<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>2
<FILENAME>ex99-1.txt
<DESCRIPTION>PRESS RELEASE Q2 FINANCIALS
<TEXT>
EXHIBIT 99.1
Contact: Paul V. Maier
Senior Vice President
and Chief Financial Officer
858-550-7573
LIGAND ANNOUNCES FINANCIAL RESULTS FOR SECOND QUARTER OF FISCAL 2006
PRODUCT SALES INCREASE 13% IN SECOND QUARTER OF 2006 VERSUS PRIOR YEAR
SAN DIEGO, CA AUGUST 9, 2006---Ligand Pharmaceuticals Incorporated (NASDAQ:
LGND) (the "Company" or "Ligand") announced unaudited financial results for its
second quarter of fiscal year 2006.
Total revenues for the three months ended June 30, 2006 were $48.4
million compared to $45.8 million for the same 2005 period, an increase of 6%.
Net product sales for the three months ended June 30, 2006 were $47.3 million
compared to $41.7 million for the same period in 2005, an increase of 13%. Loss
from operations was $11.0 million for the three months ended June 30, 2006
compared to $6.5 million for the same 2005 period. Net loss for the quarter
ended June 30, 2006 was $16.0 million ($0.20 per share) compared to $8.9 million
($0.12 per share) for the same 2005 period. Net loss included the accretion and
reduction in net present value of the co-promote termination liability to fair
value as of June 30, 2006 of $3.1 million, relating to the termination of the
Organon co-promotion agreement. Excluding the effect in second quarter 2006 of
the Organon co-promotion agreement termination charges, adjusted net loss would
have been $12.9 million ($0.16 per share) in second quarter 2006.(1)
Total revenues for the six months ended June 30, 2006 were $99.4
million compared to $82.8 million for the same 2005 period, an increase of 20%.
Net product sales for the six months ended June 30, 2006 were $95.3 million
compared to $76.8 million for the same 2005 period an increase of 24%. Loss from
operations was $148.1 million for the six months ended June 30, 2006 compared to
$22.3 million for the same 2005 period. Loss from operations included one-time
termination charges of $132.5 million relating to the termination of the Organon
co-promotion agreement. Excluding the effect of the Organon co-promotion
agreement termination charges, adjusted loss from operations would have
decreased from $22.3 million in the first six months of 2005 to $15.6 million in
the first six months of 2006, an improvement of 30%. Net loss for the six months
ended June 30, 2006 was $158.2 million ($2.03 per share) compared to $27.4
million ($0.37 per share) for the same 2005 period. Net loss included
termination charges of $139.3 million including one time termination charges of
$132.5 million and the accretion of the co-promote termination liability to fair
value as of June 30, 2006 of $6.8 million, relating to the termination of the
Organon co-promotion agreement. Excluding the effect in the first six months of
2006 of the Organon co-promotion agreement termination charges, adjusted net
loss would have decreased from $27.4 million ($0.37 per share) in the first six
months of 2005 to $18.9 million ($0.24 per share) in the first six months of
2006, an improvement of 31%. (1)
--------------------------------------------------------------------------------
(1) Reconciliation of NON-GAAP financial measures to GAAP is presented at the
end of this release.
1
<PAGE>
"Ligand's continued product sales growth of 13% in the second quarter and 24% in
the first half of 2006 compared to the same periods in 2005 reflects strong
AVINZA net sales growth of 23% to $33.7 million in the second quarter 2006" said
Paul V. Maier, Ligand's senior vice president and chief financial officer. "The
improvement in product gross margins to 79% in the first half of 2006 compared
to 72% in the first half of 2005 continued the positive trend experienced in
2005. We ended the second quarter 2006 with total cash balances of $62.6 million
within an expected range. We are pleased to have reached an agreement to settle
the class action and derivative securities litigation during the second quarter
which should allow the organization to focus on the company's core business and
ongoing strategic alternatives process," said Maier.
TOTAL NET PRODUCT SALES:
Total net product sales for the three months ended June 30, 2006 were
$47.3 million compared to $41.7 million for the same 2005 period, an increase of
13%. Total net product sales for the six months ended June 30, 2006 were $95.3
million compared to $76.8 million for the same 2005 period, an increase of 24%.
