Ligand Reports Fourth Quarter and Full Year 2018 Financial Results

Conference Call Begins at 4:30 p.m. Eastern Time Today

Analyst
day to be held on Tuesday March 12 at 10:00 a.m. Eastern Time in New
York City

SAN DIEGO–(BUSINESS WIRE)–Ligand Pharmaceuticals Incorporated (NASDAQ: LGND) today reported
financial results for the three and 12 months ended December 31, 2018,
and provided an operating forecast and program updates. Ligand
management will host a conference call today beginning at 4:30 p.m.
Eastern time to discuss this announcement and answer questions.

“The fourth quarter of 2018 capped off a year of superior financial and
operational performance by Ligand and our partners. Promacta showed
impressive revenue growth, increasing 35% over the prior year and
increasing over 10% Q4 over Q3. The product growth comes as the market
evolves. Promacta is a market leading medicine in its class with a
global intellectual property estate and strong market protection that we
expect to continue until the middle of the next decade with Orange
Book-listed patents into 2028. Kyprolis finished on a high note with
solid Q4 sales and total 2018 revenue exceeding $1 billion. CASI
Pharmaceuticals obtained regulatory approval for EVOMELA in China, and
Retrophin initiated a clinical trial with Sparsentan in IgA nephropathy,
a second promising indication for the drug. Seelos Therapeutics, a
Ligand partner on four programs, is now a public company with additional
outside investment following its recent merger with Apricus
Biosciences,” said John Higgins, Chief Executive Officer of Ligand.

Higgins continued, “The Ligand Shots-on-Goal business model, focused on
assembling a diverse array of royalty bearing assets, is thriving with a
promising outlook for the near, mid and long term. Our business is
generating continued significant growth in cash-flow and profitability
due to its high-margin operations. We are seeing expanding future
pipeline potential with late-stage partner advancement and continued
leverage of our patented technologies as we enter new license
agreements. Existing royalty streams are performing very well, and are
expected to continue to grow over the next several years. We are
positioned for major partner events and potential product launches over
the next four years from a number of important partnered assets.
Finally, the long-term outlook beyond five years is coming into focus
and becoming even more compelling as we assemble a large portfolio of
assets and see our OmniAb partners advance in the clinic toward
potential launches in the early-to-middle of the next decade. We believe
Ligand is a strong and diversified business and have invested in the
company through active share repurchases, buying back over 4% of
Ligand’s outstanding shares over the past few months.”

Ligand also provided details of its upcoming analyst day, which will be
held on Tuesday March 12 from 10:00 – 11:30 a.m. Eastern time in New
York City. Company presenters will include John Higgins, CEO, Matt
Foehr, COO, Matt Korenberg, CFO and Mike Wood, PhD, Vernalis, a Ligand
Company, Research Director and Cambridge Site Head. Additional speakers
and partner presenters will be announced at a later date. For more
information or to RSVP, please contact Kasha Chen at kchen@lhai.com.

Fourth Quarter 2018 Financial Results

Total revenues for the fourth quarter of 2018 were $59.6 million,
compared with $50.5 million for the same period in 2017. Royalties were
$40.2 million, compared with $28.3 million for the fourth quarter of
2017 as originally reported, or $32.7 million as would have been
reported had new revenue recognition accounting standard ASC 606 been
applicable at the time. Fourth quarter 2018 royalties primarily
consisted of royalties from Promacta®, Kyprolis®
and EVOMELA®. Material sales were $10.1 million, compared
with $7.7 million for the same period in 2017 due to the timing of
Captisol® purchases for use in clinical trials and commercial
products. License fees, milestones and other revenues were $9.3 million,
compared with $14.4 million for the same period in 2017.

Cost of material sales was $3.0 million for the fourth quarter of 2018,
compared with $1.7 million for the same period in 2017. Amortization of
intangibles was $3.5 million, compared with $4.0 million for the same
period in 2017. Research and development expense was $8.8 million,
compared with $8.6 million for the same period of 2017. General and
administrative expense was $11.2 million, compared with $7.7 million for
the same period in 2017, with the increase due to costs associated with
recent acquisitions and non-cash share-based compensation expense.

