Ligand $LGND notes from 6/23 Analyst Day

• Ligand held an Investor and Analyst day on June 23rd
• Check out the Past Events page to access the webcast link and download slides from the presentations
• Visit the LGND Research notes page for complete info on LGND products and portfolio
• Topics discussed include:

1. Promacta is a "now" story- codiscovered with GSK in mid 1990s
   
2. Featured segment: thrombocytopenia in HepC - guest speaker and clinical trial leader Dr Nezam Afdhal
   
3. breakout session #1 lab expt to show what captisol can do 
   
4. breakout session #2 LGND portfolio -  "shots on goal" strategy...want large portfolio with multiple molecules and multiple therapeutics areas
   

• Want to fail fast, have go/no go decisions early. Company is very judicious in what decide to fund internally
• In 2011, 8 products paying royalty or material sales revenues (new language parsing? )
• Cydex acquisition double portfolio to >60 programs
• See below the jump for the rest of my (long-winded) notes:

• Directors have bought >$1.2m in stock in past 6 months and own 10% of company
• Matt Foehr joined from GSK recently as COO
• HCV data expected by ye 2011 from GSK
• projected to turn profitable by ye2011, lowest cost structure in company's history
• internal pipeline: highlighted SARM, diabetes, JAK3, melphalan
• almost $0.5b in NOLs as turn profitable
• 2012 core assets early in rev life cycle predicted to make up >$30m rev total - promacta, avinza, conbriza, nexterone, carfilzomib
• 2015 grow to >$200m rev -  add aprela, cxcr2, clopidogrel, melphalan, carbamazepine, merck captisol program
• these rev #'s exclude license fees, etc
• Promacta- expect royalties for another 14 yrs thru 2025
• >50 fully funded partner programs. royalties range 1-16%...most abundant with MRK, PFE, GSK
• >60 total, 10 therapeutics areas. 4 pgms receive internal focus
• melphalan- expect to take to NDA in about 2 yr time range (possibly launch themselves)
• JAK3 topical and ocular - targeting dermatology and ophthalmology . could be attractive for partnering
• 4 diabetes programs discovery thru early clinical
• selected upcoming milestones:

3q11 - carfilzomib NDA filing
3q11 - platform captisol partnership (didn't elaborate)
4q11 - promacta HCV data
4q11 - Aprela NDA filing
4q11 - SARM program update (didn't elaborate)
1q12 - initiate pivotal Melphalan study
1q12 - top line IL9 p2 data
1q12 - clopidogrel 505b2 study initiation
2q12 - MRK CXCR2 COPD study completion
2q12 - Carfizomib NDA approval
2q12 - Promacta sNDA filing for HCV

COO presentation - former head of GSK dermatology R&D group

• Cydex - provides high-return internal, late stage programs
• 70-90% of drugs in large pharma pipelines have solubility issues. considered to be leading challenge in drug development (source: CEN 2010)
• Captisol can increase solubility, reduce site rxns, is versatile across molecule families and varied compound sizes. Safe, ianctive, inert, experience in >100 clinical studies
• Formulation and process-based patents thru 2029
• Manufactured by Hovione - multiple sites can deliver, plenty of capacity
• Examples of how marketed products benefited from Captisol technology:

Vfend: inc'd solubility 50x and enabled IV formulation for invasive fungal infections
Abilify: inc solubility 7500x, reduce site rxns from other excipients, solved drug precip issues to extend shelf life for manic bipolar
Geodon: inc solubility 150,000x
Cerenia: inc solubility 4x, provided injection site tolerance
Nexterone: remove co-solvents linked to AEs and drug incompatibilities, enabled ready to use formulation
Carfilzomib: inc solubility >2000x, facilitated therapeutic dose establishment

• Looking to expand the ways in which htye partner around captisol - broader platform relationships
• High returns from internal pgms that can be taken end to end w/ modest investment. Will take selected products forward
• Reformulation can truly bring meaningful innovation to established medicines  - often can be 505b2 path - can use existing data (own or other companies'), lower devel costs, shorter timelines, smaller infrastructure requirements
• Melphalan pgm has rec'd orphan drug status  -PDUFA fee waiver and 7 yrs market exclusivity 
• dosing is complete (preliminary data from first 15 pts presented at ASCO)

