LIGAND PHARMACEUTICALS INCORPORATED

(LGND)
  Report
Delayed Nasdaq  -  05/23 04:00:00 pm EDT
83.51 USD   +0.76%
05/16Stephens Adjusts Ligand Pharmaceuticals' Price Target to $130 from $153, Keeps Overweight Rating
MT
05/09LIGAND PHARMACEUTICALS INC Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)
AQ
05/09Tranche Update on Ligand Pharmaceuticals Incorporated's Equity Buyback Plan announced on September 12, 2019.
CI
SummaryQuotesChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisions 
SummaryMost relevantAll NewsAnalyst Reco.Other languagesPress ReleasesOfficial PublicationsSector news

LIGAND PHARMACEUTICALS INC Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

11/09/2021 | 05:17pm EDT
Caution: This discussion and analysis may contain predictions, estimates and
other forward-looking statements that involve a number of risks and
uncertainties, including those discussed in Part II, Item 1A. Risk Factors. This
outlook represents our current judgment on the future direction of our business.
These statements include those related to our Captisol-related revenues and
manufacturing capacity, our Kyprolis and other product royalty revenues, the
impact of COVID-19, product returns, product development, and the potential
separation of the OmniAb business. Actual events or results may differ
materially from our expectations. For example, there can be no assurance that
our revenues or expenses will meet any expectations or follow any trend(s), that
we will be able to retain our key employees or that we will be able to enter
into any strategic partnerships or other transactions. We cannot assure you that
we will receive expected Kyprolis, Captisol and other product revenues to
support our ongoing business or that our internal or partnered pipeline products
will progress in their development, gain marketing approval or achieve success
in the market. In addition, ongoing or future arbitration, litigation or
disputes with third parties may have a material adverse effect on us. Such risks
and uncertainties, and others, could cause actual results to differ materially
from any future performance suggested. We undertake no obligation to make any
revisions to these forward-looking statements to reflect events or circumstances
arising after the date of this quarterly report. This caution is made under the
safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as
amended, or the Exchange Act.

We use our trademarks, trade names and services marks in this report as well as
trademarks, trade names and service marks that are the property of other
organizations. Solely for convenience, trademarks and trade names referred to in
this report appear without the ® and ™ symbols, but those references are not
intended to indicate, in any way, that we will not assert, to the fullest extent
under applicable law, our rights or that the applicable owner will not assert
its rights, to these trade marks and trade names.

References to "Ligand Pharmaceuticals Incorporated," "Ligand," the "Company,"
"we" or "our" include Ligand Pharmaceuticals Incorporated and our wholly-owned
subsidiaries.


Overview

We are a biopharmaceutical company focused on developing or acquiring
technologies that help pharmaceutical companies discover and develop medicines.
We employ research technologies such as antibody discovery technologies, ion
channel discovery technology, Pseudomonas fluorescens protein expression
technology, formulation science and liver targeted pro-drug technologies to
assist companies in their work toward securing prescription drug and biologic
approvals. We currently have partnerships and license agreements with over 130
pharmaceutical and biotechnology companies. Over 300 programs are in various
stages of commercialization, development or research and are fully funded by our
collaboration partners and licensees. We have contributed novel research and
technologies for approved medicines that treat cancer, osteoporosis, fungal
infections and postpartum depression, among others. Our collaboration partners
and licensees have programs currently in clinical development targeting cancer,
seizure, diabetes, cardiovascular disease, muscle wasting, liver disease, and
kidney disease, among others. We have over 1,400 issued patents worldwide.

We have assembled our large portfolio of fully-funded programs either by
licensing our own proprietary drug development programs, licensing our platform
technologies such as Captisol or OmniAb to partners for use with their
proprietary programs, or acquiring existing partnered programs from other
companies. Fully-funded programs, which we refer to as "shots on goal," are
those for which our partners pay all of the development and commercialization
costs. For our internal programs, we generally plan to advance drug candidates
through early-stage drug development or clinical proof-of-concept and then seek
partners to continue development and potential commercialization.

