is not appropriate.
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Spectrum Pharmaceuticals announced that the FDA granted seven years of Orphan Drug Exclusivity for EVOMELA™ for use as a high-dose conditioning treatment prior to hematopoietic progenitor (stem) cell transplantation in patients with multiple myeloma.
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Duavive
®
received EU pricing and was launched in Italy by Merck Sharp & Dohme, under license from Pfizer.
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Alvogen Inc. received approval from the FDA for Captisol-enabled IV voriconazole.
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Zydus Cadila announced the launch of Vivitra™, a biosimilar of trastuzumab, in India. Ligand gained rights to royalties on sales of Vivitra in the March 2013 Selexis royalty acquisition.
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Lundbeck announced the FDA accepted the resubmission of the NDA for IV carbamazepine. An action letter is anticipated before the end of 2016.
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Retrophin announced completion of enrollment in the Phase 2 DUET study of Sparsentan for the treatment of focal segmental glomerulosclerosis (FSGS). The DUET study exceeded its enrollment target of 100 patients, and top-line results are expected in the third quarter of 2016.
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Sage Therapeutics presented data that expanded scientific, clinical and burden-of-illness data for SAGE-547 at the 68
th
American Academy of Neurology Annual Meeting.
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Coherus BioSciences and Baxalta announced that CHS-0214, a proposed biosimilar of Enbrel
®
(etanercept) to which Ligand gained royalty rights in the March 2013 Selexis royalty acquisition, met its primary endpoint in a confirmatory, double-blind, randomized, controlled, two-part clinical study. This ongoing study is evaluating the efficacy and safety of CHS-0214 compared with Enbrel
®
in patients with moderate-to-severe rheumatoid arthritis that is inadequately controlled with methotrexate.
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Viking Therapeutics highlighted positive data from a Phase 1b trial of VK2809 (TR Beta) in subjects with mild hypercholesterolemia at the 65
th
Annual Scientific Session and Expo of the American College of Cardiology.
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Merrimack Pharmaceuticals presented data on MM-302, MM-141 and MM-151 at the 2016 American Association for Cancer Research Annual Meeting.
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Opthea Limited announced that the primary objective of safety in the dose-escalation phase of its ongoing first-in-human clinical trial of OPT-302, a novel VEGF-C/D 'Trap' therapy for wet age-related macular degeneration, had been met.
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Marinus Pharmaceuticals announced that the FDA granted Orphan Drug designation for ganaxolone IV for the treatment of status epilepticus. A Phase 1 clinical trial evaluating the safety, tolerability and pharmacokinetics of ganaxolone IV is expected to initiate in the first half of 2016.
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Marinus Pharmaceuticals presented preclinical data of ganaxolone IV, which showed robust activity in the model. The data were presented during an oral and poster presentations at the 68
th
American Academy of Neurology Annual Meeting.
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AVEO Oncology announced granting CANbridge Life Sciences worldwide rights, excluding the United States, Canada and Mexico, to AV-203, AVEO’s clinical-stage ErbB3 (HER3) inhibitory antibody candidate.
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The journal
Nature
published an article highlighting the efficacy of Gilead’s GS-5734 against the Ebola virus in rhesus monkeys.
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Ligand announced a worldwide license agreement with Emergent BioSolutions that allows Emergent to use the OmniAb platform to discover fully human mono- and bispecific antibodies. Ligand is eligible to receive annual access payments, fees on patent filings, milestone payments and royalties on future net sales of any antibodies discovered under the license.
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Ligand announced a worldwide license agreement with Tizona Therapeutics that allows Tizona to use the OmniAb platform to discover fully human mono- and bispecific antibodies. Ligand is eligible to receive annual access payments, fees on patent filings, milestone payments and royalties on future net sales of any antibodies discovered under the license.
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Ligand announced a worldwide license agreement with ABBA Therapeutics that allows ABBA to use the OmniAb platform to discover fully human mono- and bispecific antibodies. Ligand is eligible to receive milestone payments and royalties on future net sales of any antibodies discovered under the license.
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Ligand entered into a Clinical Use Agreement with XTL Biopharmaceuticals to supply Captisol for use in the formulation of its lead drug, hCDR1, for the treatment of systemic lupus erythematosus. Under the terms of the agreement, Ligand is eligible to receive milestones and revenue from clinical Captisol sales.
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Ligand scientists gave an oral presentation on GRA at ENDO 2016 and presented a poster at the Levine-Riggs Diabetes Research Symposium, which highlighted data from the Phase 1b trial demonstrating that GRA significantly reduced fasting and post-prandial glucose in subjects with type 2 diabetes.
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ITEM 3.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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ITEM 4.
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CONTROLS AND PROCEDURES
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PART II.
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OTHER INFORMATION
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ITEM 1A.
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RISK FACTORS
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ITEM 6.
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EXHIBITS
|
Date:
|
November 14, 2016
|
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By:
|
/s/ Matthew Korenberg
|
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Matthew Korenberg
|
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Vice President, Finance and Chief Financial Officer
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Duly Authorized Officer and Principal Financial Officer
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Exhibit Number
|
Description
|
|
|
10.1
|
Second Amendment to the Loan and Security Agreement, dated January 22, 2016 by and among the Company and Viking Therapeutics, Inc.
|
31.1
|
Certification by Principal Executive Officer, Pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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31.2
|
Certification by Principal Financial Officer, Pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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32.1
|
Certifications by Principal Executive Officer and Principal Financial Officer, Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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101.INS
|
XBRL Instance Document
|
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q/A of Ligand Pharmaceuticals Incorporated;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ John L. Higgins
|
John L. Higgins
|
Chief Executive Officer
|
(Principal Executive Officer)
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q/A of Ligand Pharmaceuticals Incorporated;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ Matthew Korenberg
|
Matthew Korenberg
|
Vice President, Finance and Chief Financial Officer
|
(Principal Financial Officer)
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|||
Date:
|
November 14, 2016
|
|
/s/ John L. Higgins
|
|
|
|
|
John L. Higgins
Chief Executive Officer
(Principal Executive Officer)
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
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||||
Date:
|
November 14, 2016
|
|
|
/s/ Matthew Korenberg
|
|
|
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Matthew Korenberg
Vice President, Finance and Chief Financial Officer
(Principal Financial Officer)
|