A comparison of total net product sales by product is as follows (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
THREE MONTHS ENDED JUNE 30, JUNE 30,
------------------------------ ------------------------------
2006 2005 2006 2005
-------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
AVINZA(R) $ 33,651 $ 27,461 $ 66,146 $ 49,458
ONTAK(R) 8,204 8,779 17,386 16,803
Targretin(R) capsules 4,996 4,671 9,998 8,686
Targretin(R) and Panretin(R) gels 476 824 1,781 1,833
-------------- -------------- --------------- --------------
TOTAL NET PRODUCT SALES $ 47,327 $ 41,735 $ 95,311 $ 76,780
============== ============== =============== ==============
</TABLE>
Sales of AVINZA increased 23% to $33.7 million and 34% to $66.1 million
for the three and six months ended June 30, 2006, compared to $27.5 million and
$49.5 million, respectively for the same 2005 period. The increase in sales for
the three and six months ended June 30, 2006 reflects the impact of a 7% price
increase effective April 1, 2005 as well as a shift in the mix of prescriptions
to the higher doses of AVINZA. The change in net sales for the first half of
2006 also reflects an approximate 1% increase in prescriptions compared to the
prior year period while prescriptions for the second quarter 2006 experienced a
3% decrease compared to the same 2005 period. Additionally, prescriptions for
the three months ended June 30, 2006 were 1% lower compared to the three months
ended March 31, 2006. These trends reflect a continuing decrease in
prescriptions under Medicaid contracts as marginal Medicaid contacts are
terminated partially offset by increases in prescriptions under managed care
contracts and Medicare Part D. In addition, the increase in AVINZA net sales
for the second quarter of 2006 further reflects a reduction in Medicaid rebate
of approximately $4.4 million, partially offset by an increase in managed care
rebates of approximately $0.2 million.
2
<PAGE>
AVINZA net sales for the three and six months ended June 30, 2006 also reflect
an approximate charge of $2.1 million for losses expected to be incurred on
product returns resulting from a 6% price increase effective July 1, 2006. This
compares to a charge of $3.5 million recorded for the three months ended March
31, 2005. This decrease in the charge for the 2006 period is primarily due to
lower rates of return on lots that closed out in the first and second quarter of
2006. AVINZA net sales for the three and six months ended June 30, 2006 also
benefited from a reduction in the existing allowance for return losses of $2.4
million and $3.0 million, respectively, due to lower rates of return on lots
that closed in 2006.
Sales of ONTAK were $8.2 million and $17.4 million, respectively for
the three and six months ended June 30, 2006 compared to $8.8 million and $16.8
million for the same 2005 period. ONTAK sales for the 2006 periods were
positively impacted by a 7% price increase effective January 1, 2005 and a 4%
price increase effective July 1, 2005. However, ONTAK sales for the three months
ended June 30, 2006 compared to the prior year period were negatively impacted
by a 16% decrease in wholesaler outmovement due primarily to a decline in the
office segment of the market which was affected by negative changes in the
Centers for Medicare and Medicaid Services reimbursement rates. We expect more
favorable reimbursement rates in 2006 compared to 2005. We may continue to
experience quarter to quarter fluctuations in demand, however, as hospitals and
clinics administering ONTAK adjust to the changing reimbursement environment.
Sales of Targretin capsules increased to $5.0 million (up 6%) and $10.0
million (up 15%), respectively, for the three and six months ended June 30, 2006
compared to $4.7 million and $8.7 million for the same 2005 period. Targretin
capsules sales for the three and six months ended June 30, 2006 also benefited
from a 34% and 42% increase, respectively, in unit sales in Europe compared to
the prior year periods. As a result of implementation of the section 641
Demonstration Program and Medicare Part D, we expect improved patient access in
the second half of 2006.
GROSS MARGIN:
Gross Margin on product sales was 78.3% for the three months ended June
30, 2006 compared to 74.4% for the same 2005 period. For the six months ended
June 30, 2006, gross margin on product sales was 79.0% compared to 71.7% for the
same 2005 period. The improvement in gross margin percentages in 2006 is
primarily attributed to price increases, lower AVINZA Medicaid rebates, lower
allowances for return losses and higher AVINZA net sales to cover the fixed
amortization of intangible assets.
The increase in gross margin percentages for the three and six months
ended June 30, 2006 reflects higher AVINZA net sales due to lower Medicaid
rebates of approximately $4.4 million and $6.9 million, respectively, partially
offset by managed care rebates of approximately $0.2 million and $1.6 million,
respectively.