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 management and commercialization) to ultimately generate
our revenue. We believe that focusing on discovery and early-stage drug
development while benefiting from our partners' development and
commercialization expertise will reduce our internal expenses and allow us to
have a larger number of drug candidates progress to later stages of drug
development.

                                       26
--------------------------------------------------------------------------------


Our revenue consists of three primary elements: royalties from commercialized
products, sale of Captisol material, and contract revenue from license,
milestone and other service payments. In addition to discovering and developing
our own proprietary drugs, we selectively pursue acquisitions to bring in new
assets, pipelines, and technologies to aid in generating additional potential
new revenue streams.

Impact of COVID-19 Pandemic

For information on the various risks to our business posed by the COVID-19 pandemic, please read Item 1A. "Risk Factors" included in this report and in our 2020 Annual Report.


Portfolio Program Updates

OmniAb® Platform Updates

OmniAb is our industry-leading, BI- (Biological Intelligence™) powered
multi-species antibody platform for the discovery of monospecific and bispecific
therapeutic human antibodies. 2020 was a year of major investment in OmniAb with
the acquisition and development of multiple technologies that enhance the
offering for partners, including the addition of antigen-generation services as
well as deep-sequence analysis of functional antibody repertoires. As of
September 30, 2021, 19 different OmniAb-derived antibodies have been studied in
approximately 84 active or completed clinical trials.

Gloria Biosciences received approval from China's National Medical Products
Administration (NMPA) for zimberelimab (GLS-010), an OmniAb-derived anti-PD-1
monoclonal antibody for the treatment of recurrent or refractory classical
Hodgkin's lymphoma. Gloria Biosciences holds development and commercialization
rights in China with respect to zimberelimab through a sublicense agreement with
Ligand's licensee Wuxi Biologics Ireland Limited. Zimberelimab is the first
OmniAb-derived antibody to receive regulatory approval.

CStone Pharmaceuticals presented the clinical data in a late-breaking abstract
at ESMO Congress 2021 from the GEMSTONE-301 trial, a registrational study of
OmniAb-derived sugemalimab in the treatment of patients with stage III non-small
cell lung cancer (NSCLC). The data for sugemalimab as a consolidation therapy
demonstrated a statistically significant and clinically meaningful improvement
in progression-free survival (PFS). Sugemalimab was well-tolerated with no new
safety signals. CStone also presented updated data from the registrational study
of sugemalimab in patients with stage IV NSCLC in a late-breaking oral
presentation at the IASLC 2021 World Conference on Lung Cancer. The final
analysis confirmed the efficacy and safety demonstrated in the interim analysis,
showing that sugemalimab plus chemotherapy was associated with a significant
improvement of PFS as first-line treatment in patients with both squamous and
non-squamous metastatic NSCLC. Additionally, the estimated 2-year overall
survival rate was nearly 50%. NDAs for sugemalimab in patients with metastatic
stage IV NSCLC and in patients with locally advanced/unresectable stage III
NSCLC have been accepted by China's NMPA and are currently under review.

Aptevo Therapeutics announced positive Phase 1 data showing some patients with
relapsed acute myeloid leukemia (AML) or myelodysplastic syndrome (MDS) achieved
a remission with APVO436 after failing 1-8 lines of prior therapies. Aptevo
Therapeutics presented a poster at the Congress on Controversies in Leukemias on
the Phase 1B data obtained so far. Additional data was published in the
peer-reviewed journal, Cancers, showing the risk of cytokine release syndrome is
low for blood cancer patients treated with APVO436. APVO436 is an OmniAb-derived
bispecific antibody targeting CD123 and CD3 for the treatment of hematological
malignancies.

Harbour BioMed announced dosing of the first patient in the registrational Phase
3 trial with batoclimab (HBM9161), its OmniAb-derived anti-FcRn monoclonal
antibody, for the treatment of generalized myasthenia gravis (gMG). This study
aims to assess the efficacy and safety of batoclimab in patients with gMG in
China. Harbour BioMed also announced dosing of the first patient in the Phase 2
clinical trial in China of batoclimab for the treatment of thyroid eye disease.
Harbour BioMed licensed batoclimab from HanAll Biopharma and has the right to
develop, manufacture and commercialize in Greater China (including Hong Kong,
Macau and Taiwan).