Rick White (from Cydex) VP BD and marketing

• Melphalan for multiple myeloma (MM). 50k US pts living now, 20k diagnosed annually
• Autologous stem cell transplant (take out cells, then high dose chemo, the re-infuse cells) is key treatment for mid-stage disease (slide 33 disease progression). "Condition" w/ melphalan (GSK sells the brand name product Alkaran). LGND product has increased stability (go from 60 min to 24 hrs). Drs want to be able to do longer/intermittent infusion, higher absolute cumulative dosing. Hope to improve remission rates. 
• Get rid of toxic propylene glycol (PG)- causes reactions including CV, renal toxicities, cardiac suppression/arrhythmia in vulnerable pt population
• $85m annual melphalan sales. 80% of this in MM conditioning (currently off-label). Orphan drug label will be for autologous bone marrow transplant conditioning (broadly, not just MM)
• Feel there are few regulatory barriers for this program. Not willing to talk about market share and sales potential yet, but why wouldn't it replace the current product introduced in 1993
• "ultra niche" call universe. ~200 transplant ctrs in US (majority of procedures done on outpatient basis). 30-35 are highly influential and do >50% of transplants - focus at those sites. Can be effective with lean sales organization (well under 50, handful of MSL, small marketing organization). "Too good to turn over to 3rd party at this time"
• Have now fully enrolled p2 trial with 24 pts: receive one day each of alkaran and captisol-enabled, PG-free (randomize order). primarily PK work. full data 4q2011
• Pivotal trial- design has been reviewed by FDA. 60 pts safety pt extension study (all will get PG-free format.) It is hard to predict enrollment. but anticipate possible to file NDA mid 2013.
• This product doesn't overlap with the expensive development programs ongoing in MM
• Have orphan drug status plus good IP around the product

Rob McKay Sr Dir, BD and IR - Promacta highlights

• 10 potential new approvals in next 4 yrs. >25 different partners
• Promacta in focus now. Next layer avinza/carfilzomib/aprela/nexterone/cxcr2/viviant
• Promacta is once-daily medicine that activates thrompoietin (TPO) receptor and causes platelet production to increase (raise levels in blood)
• next generation molecule was also licensed to GSK in 2008 - listed as p2 on GSK pipeline GSK-5921
• Already approved in all major markets for ITP, sold by premier company, LGND receives 5-10% royalties
• Expect waves of new indications over 14 remaining yrs patent protection (july 2025) - hepC then oncology (11 p1 and p2 trials ongoing) then others
• Recent launches in japan, EU, south america. 1q11 more than doubled sales from 1q10.
• There is now signifcantly better long term safety data on the FDA label after full approval
• Need good partners (GSK) - far beyond cost that LGND could afford
• Slide 43: complex thombocytopenia market components - total of at least 1.6m pts in US. If Promacta penetrates 100k pts, that would result in $1b sales (8.3% blended royalty to ligand = $83m annually! HCV could come online in 2013. Will do >$100m in ITP sales this year alone. This program financially means way more to LGND than GSK