Net loss for the fourth quarter of 2018 was $42.5 million, or $2.02 per
diluted share, compared with a net loss of $7.0 million, or $0.33 per
diluted share, for the same period in 2017. Net income for the fourth
quarter of 2018 was impacted by a non-cash loss of $74.0 million due to
the marking of Ligand’s investment in Viking Therapeutics to market. For
reference, in the third quarter the financial results were benefited by
$62.4 million due to the increase in value of Viking Therapeutics being
recorded on the income statement at the end of that quarter. The impact
to the income statement is new this year as a result of recently adopted
ASU 2016-01 which requires equity to be marked to market value through
the statement of operations in contrast to the previous treatment which
only impacted the balance sheet. Adjusted net income for the fourth
quarter of 2018 was $39.0 million, or $1.70 per diluted share, compared
with adjusted net income of $29.6 million, or $1.31 per diluted share,
for the same period in 2017.

As of December 31, 2018, Ligand had cash, cash equivalents and
short-term investments of approximately $718.4 million. Cash generated
from operations during the fourth quarter of 2018 was $33.3 million.

Full Year 2018 Financial Results

Total revenues for 2018 were $251.5 million, compared with $141.1
million for 2017. Royalties were $128.6 million, compared with $88.7
million for 2017 as originally reported, or $97.2 million as would have
been reported had new accounting standard ASC 606 been applicable at the
time. Royalties for 2018 primarily consisted of royalties from Promacta,
Kyprolis and EVOMELA. Material sales were $29.1 million, compared with
$22.1 million for 2017 due to the timing of Captisol purchases for use
in clinical trials and commercial products. License fees, milestones and
other revenues were $93.8 million, compared with $30.3 million for 2017,
primarily due to the receipt of a $47 million payment from WuXi
Biologics to amend its OmniAb platform license agreement and a $20
million upfront payment upon the licensing of Ligand’s glucagon receptor
antagonist (GRA) program.

Cost of material sales was $6.3 million for 2018, compared with $5.4
million for 2017. Amortization of intangibles was $15.8 million,
compared with $12.1 million for 2017, due to recent acquisitions and
amortization of research and development assets. Research and
development expense was $27.9, compared with $26.9 million for 2017.
General and administrative expense was $37.7 million, compared with
$28.7 million for 2017, with the increase due to costs associated with
recent acquisitions and non-cash share-based compensation expense.

Net income for 2018 was $143.3 million, or $5.96 per diluted share,
compared with net income of $12.6 million, or $0.53 per diluted share,
for 2017. Net income for 2018 was impacted by a non-cash net annual gain
due to the marking of Ligand’s investment in Viking Therapeutics to
market. Adjusted net income for 2018 was $166.9 million, or $7.15 per
diluted share, compared with adjusted net income of $72.5 million, or
$3.26 per diluted share, for 2017.

2019 Financial Guidance

Ligand is providing updated guidance for 2019 with total revenues
expected to be approximately $224 million, up from previous guidance of
$212 million, which includes royalties of approximately $154 million,
material sales of approximately $27 million and license fees and
milestones of approximately $43 million. Ligand notes that with total
revenues of $224 million, adjusted earnings per diluted share would be
approximately $6.05, up from previous guidance of $5.50.

Fourth Quarter 2018 and Recent Business Highlights

Promacta®/Revolade®

  • Novartis reported fourth quarter 2018 net sales of Promacta/Revolade
    (eltrombopag) of $330 million, a $75 million or 29% increase over the
    same period in 2017.
  • Novartis announced that the U.S. Food and Drug Administration (FDA)
    expanded the label for Promacta (eltrombopag) to include first-line
    treatment for adults and pediatric patients two years and older with
    Severe Aplastic Anemia in combination with standard immunosuppressive
    therapy.
  • Novartis announced results of a retrospective, real-world evidence
    study in patients with immune thrombocytopenia (ITP) treated with
    Promacta/Revolade (eltrombopag), compared with other second-line
    therapies, demonstrating that patients experienced better clinical
    outcomes with Promacta/Revolade in terms of fewer bleeding episodes.
  • Novartis presented data from a Phase 4 open-label study of Promacta in
    the treatment of chronic ITP at the European Congress on Thrombosis
    and Haemostasis 2018.

