Ligand Pharmaceuticals Incorporated (NASDAQ: LGND) reported a correction to its earnings release issued on May 6, 2009 relating to a milestone earned from Pfizer, Inc. Under the terms of a 1991 research agreement with Pfizer and as a result of approval by the European Commission for Pfizer’s FABLYN® (lasofoxifene) Tablets, the Company earned a contractual milestone of $3.0 million. As previously disclosed on March 24, 2009 at the time of the European approval, under the terms of a 1996 settlement agreement, Pfizer had the right to pay for the milestone in cash or by returning shares of Ligand stock valued at a pre-determined price. Pfizer elected to pay for the milestone by returning 323,338 shares of stock it owned in Ligand valued as of the date of the 1996 settlement agreement (adjusted for Ligand’s 2007 return of capital), or $9.28 per share.
The Company reported the milestone in its May 6, 2009 earnings release as revenue at its contractual amount of $3.0 million. Subsequent to the Company's earnings release, as a result of continuing analysis of authoritative literature, the Company determined that the revenue associated with the milestone, previously reported as $3.0 million, should be recorded at the current fair value ($2.83 per share) of the 332,338 shares of stock on the date the milestone was earned, or $0.9 million, instead of at the stock valuation as defined in the 1996 settlement agreement
Accordingly, total revenues for the first quarter have been reduced to $9.5 million from $11.6 million, loss from continuing operations has increased to $7.5 million, or $0.07 per share, from $5.4 million, or $0.05 per share, and total net loss has increased to $5.1 million, or $0.05 per share, from $3.0 million, or $0.03 per share. Notwithstanding this change in valuation from a contractual basis to a GAAP accounting basis for how the milestone should be recorded, there is no impact on the Company’s cash balance, operating expenses or outstanding shares.
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