OmniAb partnered with LandingAI to incorporate an industry leading LandingLens™
visual inspection software platform to strengthen the xPloration™ deep screening
platform using AI and computer vision.

During the third quarter of 2021, we entered into an OmniAb licensing agreement with Pierre Fabre.



                                       27
--------------------------------------------------------------------------------

Pelican Platform Updates


The Pelican Expression Technology™ is our proprietary Pseudomonas fluorescens
protein expression technology that has major collaborations with Jazz
Pharmaceuticals, Merck, Serum Institute of India and Alvogen, each of which has
potential to contribute meaningfully to our royalty revenue.

Merck announced VAXNEUVANCE™ met key immunogenicity and safety endpoints in a
Phase 3 pivotal trial evaluating use in infants. The FDA approved VAXNEUVANCE
for adults 18 years of age and older in July and Merck has submitted a
supplemental regulatory licensure application to the FDA for use in children. On
October 20, 2021, the Center for Disease Control's committee on immunization
practices provisionally recommended vaccination either with a sequential regimen
of VAXNEUVANCE followed by PNEUMOVAX23, or with a single dose of 20-valent
pneumococcal conjugate vaccine for adults 65 years and older, and for adults
ages 19 to 64 with certain underlying medical conditions or other disease risk
factors.

Jazz Pharmaceuticals announced the National Comprehensive Cancer Network added
Rylaze™ to its Clinical Practice Guidelines in Oncology as a treatment option
for both pediatric and adult acute lymphoblastic leukemia patients with
hypersensitivity to E. coli asparaginase products as a component of the
multi-agent chemotherapeutic regimen.

Captisol® Business Updates

Marinus announced a collaboration with Orion Corporation for European commercialization of Captisol-enabled ganaxolone. Ganaxolone IV is being investigated in a randomized, placebo-controlled Phase 3 trial for refractory status epilepticus, with data readout expected in the second half of 2022.


Takeda announced the Phase 3 PANTHER trial studying pevonedistat plus
azacytidine as first-line treatment for patients with higher-risk MDS, chronic
myelomonocytic leukemia and low-blast AML did not achieve pre-defined
statistical significance for the primary endpoint of event-free survival. Takeda
plans to submit full data results for presentation at an upcoming medical
conference.

Other Business Updates


Travere Therapeutics announced positive topline interim results from the ongoing
Phase 3 PROTECT study of sparsentan in IgA nephropathy. Sparsentan treatment
demonstrated a statistically significant mean reduction of proteinuria from
baseline after 36 weeks, more than threefold the reduction of active comparator
irbesartan (p<0.0001). Travere held a Type A meeting with the U.S. FDA for
sparsentan in focal segmental glomerulosclerosis (FSGS) confirming plans to
submit additional data in the first half of 2022 as part of an accelerated
approval submission. Travere also announced the FDA concurred that the interim
analyses from the PROTECT Study support submission of an application for
accelerated approval, and that they expect to submit the NDA of sparsentan for
IgAN in the first quarter of 2022. Additionally, Travere and Vifor Pharma
entered into a licensing agreement for the commercialization of sparsentan in
Europe, Australia and New Zealand. Travere plans to submit a combined IgAN and
FSGS MAA application for conditional marketing authorization of sparsentan in
Europe in mid-2022.

We entered into a collaboration agreement with China Resources Double-Crane for
exclusive Asia rights to develop a novel investigational oral COVID-19 antiviral
therapeutic compound using our BEPro technology. BEPro is a proprietary prodrug
technology for the development of compounds with improved product profiles. We
had generated preclinical pharmacokinetics data showing its oral BEPro-enabled
COVID-19 antivirals have favorable blood concentration profiles and generated
lower levels of active nucleotide in the kidney, a potential site for toxicity,
compared with other oral and intravenous compounds.