Kyprolis® (carfilzomib), an
Amgen Product Utilizing Captisol

  • On January 29, 2019, Amgen reported fourth quarter 2018 net sales of
    Kyprolis of $251 million, a $24 million or 11% increase over the same
    period in 2017. On February 1, 2019, Ono Pharmaceutical reported
    Kyprolis sales in Japan of approximately $12 million for the most
    recent quarter.
  • On October 1, 2018, Amgen announced that the FDA approved the
    supplemental New Drug Application to expand the prescribing
    information for Kyprolis to include a once-weekly dosing option in
    combination with dexamethasone for patients with relapsed or
    refractory multiple myeloma.

Recent Acquisitions

  • Ligand announced the acquisition of economic rights to PTX-022 from
    Palvella Therapeutics for $10 million in cash. Ligand will receive a
    tiered net sales royalty in the mid-to-upper single digits, as well as
    regulatory and financing milestones. PTX-022 is a novel,
    orphan-indicated, topical formulation of rapamycin in Phase 2/3
    development for the treatment of pachyonychia congenita, a rare skin
    disorder with no FDA-approved treatment.
  • Ligand announced an investment in Dianomi Therapeutics, paying a total
    of $3 million in exchange for 1) a tiered royalty of two or three
    percent based on level of net sales for the first five products to be
    approved using Dianomi’s patented Mineral Coated Microparticle (MCM)
    technology and 2) a loan convertible into $1 million of equity at the
    next qualified financing.
  • Ligand closed the acquisition of Vernalis plc, a structure-based drug
    discovery biotechnology company with a broad pipeline of partnered
    programs and ongoing collaborations, for $43 million in cash. The
    acquisition provides Ligand with more than eight fully-funded shots on
    goal, a 70-person R&D team based in Cambridge, England, a portfolio of
    ongoing collaboration agreements that have the potential to create
    additional shots on goal, a compound library of unpartnered programs
    and operations that provide a platform to help efficiently pursue
    investment and acquisition activities in Europe and the United Kingdom.