3
<PAGE>
Overall, given the continuing impact of price increases and the fixed
level of amortization of the capitalized license, royalty and technology rights,
we expect the overall gross margin percentage to increase as sales of AVINZA and
ONTAK increase.
COLLABORATIVE R&D/OTHER REVENUES:
Collaborative research, development and other revenues for the
three and six months ended June 30, 2006 were $1.1 million and $4.1 million,
respectively, compared to $4.1 million and $6.0 million, respectively, for the
same 2005 period. Development milestones for the 2006 period reflect a milestone
of $2.0 million earned in the first quarter from GlaxoSmithKline in connection
with the commencement of Phase III studies of eltrombopag and a $0.3 million
milestone earned in the second quarter from Wyeth in connection with the filing
of an NDA for bazedoxifene.
R&D:
Research and development expenses were $13.9 million (down 4%) and
$26.1 million (down 11%) respectively, for the three and six months ended June
30, 2006 compared to $14.5 million and $29.3 million, respectively, for the same
2005 periods. Spending decreased in both new product development and existing
product support. The decrease in expenses related to new product development is
due primarily to a reduced level of spending on Phase III clinical trials for
Targretin capsules in NSCLC partially offset by an increase in LGD4665
thrombopoietin (TPO) and LGD5552 (glucocorticoid agonists) expenses as our lead
drug candidates were moved to IND track. We expect INDs for both products to be
filed in the fourth quarter of 2006.
SG&A:
Selling, general and administrative expense was $24.6 million and $47.0
million, respectively, for the three and six months ended June 30, 2006 compared
to $20.1 million and $39.4 million, respectively, for the same 2005 periods. The
increase is primarily due to legal costs (incurred in connection with the
ongoing SEC investigation; shareholder litigation and our strategic alternatives
process) which increased by approximately $2.7 million and $4.0 million,
respectively, for the three and six months ended June 30, 2006 compared to the
prior year periods. Legal expenses incurred in connection with shareholder
litigation during the three months ended June 30, 2006 that were not covered
under the company's D&O insurance policy amounted to approximately $1.4 million.
G&A expenses were also higher for the first and second quarters of 2006
due to higher audit and consultant fees in connection with our 2005 and 2006 SOX
compliance programs. In addition, AVINZA advertising and promotion expenses
increased in the three and six months ended June 30, 2006 compared to the prior
year periods when Ligand and Organon shared equally all AVINZA promotion
expenses. We expect SG&A expenses to continue to be higher in the second half of
2006 compared to the prior year due
4
<PAGE>
to the ongoing cost of compliance with the Sarbanes-Oxley Act, legal
expenses in connection with the SEC investigation and strategic alternatives
process and the expense to be recognized in connection with the employee
retention agreements previously disclosed.
ACCOUNTING FOR STOCK BASED COMPENSATION:
Effective January 1, 2006, the Company adopted SFAS 123(R), using the
modified prospective transition method. The implementation of SFAS 123(R)
resulted in employee compensation expense of approximately $1.2 million and $1.8
million, respectively, for the three and six months ended June 30, 2006,
respectively.
CO-PROMOTION:
Co-promotion expense due to Organon amounted to $11.1 million and $21.9
million, respectively, for the three and six months ended June 30, 2006 compared
to $7.0 million and $14.7 million, respectively, for the same 2005 periods. The
2006 co-promotion expense is based on an agreement to pay Organon 23% of net
AVINZA product sales in connection with the AVINZA termination and return of
co-promote rights agreement with Organon compared to co-promote expense in the
prior year period based on 30% of net AVINZA product sales per the original
co-promotion agreement. Co-promotion expense for the three and six months ended
June 30, 2006 also includes $3.3 million and $6.6 million, respectively, which
represents the pro-rata accrual of a $10.0 million payment we agreed to make to
Organon in January 2007 provided that Organon achieves the required level of
sales calls during the transition period.
CO-PROMOTE TERMINATION CHARGES AND ACCOUNTING IMPACT:
In January 2006, the Company signed an agreement with Organon that
terminated the AVINZA co-promotion agreement between the two companies and
returned AVINZA co-promotion rights to Ligand. The co-promotion termination
charges were recognized as liabilities and expensed as costs of termination.