Sermonix Pharmaceuticals announced completion of enrollment in the Phase 2
ELAINE 1 randomized trial assessing oral lasofoxifene versus intramuscular
fulvestrant for the treatment of ER+/HER2- breast cancer in patients with an
ESR1 mutation. Sermonix expects data from the trial to be reported in the first
half of 2022. Lasofoxifene is also being studied in a separate fully-enrolled
trial, ELAINE 2, in combination with Eli Lilly and Company's CDK4 and 6
inhibitor Verzenio® (abemaciclib). Topline data are also expected in the first
half of 2022.


Results of Operations

                                       28
--------------------------------------------------------------------------------

Revenue

(Dollars in thousands)              Q3 2021           Q3 2020           Change             % Change            YTD 2021           YTD 2020           Change             % Change
Royalties                         $ 15,648          $  9,005          $  6,643                   74  %       $  31,376          $  22,751          $  8,625                   38  %
Captisol                            35,093            23,389            11,704                   50  %         128,875             68,966            59,909                   87  %
Contract revenue                    14,094             9,454             4,640                   49  %          44,409             24,712            19,697                   80  %
Total revenue                     $ 64,835          $ 41,848          $ 22,987                   55  %       $ 204,660          $ 116,429          $ 88,231                   76  %



Royalty revenue is a function of our partners' product sales and the applicable
royalty rate. Kyprolis royalty rates are under a tiered royalty rate structure
with the highest tier being 3.0%. Evomela has a fixed royalty rate of 20%.
Contract revenue includes service revenue, license fees and development,
regulatory and sales based milestone payments.

The following table represents royalty revenue by program:

                              Q3 2021 Estimated                                           Q3 2020 Estimated
                               Partner Product   Effective Royalty Q3 2021 Royalty         Partner Product   Effective Royalty  Q3 2020 Royalty
(in millions)                       Sales              Rate            Revenue                  Sales              Rate             Revenue
Kyprolis                      $         312.3               2.8  % $         8.8          $         277.2               2.5  % $          6.9
Evomela                                  13.3              20.0  %           2.7                      9.0              20.0  %            1.8
Other                                    59.7               7.0  %           4.2                     45.6               0.6  %            0.3
Total                         $         385.3                      $        15.6          $         331.8                      $          9.0



                                  YTD 2021
                              Estimated Partner Effective Royalty YTD 2021 Royalty       YTD 2020 Partner  Effective Royalty YTD 2020 Royalty
(in millions)                   Product Sales         Rate            Revenue              Product Sales         Rate            Revenue
Kyprolis                      $        842.5               2.2  % $        18.5          $        832.3               2.0  % $        16.8
Evomela                                 36.0              20.0  %           7.2                    22.9              20.0  %           4.6
Other                                  131.5               4.3  %           5.6                   132.2               1.0  %           1.4
Total                         $      1,010.0                      $        31.3          $        987.4                      $        22.8



Q3 2021 vs. Q3 2020

Total revenue increased by $23.0 million, or 55%, to $64.8 million in Q3 2021
compared to $41.8 million in Q3 2020 primarily reflecting higher sales of
Captisol for use in the manufacturing of remdesivir. Royalties and contract
revenue increased in Q3 2021 compared to Q3 2020, with the increase primarily
attributable to the additional revenue from our Pfenex acquisition in October
2020 as well as an increase in partner product sales of Kyprolis and Evomela.

YTD 2021 vs. YTD 2020


Total revenue increased by $88.2 million, or 76%, to $204.7 million in YTD 2021
compared to $116.4 million in the same period last year primarily reflecting
higher sales of Captisol for use in the manufacturing of remdesivir. Contract
revenue increased in YTD 2021 compared to the same period last year, with the
increase primarily attributable to the additional contract revenue of $8.0
million and $8.5 million from the acquisitions of Icagen in April 2020 and
Pfenex in October 2020, respectively. An increase in partner product sales of
Kyprolis and Evomela as well as the acquisition of Pfenex contributed to the
increase in royalty revenue from the same period in 2020.