Additional Pipeline and Partner Developments

  • Ligand’s portfolio of partnerships now includes more than 200
    shots-on-goal. Growth of the portfolio from more than 178
    shots-on-goal has been driven primarily by business development and
    licensing activity and the expansion and advancement of OmniAb
    partnerships.
  • CASI Pharmaceuticals announced that it received National Medical
    Products Administration (formerly, the China FDA) approval of EVOMELA
    for use as a high-dose conditioning treatment prior to hematopoietic
    progenitor (stem) cell transplantation in patients with multiple
    myeloma, and the palliative treatment of patients with multiple
    myeloma for whom oral therapy is not appropriate.
  • Daiichi Sankyo announced receipt of marketing approval in Japan for
    MINNEBRO (esaxerenone) for the treatment of hypertension.
  • Viking Therapeutics presented positive results from a 12-week Phase 2
    study of VK2809 in patients with non-alcoholic fatty liver disease in
    an oral late-breaker presentation at the AASLD’s annual meeting (The
    Liver Meeting®) in San Francisco, CA.
  • Viking Therapeutics presented positive results from its Phase 2 study
    of VK5211 in patients recovering from hip fracture at the American
    Society for Bone and Mineral Research 2018 annual meeting.
  • Seelos Therapeutics closed a reverse merger with Apricus Biosciences
    and is now publicly traded on the Nasdaq Capital Market under the
    trading symbol “SEEL”. In conjunction with the reverse merger
    transaction, Seelos issued common stock and warrants in a private
    round led by a group of leading venture capital investors, for gross
    proceeds of $18 million.
  • Sage Therapeutics announced that the FDA Psychopharmacologic Drugs
    Advisory Committee and Drug Safety and Risk Management Advisory
    Committee jointly voted that data support the favorable benefit-risk
    profile of Zulresso injection for the treatment of postpartum
    depression. Sage also announced on November 20, 2018 that the action
    date for ZULRESSO is March 19, 2019.
  • Retrophin announced that the first patient was dosed in a global,
    pivotal Phase 3 clinical trial evaluating the long-term
    nephroprotective potential of sparsentan for the treatment of IgA
    nephropathy.
  • Retrophin presented new data examining the long-term effects of
    sparsentan in focal segmental glomerulosclerosis (FSGS) at the
    American Society of Nephrology Kidney Week 2018, and announced that
    the Journal of the American Society of Nephrology published
    online the positive results from Retrophin’s Phase 2 DUET study of
    sparsentan for the treatment of FSGS.
  • Verona Pharma announced enrollment of the last patient in its Phase 2
    clinical trial evaluating the effect of nebulized ensifentrine
    (RPL554) as an add-on to dual therapy using long-acting
    anti-muscarinic / long-acting beta2-agonists and triple therapy in the
    maintenance treatment of patients with moderate to severe chronic
    obstructive pulmonary disease (COPD).
  • Verona Pharma announced initiation of a Phase 2 clinical trial to
    evaluate the pharmacokinetic profile, efficacy and safety of a dry
    powder inhaler formulation of ensifentrine in patients with
    moderate-to-severe COPD.
  • Melinta Therapeutics announced positive topline results from its Phase
    3 trial of Baxdela™ for the treatment of adult patients with
    community-acquired bacterial pneumonia.
  • Sermonix Pharmaceuticals announced FDA acceptance of its
    Investigational New Drug application and the initiation of a
    100-patient Phase 2 trial of oral lasofoxifene for the treatment of
    metastatic breast cancer.
  • Sermonix Pharmaceuticals announced the presentation of three posters
    of oral lasofoxifene in metastatic breast cancer at the 2018 San
    Antonio Breast Cancer Symposium.
  • Opthea Limited reported that the last patient was enrolled in its
    ongoing Phase 2b trial of OPT-302 for wet age-related macular
    degeneration.
  • Marinus Pharmaceuticals announced positive results from its Phase 2
    clinical trial evaluating ganaxolone IV in women with postpartum
    depression.
  • On December 3, 2018, Amgen announced the first clinical results from a
    study evaluating investigational novel bispecific T cell engager
    (BiTE®) immunotherapy AMG 330. In a Phase 1 dose-escalation study, AMG
    330, which targets CD33, provided early evidence of tolerability and
    anti-tumor activity in patients with relapsed and/or refractory
    multiple myeloma and relapsed or refractory acute myeloid leukemia.
  • Aptevo Therapeutics announced that the first patient was dosed in a
    Phase 1/1b clinical trial of APVO436, a novel anti-CD123 by anti-CD3
    bispecific antibody, which is being developed for the treatment of
    patients with acute myeloid leukemia and high-grade myelodysplastic
    syndrome.
  • Corvus Pharmaceuticals announced updated clinical and biomarker data
    from its ongoing Phase 1/1b study of CPI-444 in patients with
    treatment-refractory renal cell carcinoma, which demonstrated an
    overall survival of 88% at more than 20 months follow-up with CPI-444
    administered in combination with atezolizumab.
  • Corvus Pharmaceuticals announced the publication of results of
    preclinical studies of CPI-444 demonstrating that it induces
    dose-dependent antitumor responses as a monotherapy and in combination
    with anti-PD-1, anti-PD-L1 and anti-CTLA-4 therapies.
  • Syros Pharmaceuticals announced new preclinical data on SY-1365, its
    first-in-class selective CDK7 inhibitor, showing that it inhibits
    tumor cell growth in HR-positive breast cancer cell lines that are
    resistant to treatment with CDK4/6 inhibitors and that it has
    synergistic activity in combination with fulvestrant in these
    treatment-resistant cells.
  • OmniAb partner Arcus Biosciences announced that abstracts relating to
    its portfolio were presented at the Society for Immunotherapy of
    Cancer Annual Meeting.