Co-promote termination charges recorded in the six months ended June 30, 2006
represent the cost associated with the termination agreement totaling $132.5
million, and is primarily comprised of a $37.75 million payment the Company
agreed to make to Organon in October 2006 and the fair value of subsequent
quarterly payments estimated at approximately $95.2 million as of January 1,
2006 the Company will make to Organon based on net product sales of AVINZA
through November 2017. The co-promote termination liability as of June 30, 2006
also includes approximately $6.8 million of accretion expense to reflect the net
present value of the liability as of that date which is included in interest
expense.
Co-promote termination charges for the three months ended June 30, 2006
included a $0.4 million credit which reflects a reduction in net present value
of the co-promote termination liability resulting from the updated estimate of
AVINZA net product sales as of June 30, 2006.
5
<PAGE>
LIQUIDITY:
Cash, cash equivalents, short term investments and restricted
investments totaled $62.6 million at June 30, 2006 compared to $69.5 million at
March 31, 2006. Operating activities used cash of $6.4 million for the three
months ended June 30, 2006 primarily due to a decrease in accrued liabilities.
STRATEGIC PROCESS:
As announced on November 18, 2005, Ligand has retained UBS to explore
all strategies to maximize shareholder value. That process remains ongoing and,
as such, Ligand will not hold a conference call in conjunction with this
release.
ABOUT LIGAND
Ligand discovers, develops and markets new drugs that address critical
unmet medical needs of patients in the areas of cancer, pain, skin diseases,
men's and women's hormone-related diseases, osteoporosis, metabolic disorders,
and cardiovascular and inflammatory diseases. Ligand's proprietary drug
discovery and development programs are based on its leadership position in gene
transcription technology, primarily related to intracellular receptors. For more
information, go to http://www.ligand.com.
NOTES REGARDING NON-GAAP FINANCIAL MEASURES
The information presented in this press release and in the attached
financial tables includes financial information prepared in accordance with
generally accepted accounting principles in the U.S., or GAAP, as well as
information presented on a pro-forma basis. These pro-forma financial measures
are considered "non-GAAP" financial measures. Generally, a non-GAAP financial
measure, within the meaning of Securities and Exchange Commission (SEC) Item 10
to Regulation S-K, is a numerical measure of a company's financial performance
or cash flows that (a) excludes amounts, or is subject to adjustments that have
the effect of excluding amounts, that are included in the most directly
comparable measure calculated and presented in accordance with GAAP in the
consolidated balance sheet, consolidated statement of operations or consolidated
statement of cash flows; or (b) includes amounts, or is subject to adjustments
that have the effect of including amounts, that are excluded from the most
directly comparable measure so calculated and presented. The Company believes
that this presentation of pro-forma results provides useful information to both
management and investors by excluding the one-time termination charges of $132.5
million relating to the termination of the Organon co-promotion agreement, which
management does not believe is indicative of core operating results. The
presentation of this additional information should not be considered in
isolation or as a substitute for results from operations prepared in accordance
with generally accepted accounting principles. The reconciliations set forth
below are provided in accordance with Regulation G and reconcile the pro-forma
financial measure with the most directly comparable GAAP-based financial
measure.
6
<PAGE>
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended, that
reflect Ligand's judgment and involve risks and uncertainties as of the date of
this release. The statements include those related to pro forma financial
results (both GAAP and pro forma) and data, including revenues sales growth and
demand, estimates, future payments, management's expectations and trend
analyses, improvements in gross margins, patient access to products and patent
expiration. Actual events or results may differ from Ligand's expectations,
judgments and beliefs. For example, there can be no assurance that pro forma
financial results are indicative of future GAAP financial results; that sales
growth or demand will continue, that our estimates or trend analyses will be
accurate and will not require or result in future adjustments, that gross
margins will continue at current levels or improve; that improvements in
reimbursement or patient access will occur; that patents will expire on the
expected dates; nor that the strategic process will be successful or yield
preferred results in any particular timeframe or at all; nor that the search for
a new Chief Executive Officer will be successfully completed.
Moreover, current and future financial results depend on estimates and
the proper operation of highly-complex accounting models, all of which are
subject to change and errors. The Company has previously reported and expects to
identify material weaknesses in its internal control over financial reporting
which could have a material adverse effect in our ability to accurately and
timely report financial information. Changes and/or efforts in our financial
data may be material either individually or in the aggregate. Any change, error
or delay in preparing financial statements or filings could adversely affect our
financial results, timeliness of SEC filings, and stock price.