Operating Costs and Expenses
(Dollars in thousands)           Q3 2021          % of Revenue          Q3 2020          % of Revenue          YTD 2021          % of Revenue          YTD 2020          % of Revenue
Cost of Captisol               $ 11,446                               $  6,353                               $  50,192                               $  18,680
Amortization of intangibles      11,827                                  3,875                                  35,391                                  11,285
Research and development         16,938                                 12,853                                  50,769                                  37,476
General and administrative       12,718                                 15,020                                  39,747                                  34,353
Other operating income           (3,800)                                     -                                 (37,600)                                      -
Total operating costs and
expenses                       $ 49,129               76%             $ 38,101               91%             $ 138,499               68%             $ 101,794               87%



Q3 2021 vs. Q3 2020

                                       29
--------------------------------------------------------------------------------


Total operating costs and expenses during Q3 2021 increased by $11.0 million, or
29%, compared to Q3 2020 primarily due to additional operating costs
attributable to Pfenex, which we acquired on October 1, 2020, as well as an
increase in Captisol sales for the current period. The increase was partially
offset by a $3.8 million non-cash valuation adjustment recorded in the third
quarter of 2021 to eliminate the remaining Pfenex CVR liability. See additional
information on the Pfenex CVR liability in Note 2, Fair Value Measurements.

Cost of Captisol increased primarily due to higher Captisol sales during Q3 2021
compared to Q3 2020. Cost of Captisol as a percentage of Captisol revenue was
33% in Q3 2021 compared to 27% in Q3 2020, with the increase primarily due to
amortization of capacity expansion payments to our supplier of Captisol during
Q3 2021.

Amortization of intangibles increased in Q3 2021 compared to the same period in 2020 primarily due to the amortization of contractual relationships and technologies acquired from Pfenex in October 2020.


At any one time, we are working on multiple programs. As such, we generally do
not track our R&D expenses on a specific program basis. Our R&D expenses
increased year over year in Q3 2021 due to the $3.8 million costs associated
with our Pfenex acquisition, which primarily consisted of salaries and lab
costs.

General and administrative expenses decreased in Q3 2021 compared to the same
period in 2020 primarily due to the acquisition and integration costs incurred
in Q3 2020, partially offset by the additional expenses from the Pfenex
acquisition as well as increased share-based compensation expense.

Other operating income in Q3 2021 included a $3.8 million non-cash valuation
adjustment to reduce the Pfenex CVR liability. The decrease in Pfenex CVR
liability is due to an expected lower probability of achieving the required
milestone under the Pfenex CVR Agreement, which provides for payment to Pfenex
CVR holders upon notice from the FDA that teriparatide injection receives an "A"
therapeutic equivalence designation relative to the listed drug FORTEO by
December 31, 2021. Based on feedback from the FDA, our commercial partner,
Alvogen, will perform and submit to the FDA the results from an assessment to
address concerns relating to potential innate immunogenicity, reducing the
probability of achieving the milestone by December 31, 2021. There were no items
recorded in other operating income in Q3 2020.

YTD 2021 vs. YTD 2020


Total operating costs and expenses during YTD 2021 increased by $36.7 million,
or 36%, compared to YTD 2020 primarily due to additional operating costs
attributable to Icagen and Pfenex, as well as higher Captisol sales during YTD
2021. The increases were partially offset by a $37.6 million non-cash valuation
adjustment to reduce the Pfenex CVR liability. See additional disclosure on the
Pfenex CVR liability in Note 2, Fair Value Measurements.

Cost of Captisol increased primarily due to higher Captisol sales during YTD
2021 compared to YTD 2020. Cost of Captisol as a percentage of Captisol revenue
was 39% in YTD 2021 compared to 27% in YTD 2020, with the increase primarily due
to the significant sales to the Gilead consortium partners in India who had
sales prices lower than other customers during the second quarter of 2021.

Amortization of intangibles increased in YTD 2021 compared to the same period in 2020 primarily due to the amortization of contractual relationships and technologies acquired from Icagen in April 2020 and Pfenex in October 2020.