Business Development

  • Ligand announced a worldwide license agreement with Genagon
    Therapeutics AB to use the OmniAb platform technologies to discover
    fully human antibodies. Genagon is an immuno-oncology focused biotech
    located in Sweden. Ligand is eligible to receive development milestone
    payments and tiered royalties on future sales.
  • Ligand announced a worldwide license agreement with iMetabolic
    Biopharma Corporation (iMBP) to use the OmniAb platform technologies
    to discover fully human antibodies. iMBP is an early-stage company
    with experienced leadership and proprietary research based on
    functional preservation of key natural enzymes responsible for lipid
    metabolism. Their discovery-stage programs target obesity and related
    diseases, with a primary focus on hyperlipidemia. Ligand is eligible
    to receive a tiered royalty on future sales of up to 6%. As part of
    the agreement, Ligand will fund and facilitate select early antibody
    discovery activities, and in return will receive an equity ownership
    position in iMBP.
  • Ligand announced an OmniAb platform license agreement with the Fred
    Hutchinson Cancer Research Center (Fred Hutch) to use the OmniAb
    rodent platform technologies to discover fully human antibodies.
    Ligand is eligible to receive a defined share of revenue received by
    Fred Hutch from companies that commercialize products incorporating
    any such OmniAb-derived antibody.
  • Ligand entered into new Captisol clinical use license agreements with
    Merck KGaA and reVision Therapeutics.

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 our equity investments in Viking
Therapeutics and Retrophin, unissued shares relating to the Senior
Convertible Notes 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 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 our investments in Viking
Therapeutics and Retrophin, share-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 today beginning at 4:30
p.m. Eastern time (1:30 p.m. Pacific time) to discuss this announcement
and answer questions. To participate via telephone, please dial (833)
591-4752 from the U.S. or (720) 405-1612 from outside the U.S., using
the conference ID 9132958. To participate via live or replay webcast, a
link is available at www.ligand.com.

About Ligand Pharmaceuticals

Ligand is a biopharmaceutical company focused on developing or acquiring
technologies that help pharmaceutical companies discover and develop
medicines. Our business model creates value for stockholders by
providing a diversified portfolio of biotech and pharmaceutical product
revenue streams that are supported by an efficient and low corporate
cost structure. Our goal is to offer investors an opportunity to
participate in the promise of the biotech industry in a profitable,
diversified and lower-risk business than a typical biotech company. Our
business model is based on doing what we do best: drug discovery,
early-stage drug development, product reformulation and partnering. We
partner with other pharmaceutical companies to leverage what they do
best (late-stage development, regulatory affairs and commercialization)
to ultimately generate our revenue.

Ligand’s Captisol® platform technology is a patent-protected,
chemically modified cyclodextrin with a structure designed to optimize
the solubility and stability of drugs. OmniAb® is a
patent-protected transgenic animal platform used in the discovery of
fully human mono- and bispecific therapeutic antibodies. Ligand has
established multiple alliances, licenses and other business
relationships with the world’s leading pharmaceutical companies
including Novartis, Amgen, Merck, Pfizer, Celgene, Gilead, Janssen,
Baxter International and Eli Lilly. For more information, please visit www.ligand.com.

Follow Ligand on Twitter @Ligand_LGND.

Forward-Looking Statements

This news release contains forward-looking statements by Ligand that
involve risks and uncertainties and reflect Ligand’s judgment as of the
date of this release. Words such as “plans,” “believes,” “expects,”
“anticipates,” and “will,” and similar expressions, are intended to
identify forward-looking statements. These forward-looking statements
include, without limitation, statements regarding: Ligand’s belief that
Promacta is or will remain a market leading medicine, the length of
patent protection for Promacta, Ligand’s belief regarding the
diversified nature of its business, Ligand’s future revenue, the growth
of future royalty streams, Ligand’s entry into new license or partnering
agreements, the timing of the initiation or completion of preclinical
studies and clinical trials by Ligand and its partners, the timing of
product launches by Ligand or its partners, and guidance regarding the
full-year 2019 financial results.

Contacts

Ligand Pharmaceuticals Incorporated
Todd Pettingill
Email: investors@ligand.com
Phone:
(858) 550-7893
Twitter: @Ligand_LGND

LHA Investor Relations
Bruce Voss
Email: bvoss@lhai.com
Phone:
(310) 691-7100

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