Additional information concerning these or other risk factors affecting
Ligand's business can be found in prior press releases as well as in Ligand's
public periodic filings with the SEC, available via Ligand's web site at
www.ligand.com. Ligand disclaims any intent or obligation to update these
forward-looking statements beyond the date of this release.
AVINZA, Targretin, ONTAK and Panretin are registered trademarks of
Ligand Pharmaceuticals Incorporated. Each other trademark, trade name or service
mark appearing in this news release belongs to its holder.
###
7
<PAGE>
LIGAND PHARMACEUTICALS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
-------------------------------- -------------------------------
2006 2005 2006 2005
--------------- --------------- -------------- ---------------
REVENUES:
<S> <C> <C> <C> <C>
Product sales $ 47,327 $ 41,735 $ 95,311 $ 76,780
Collaborative research and development and
other revenues 1,120 4,064 4,092 6,004
--------------- --------------- --------------- --------------
Total revenues 48,447 45,799 99,403 82,784
--------------- --------------- --------------- --------------
OPERATING COSTS AND EXPENSES:
Cost of products sold 10,266 10,667 20,006 21,732
Research and development 13,895 14,524 26,113 29,259
Selling, general and administrative 24,637 20,149 46,988 39,364
Co-promotion 11,073 6,966 21,880 14,706
Co-promote termination charges (434) -- 132,507 --
--------------- --------------- --------------- --------------
Total operating costs and expenses 59,437 52,306 247,494 105,061
Loss from operations (10,990) (6,507) (148,091) (22,277)
Other expense, net (4,968) (2,417) (10,096) (5,119)
--------------- --------------- --------------- --------------
Net loss $ (15,958) $ (8,924) $ (158,187) $ (27,396)
=============== =============== =============== ==============
BASIC AND DILUTED PER SHARE AMOUNTS:
Net loss $ (0.20) $ (0.12) $ (2.03) $ (0.37)
=============== =============== =============== ==============
Weighted average number of common shares 78,539,820 74,036,753 78,021,236 73,976,939
=============== =============== =============== ==============
</TABLE>
8
<PAGE>
LIGAND PHARMACEUTICALS INCORPORATED
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except share and per share data)
THE TABLE BELOW IS A RECONCILIATION OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
("GAAP") LOSS FROM OPERATIONS, NET LOSS, AND BASIC AND DILUTED NET LOSS PER
SHARE AMOUNTS TO SUCH AMOUNTS ADJUSTED FOR THE ELIMINATION OF THE ONE-TIME
CHARGE OF THE ORGANON CO-PROMOTION TERMINATION AGREEMENT (NON-GAAP FINANCIAL
MEASURES)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
THREE MONTHS ENDED JUNE 30, 2006 JUNE 30, 2005
------------------------------------------------------ ------------------
PRO-FORMA
AS REPORTED ADJUSTMENTS AS ADJUSTED AS REPORTED
---------------- ---------------- ------------------- ------------------
REVENUES:
<S> <C> <C> <C>
Product sales $ 47,327 $ 47,327 $ 41,735
Collaborative research and development and
other revenues 1,120 1,120 4,064
---------------- -------------------- -----------------
Total revenues 48,447 48,447 45,799
---------------- -------------------- -----------------
OPERATING COSTS AND EXPENSES:
Cost of products sold 10,266 10,266 10,667
Research and development 13,895 13,895 14,524
Selling, general and administrative 24,637 24,637 20,149
Co-promotion 11,073 11,073 6,966
Co-promote termination charges (434) 434 (1) -- --
---------------- ---------------- -------------------- -----------------
Total operating costs and expenses 59,437 434 59,871 52,306
---------------- ---------------- -------------------- -----------------
Loss from operations (10,990) (434) (11,424) (6,507)
Other expense, net (4,968) 3,500 (2) (1,468) (2,417)
---------------- ---------------- -------------------- -----------------
Net loss $ (15,958) $ 3,066 $ (12,892) $ (8,924)
================ ================ ==================== =================
BASIC AND DILUTED PER SHARE AMOUNTS:
Net loss $ (0.20) $ (0.16) $ (0.12)
---------------- -------------------- -----------------
Weighted average number of common shares 78,539,820 78,539,820 74,036,753
================ ==================== =================
</TABLE>
(1) Represents a reduction in the co-promote termination liability based on the
Company's updated estimate of future AVINZA net sales.