At any one time, we are working on multiple programs. As such, we generally do
not track our R&D expenses on a specific program basis. Our R&D expenses
increased year over year in YTD 2021 due to the $13.0 million costs associated
with our Pfenex acquisition, which primarily consisted of salaries and lab
costs.

General and administrative expenses increased in YTD 2021 compared to the same period in 2020 primarily due to the additional expenses from the Pfenex and Icagen acquisitions as well as increased share-based compensation expense.


Other operating income in YTD 2021 primarily included a $37.6 million non-cash
valuation adjustment to eliminate the Pfenex CVR liability during YTD 2021 as
mentioned above. There were no items recorded in other operating income in YTD
2020.

                                       30
--------------------------------------------------------------------------------

Other Income (Expense)
(Dollars in thousands)           Q3 2021           Q3 2020            Change            YTD 2021           YTD 2020           Change
Gain (loss) from short-term
investments                     $ 1,937          $  (9,862)         $ 11,799          $   8,135          $ (17,143)         $ 25,278
Interest income                     169                991              (822)               698              7,690            (6,992)
Interest expense                 (4,439)            (6,269)            1,830            (15,154)           (21,030)            5,876
Other income (expense), net       1,886               (219)            2,105             (5,516)             1,940            (7,456)
Total other income (expense),
net                             $  (447)         $ (15,359)         $ 14,912          $ (11,837)         $ (28,543)         $ 16,706



Q3 2021 vs. Q3 2020

The fluctuation in the gain (loss) from short-term investments is primarily
driven by the changes in the fair value of our ownership in Viking common stock
and warrants (an unrealized gain of $1.6 million in Q3 2021 as compared to an
unrealized loss of $11.7 million in Q3 2020).

Interest income consists primarily of interest earned on our short-term investments. The decrease over the prior period was due to the decrease in our short-term investment balance.


Interest expense includes the 0.75% coupon cash interest expense in addition to
the non-cash accretion of discount (including the amortization of debt issuance
cost) on our 2023 Notes for the three months ended September 30, 2021. The
decrease was primarily due to a lower average debt outstanding balance during Q3
2021 as compared to Q3 2020. During the nine months ended September 30, 2021, we
repurchased $152.0 million in principal of the 2023 Notes for $156.0 million in
cash, including accrued interest of $0.3 million. See Note 4, Convertible Senior
Notes.
Other income (expense), net, in Q3 2021 increased by $2.1 million as compared to
Q3 2020, due primarily to a $2.0 million reduction in fair value adjustment of
Metabasis and Icagen CVRs during Q3 2021. See Note 2, Fair Value Measurements.

YTD 2021 vs. YTD 2020


The fluctuation in the gain (loss) from short-term investments is primarily
driven by the changes in the fair value of our ownership in Viking common stock
and warrants (an unrealized gain of $2.4 million in YTD 2021 as compared to an
unrealized loss of $17.9 million in YTD 2020).

Interest income consists primarily of interest earned on our short-term investments. The decrease over the prior period was due to the decrease in our short-term investment balance.


Interest expense includes the 0.75% coupon cash interest expense in addition to
the non-cash accretion of discount (including the amortization of debt issuance
cost) on our 2023 Notes for the nine months ended September 30, 2021. The
decrease was primarily due to a lower average debt outstanding balance during
YTD 2021 as compared to YTD 2020. During the nine months ended September 30,
2021, we repurchased $152.0 million in principal of the 2023 Notes for $156.0
million in cash, including accrued interest of $0.3 million. See Note 4,
Convertible Senior Notes.
Other income (expense), net, in YTD 2021 included a $7.3 million loss on debt
extinguishment in connection with the 2023 Notes repurchase during the nine
months ended September 30, 2021.