Nezam Afdhal - scientific advisor. involved in promacta clinical work

• Thrombocytopenia is a major factor in pts not achieving desired clinical outcome (estimate ~2m pts in US)
• Non-drug techniques to raise platelets - transfusion, splenectomy = costly, risky, inconvenient
• In Japan- practice is to do splenectomy before giving interferon drugs for liver disease
• Liver disease-associated thrombosis. Cell counts get to 20-40k/uL - not as low as ITP. Here, bleeding from thrombosis alone not as much of an issue. Prevalence of thrombocytopenia increases w/ disease severity and predicts 5 yr survival
• Peak HCV infection period was 1960s-1980s - almost doubling of pts with cirrhosis liver disease by 2015
• Normal liver: 2.3% rate of thrombocytopenia, fatty liver: 5.1%, Chronic hepatitis 20.3%, advanced liver disease: 31.8%
• 4% of pts in recent direct acting antivirals DAA trials for interferon based therapy (even if start with healthy levels). This effect is secondary to the drugs' mechanisms of action
• Promacta is oral once-daily tablet, increases megakaryocyte proliferation and differentiation, increases platelet count, has been well demonstrated in HCV pts. EPO-alpha and neupogen are injectable alternatives
• Key question: will there be a role for Promacta as move forward with HCV therapy? Still relevant? Long term safety?
• 10% of HCV pts have treatment-limiting thrombocytopenia - and they get worse outcomes (underlying disease and can't start/complete therapy)
• slide 53 - HCV treatment pipeline landscape
• 1st gen protease inhibitors recently approved in US, becoming part of tx paradigm (telaprevir, boceprevir)
• 2015-2016 is target to change treatment paradigm. Interferon/ribavarin/one DAA is current standard. Will move to IFN plus multiple DAA's over next 3-5 yrs. Final transition would be to IFN-free world w/ multiple combos of DAA to get highest cure rates
• telaprevir: increased cure rate from 44% to 75%, Its approval - take that first step to change landscape
• New proteease inhibitors - get Dr to try to treat in pts with more severe liver disease - as they are most likely to benefit (9% SVR severe, 25% SVR moderate liver disease now). the new drugs do not treat underlying thrmbocytopenia. So as long as IFN therapy exists, pt population for promacta is growing
• NEJM publication - Promacta in HCV pts with thromocytopenia. Slide 58 shows trial design.  Got 74-95% of pts to 70-100k platelet count needed for treatment initiation vs 0% on placebo. 36-65% on Promacta completed therapy vs 6% placebo. On highest dose, many pts rose to >200k before initiating therapy. No evidence of significant liver or thromboembolic events in this trial
• Ongoing: ENABLE1&2 phase 3 trials. ribavirin plus PEGASYS or PEG-intron. Add Promacta to treat IFN-induced thrombocytopenia.
• Drug is not metablized via cytochrome p450. Don't know if it intereacts with protease inhibitors, but unlikely
• Slide 65 shows trial design: all get open label promacta -dose escalation to get cell counts to 90-100k, then withdrawn. Then start therapy (2:1 randomized to stay on promacta vs palcebo). Primary endpoint is SVR at 24 weeks (nondetectable HCV RNA). 26 countries, >250 ctrs, 3 regions
• Prior ELEVATE trial raised safety concerns (pts received highest dose- counts were below 50k before trial, given for 2 weeks, then have invasive procedure - succesfully raised counts and avoided transfusions - primary endpoint,): saw increased risk of thrombotic events in Promacta arm (6 events vs 2 events - 4% vs 1%). Study was stopped because endpts reached. All events occurred at very high platelet count - had more to do w/ the high risk invasive procedure than the drug
• This finding led to requirement for both p3 trials have DSMB monitor this closely, but both extended length trials nearing completion without any issue

John Sharp (CFO) - financial highlights

• 2011- business performing as expected in guidance. sticking with guidance for now. Current guidance excludes new deals. Narrowing expense range to high end of $20m
• Positive cash flow by 4q2011, ye2011 will have about $20m cash balance
• COGS driven by product mix (clinical vs commercial)...revise guidance from 35% to 40% b/c more commercial product percentage
• Expenses about 1/4 what they were 5 years ago
• Slide 80 now says 8x royalty-bearing products (no need for alarm from the note above)
• 50 partnered pgms..not all will drive revenue, but more shots on goal is better
• Slide 81 is a peek at 2013 - doubled revenue in 2 year, largely driven by royalties (high quality, growing, high margin revenue - material sales looked roughly unchanged - less reliance on lumpy milestones, etc)
• Net present value of NOLs is ~$100m ($5 per share), should reduce near-term tax rate to 2%
• $16m r&d tax credits, sometimes can be used to offset 1:1 for taxes owed