(2) Represents the accretion of interest expense to reflect the increase in net
present value of the Organon termination liability from April 1, 2006 to
June 30, 2006.
9
<PAGE>
LIGAND PHARMACEUTICALS INCORPORATED
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except share and per share data)
THE TABLE BELOW IS A RECONCILIATION OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
("GAAP") LOSS FROM OPERATIONS, NET LOSS, AND BASIC AND DILUTED NET LOSS PER
SHARE AMOUNTS TO SUCH AMOUNTS ADJUSTED FOR THE ELIMINATION OF THE ONE-TIME
CHARGE OF THE ORGANON CO-PROMOTION TERMINATION AGREEMENT (NON-GAAP FINANCIAL
MEASURES)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SIX MONTHS ENDED JUNE 30, 2006 JUNE 30, 2005
---------------------------------------------------- ------------------
PRO-FORMA
AS REPORTED ADJUSTMENTS AS ADJUSTED AS REPORTED
---------------- ---------------- ---------------- ------------------
REVENUES:
<S> <C> <C> <C>
Product sales $ 95,311 $ 95,311 $ 76,780
Collaborative research and development and
other revenues 4,092 4,092 6,004
---------------- ---------------- ----------------
Total revenues 99,403 99,403 82,784
---------------- ---------------- ------------------
OPERATING COSTS AND EXPENSES:
Cost of products sold 20,006 20,006 21,732
Research and development 26,113 26,113 29,259
Selling, general and administrative 46,988 46,988 39,364
Co-promotion 21,880 21,880 14,706
Co-promote termination charges 132,507 (132,507) (1) -- --
---------------- ---------------- ---------------- ------------------
Total operating costs and expenses 247,494 (132,507) 114,987 105,061
---------------- ---------------- ---------------- ------------------
Loss from operations (148,091) 132,507 (15,584) (22,277)
Other expense, net (10,096) 6,800 (2) (3,296) (5,119)
---------------- ---------------- ---------------- ------------------
Net loss $ (158,187) $ 139,307 $ (18,880) $ (27,396)
================ ================ ================ ==================
BASIC AND DILUTED PER SHARE AMOUNTS:
Net loss $ (2.03) $ (0.24) $ (0.37)
----------------- ---------------- ------------------
Weighted average number of common shares 78,021,236 78,021,236 73,976,939
================ ================ ==================
</TABLE>
(1) Represents a termination payment to be made to Organon of $37.75 million on
October 15, 2006 and the estimated net present value at a discount rate of
15%, as of January 1, 2006 (the effective date of the termination
agreement), of quarterly payments to be made to Organon based on 6.5% of
reported AVINZA net sales through December 2012 and thereafter, 6% of
reported AVINZA net sales through November 2017. This amount includes a $0.4
million reduction in the net present value of liability resulting from
updated estimate of AVINZA net sales as of June 30, 2006.
(2) Represents the accretion of interest expense to reflect the increase in net
present value of the Organon termination liability from January 1, 2006 to
June 30, 2006.
10
<PAGE>
LIGAND PHARMACEUTICALS INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
ASSETS JUNE 30, 2006 DECEMBER 31, 2005
----------------- -----------------------
Current assets:
<S> <C> <C>
Cash, cash equivalents and short-term investments $ 60,783 $ 86,930
Other current assets 53,120 46,037
----------------- -----------------------
Total current assets 113,903 132,967
Restricted investments 1,826 1,826
Property and equipment, net 21,561 22,483
Acquired technology, product rights and royalty buy-down 139,766 146,770
Other assets 8,876 10,573
----------------- -----------------------
$ 285,932 $ 314,619
================= =======================
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities, excluding deferred revenue and co-promote
termination liability $ 80,264 $ 77,692
Current portion of deferred revenue, net 143,102 157,519
Current portion of co-promote termination liability 45,046 --
Long-term debt 139,463 166,745
Long-term portion of co-promote termination liability 94,261 --
Other long-term liabilities 9,953 10,737
Common stock subject to conditional redemption 12,345 12,345
Stockholders' deficit (238,502) (110,419)
----------------- -----------------------
$ 285,932 $ 314,619
================= =======================
</TABLE>
11
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