Ligand stockholder Daniel Loeb, with 9.5% stake, presses for sale of company

By Ronda Fears

Nashville, Sept. 26 - In a letter to San Diego-based Ligand Pharmaceuticals Inc. chief executive David Robinson, Third Point LLC CEO Daniel Loeb lambastes current management and is calling for a sale of the company to the highest bidder.

Calls to Ligand executives were not answered Monday.

Third Point has acquired 9.5% of Ligand shares, according to a filing by the fund at the Securities and Exchange Commission on Friday. The filing included a scathing letter to Robinson in which Loeb ticked off a string of "operational and financial blunders that support our demands that the company must be sold." Loeb also slammed Ligand chief financial officer Paul Maier in the letter.

"Based on our [due diligence] investigation, we have concluded that Ligand shares, currently around $7.50 per share, trade at approximately half the value of our worst-case estimated value of $14 per share," Loeb said.

"We believe this discrepancy is largely due to the overwhelmingly low regard held by the investment community for the management and board of the company."

In contrast, Loeb praised the scientific staff of Ligand and asserted the company has legitimate assets that could be saleable.

"Accordingly, it is our view that this management team is unable to derive value from the company's assets and therefore we insist that the board of directors immediately retain bankers to evaluate strategic options, including a sale of the company," Loeb said.

Ligand worth more as parts

Notwithstanding the sorry state of the company, the apparent lack of financial controls and consistently disappointing results, said Third Point, the stockholder estimates that the value of Ligand's assets far outstrip the current enterprise value of the company expressing in its market cap of about $700 million.

Using a sum-of-the-parts approach to value the company, Ligand is worth a minimum of $14 per share, or a $1.5 billion enterprise value, according to Third Point. Ligand shares debuted in 1993 at an initial public offering price of $13.

On Monday, the stock was up 7.72%, or 62 cents, to close at $8.65.

"We have already spoken to investment bankers who would be happy to take the assignment and believe that there are strategic buyers interested in purchasing the company for a significant premium," Loeb said in the letter to Robinson.

He said the company's healthy pipeline of products would make it marketable. Among those are Ligand's Avinza painkiller, cancer drugs Ontak and Targretin and royalties on numerous late-stage product candidates partnered with the Big Pharma likes of GlaxoSmithKline plc, Eli Lilly & Co. and Wyeth.

"Many of the company's drugs represent $1 billion market opportunities, driving royalty income to Ligand ranging from $30 million to $120 million per product," Loeb said.

SEC trouble troubling

Not the least of Loeb's complaints with Robinson was the company's yet-to-be-filed restatements of past financial reports.

In May, Ligand announced it will restate financial results for 2002, 2003 and first-quarter 2004 due to improper accounting for revenue, and delayed filing its 2004 10-K report as well as its first-quarter 2005 10-Q report.

On Sept. 12, Ligand said it had been informed that the Securities and Exchange Commission has opened a non-public formal investigation in connection with the restatement of the company's financial statements for the years 2002 and 2003 and for the quarters of 2003 as well as the first three quarters of 2004.

Ligand stock trading has been affected by the SEC situation, with the stock recently shifting from trading on the Nasdaq to the pink sheets. On Sept. 2, the company said its request for an extension to get its SEC financials filed was rejected by the Nasdaq but that the company was given a 60-day period to file for re-listing on the Nasdaq.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.