Income Tax Benefit (Expense)
(Dollars in thousands)           Q3 2021           Q3 2020            Change           YTD 2021           YTD 2020           Change
Income (loss) before income
taxes                          $ 15,259          $ (11,612)         $ 26,871          $ 54,324          $ (13,908)         $ 68,232
Income tax benefit (expense)     (1,536)             4,911            (6,447)            8,230              5,162             3,068
Income (loss) from operations  $ 13,723          $  (6,701)         $ 20,424          $ 62,554          $  (8,746)         $ 71,300
Effective tax rate                 10.1  %            42.3  %                            (15.1) %            37.1  %



We compute our income tax provision by applying the estimated annual effective
tax rate to income from operations and adding the effects of any discrete income
tax items specific to the period. The effective tax rate for the three and nine
months ended September 30, 2021 was 10.1% and (15.1)%, respectively. The
variance from the U.S. federal statutory tax rate of 21%
                                       31
--------------------------------------------------------------------------------


for the three and nine months ended September 30, 2021 was significantly
impacted by tax benefits related to (1) a $3.8 million and $37.6 million
associated with the Pfenex CVR adjustment recorded during the third and second
quarters of 2021, respectively, due to the lower probability of achieving the
specific development and regulatory milestone by December 31, 2021 as defined by
the Pfenex CVR, and (2) net excess tax windfalls from share-based compensation
resulting from increased stock option exercise activity. The effective tax rate
for the three and nine months ended September 30, 2020 was 42.3% and 37.1%,
respectively. The variances from the U.S. federal statutory tax rate of 21% for
the three and nine months ended September 30, 2020 were primarily attributable
to the mix of earnings in the jurisdictions with lower statutory rates than the
U.S. offset by tax deductions related to stock award activities and tax
deductions related to foreign derived intangible income tax credits.

Liquidity and Capital Resources


As of September 30, 2021, our cash, cash equivalents, and short-term investments
totaled $323.2 million, which decreased by $88.0 million from the end of last
year due to factors described in the Cash Flow Summary below. Our primary source
of liquidity, other than our holdings of cash, cash equivalents, and short-term
investments, has been cash flows from operations. Our ability to generate cash
from operations provides us with the financial flexibility we need to meet
operating, investing, and financing needs.

Historically, we have liquidated our short-term investments and/or issued debt
and equity securities to finance our business needs as a supplement to cash
provided by operating activities. Our short-term investments include U.S.
government debt securities, investment-grade corporate debt securities, mutual
funds and certificates of deposit. We have established guidelines relative to
diversification and maturities of our investments in order to provide both
safety and liquidity. These guidelines are periodically reviewed and modified to
take advantage of trends in yields and interest rates. Additionally, we own
certain securities which are classified as short-term investments that we
received as a result of a milestone and an upfront license payment as well as
6.7 million shares of common stock in Viking.

In May 2018, we issued an aggregate principal amount of $750.0 million of the
2023 Notes. In conjunction of the 2023 Notes offering, we used a portion of the
proceeds from such issuance totaling $49.7 million to repurchase 260,000 shares
of our common stock. During the nine months ended September 30, 2021, we
repurchased $152.0 million in principal of the 2023 Notes for $156.0 million in
cash, including accrued interest of $0.3 million. After the repurchases, $343.3
million in principal amount of the 2023 Notes remain outstanding. We may
continue to use cash on hand to repurchase additional 2023 Notes through
open-market transactions, including through Rule 10b5-1 trading plans to
facilitate open-market repurchases, or otherwise, from time to time. The timing
and amount of repurchase transactions will be determined by management based on
the evaluation of market conditions, trading price of the 2023 Notes, legal
requirements and other factors. The 2023 Notes were not convertible as of
September 30, 2021. It is our intent and policy to settle conversions through
combination settlement, which essentially involves payment in cash equal to the
principal portion and delivery of shares of common stock for the excess of the
conversion value over the principal portion. See Note 4, Convertible Senior
Notes.

We believe that our existing funds, cash generated from operations and existing
sources of and access to financing are adequate to fund our need for working
capital, capital expenditures, debt service requirements, continued advancement
of research and development efforts, potential stock repurchases and other
business initiatives we plan to strategically pursue, including acquisitions and
strategic investments.

