Ligand Pharmaceuticals Inc. is on track for its first profitable
year, said Rob McKay, the biotechs senior director of business
development.

It will happen by the end of the year, not that it couldnt
happen earlier, McKay said.

For Ligand, that will mark a major turn of events. The company
has been so bad for so long, its incredible, said Jeffrey S. Cohen,
an analyst who covers Ligand at C. K. Cooper & Co. in Irvine.
He noted that at the end of 2010, the company had an accumulated
deficit of nearly $692 million. The stock chart has been straight
south for years and years. If you owned the stock five years ago it
was $70, and now its $10. The question is: Has it bottomed out? I
think it has.

Ligand, a drug discovery and development company, was founded in
1987 and has endured annual net losses every year in large part due
to an expensive overall cost structure, in addition to costly
acquisitions and high legal costs in recent years, Cohen said.

Focusing on Financial Growth

But the company began a transformation four years ago when new
management came in. John L. Higgins took over as CEO in 2007,
drastically cutting expenses and embracing a new business model
thats centered on acquiring distressed biotechs and partnering with
large pharmaceutical companies, such as GlaxoSmithKline plc., Merck
& Co. Inc. and Pfizer Inc., that will bear the financial burden
of commercializing drugs.

In November in a move that Higgins said capped the companys
extensive restructuring efforts Ligands board of directors approved
a 1-for-6 reverse stock split. Ligand is focused more than ever on
becoming a financial growth company, Higgins said, in a
statement.

Ligands most recent acquisition of CyDex Pharmaceuticals Inc.
was the first time an acquisition wasnt a distressed company, said
McKay, noting that CyDex added to Ligands business model and
rapidly accelerated its financial growth.

CyDex generated $16.3 million in revenue last year, compared
with Ligands $23.5 million. Ligand now has more than 60 drug
development programs, with therapies addressing Alzheimers disease,
diabetes, anemia, asthma, rheumatoid arthritis and
osteoporosis.

Significant Moment Awaits

Of Ligands many drugs that have gone to big pharmaceutical
companies, there is one that is generally regarded as being the
most valuable. Thats Promacta, the first oral medication to
increase platelet production for people with serious blood
disorders. In 2008, Ligand granted GlaxoSmithKline exclusive rights
to Promacta in a deal valued at $163 million plus royalties.

Last year, royalties from the drug brought in between $2 million
and $3 million, and this year that amount is expected double, McKay
said. However, if the drug gains approval from the U.S. Food and
Drug Administration for the treatment of hepatitis C, market
potential of the drug will explode.

People with hepatitis C, a liver disease, must put their
treatment on hold if their platelet level declines past a certain
threshold. Promacta is being tested as a way to boost the platelet
level so therapy can resume.

We have two phase three studies wrapping up in the third
quarter, with data coming out in December, McKay said. That will be
a significant moment. If that data is positive, then suddenly
Promacta becomes a lot more valuable. This event is a big deal to
Ligand.

If all goes as expected, annual royalty revenues from the drug
could see a major boost in 2013 to as much as $12 million, McKay
said.

The other program with great potential for Ligands balance sheet
is known as SARM, a drug that increases muscle mass and can be used
to treat patients with muscle-wasting conditions. SARM is on the
verge of being licensed to a company that can bring it through the
FDA approval process and market it to doctors, McKay said.

Theres a potential huge market for SARM, Cohen said. With good
phase one data, they could potentially do an all-out $100 million
to $200 million deal with a large pharmaceutical company.

Kelly Quigley is a freelance writer for the San Diego Business
Journal.