As of September 30, 2021, we had $9.4 million in fair value of contingent consideration liabilities associated with prior acquisitions to be settled in future periods.

Leases and Off-Balance Sheet Arrangements


We lease our office facilities under operating lease arrangements with varying
terms through March 2032. In addition, we signed our new Emeryville headquarter
expansion leases and Icagen leases during the nine months ended September 30,
2021 as discussed below under the "Contractual Obligations" section. The lease
agreements provide for increases in annual rents based on changes in the
Consumer Price Index or fixed percentage increases between 3.0% to 4.0%. See
Note 8, Leases. We had no off-balance sheet arrangements at September 30, 2021
and December 31, 2020.
                                       32
--------------------------------------------------------------------------------



Cash Flow Summary
(Dollars in thousands)                YTD 2021        YTD 2020

Net cash provided by (used in):

 Operating activities               $   51,156      $   54,049
 Investing activities               $   66,236      $  613,850
 Financing activities               $ (141,925)     $ (283,016)



During the nine months ended September 30, 2021, we repurchased $152.0 million
in principal of the 2023 Notes for $156.0 million in cash, including accrued
interest of $0.3 million. During the nine months ended September 30, 2020, we
repurchased $234.4 million in principal of the 2023 Notes for $203.8 million in
cash, including accrued interest of $0.6 million, used $73.3 million to
repurchase our common stock, paid $15.1 million in cash for the Icagen
acquisition, and a total of $11.6 million in cash for xCella and Taurus
acquisitions.

Contractual Obligations


There have been no material changes outside the ordinary course of business to
the Contractual Obligations table set forth in our 2020 Annual Report, other
than the addition to our operating lease liabilities (adjusted for the lease
incentives) for the portion of the new leases with a starting accounting
commencement date during the nine months ended September 30, 2021. See Note 8,
Leases.

Critical Accounting Policies

Certain of our policies require the application of management judgment in making
estimates and assumptions that affect the amounts reported in our consolidated
financial statements and the disclosures made in the accompanying notes. Those
estimates and assumptions are based on historical experience and various other
factors deemed applicable and reasonable under the circumstances. The use of
judgment in determining such estimates and assumptions is by nature, subject to
a degree of uncertainty. Accordingly, actual results could differ materially
from the estimates made. There have been no material changes in our critical
accounting policies and estimates as compared to the critical accounting
policies and estimates described in our 2020 Annual Report, other than the
adoption of the Accounting Standards Updates described in Item 1. Condensed
consolidated Financial Statements - Note 1, Basis of Presentation and Summary of
Significant Accounting Policies, related to allowance for credit losses.

© Edgar Online, source Glimpses

All news about LIGAND PHARMACEUTICALS INCORPORATED
05/16Stephens Adjusts Ligand Pharmaceuticals' Price Target to $130 from $153, Keeps Overweig..
MT
05/09LIGAND PHARMACEUTICALS INC Management's Discussion and Analysis of Financial Condition..
AQ
05/09Tranche Update on Ligand Pharmaceuticals Incorporated's Equity Buyback Plan announced o..
CI
05/04LIGAND : Q1 Earnings Snapshot
AQ
05/04TRANSCRIPT : Ligand Pharmaceuticals Incorporated, Q1 2022 Earnings Call, May 04, 2022
CI
05/04Earnings Flash (LGND) LIGAND PHARMACEUTICALS INCORPORATED Posts Q1 Revenue $45.7M, vs. ..
MT
05/04Earnings Flash (LGND) LIGAND PHARMACEUTICALS INCORPORATED Posts Q1 EPS $0.58
MT
05/04Ligand Reports First Quarter 2022 Financial Results
BU
05/04Ligand Pharmaceuticals Incorporated Reports Earnings Results for the First Quarter Ende..
CI
05/04Ligand Pharmaceuticals Incorporated Reaffirms Revenue Guidance for the Year 2022
CI
More news
Analyst Recommendations on LIGAND PHARMACEUTICALS INCORPORATED
More recommendations