Ligand Pharmaceuticals Incorporated (NASDAQ: LGND) today announced plans to restate financial statements for 2011 and the first two quarters of 2012.
Ligand’s Audit Committee, in consultation with management has determined that previously issued audited consolidated financial statements included in Ligand’s Form 10-K for the year ended December 31, 2011, as well as the unaudited consolidated financial statements included in Ligand’s Forms 10-Q for each of the periods ended March 31, 2012 and June 30, 2012, should be restated due to errors in calculating fair value of the contingent liability in connection with Ligand’s acquisition of CyDex Pharmaceuticals, Inc. (CyDex) on January 24, 2011. The errors were associated with the Captisol-enabled ® clopidogrel program licensed to The Medicines Company (MedCo), in particular with respect to assumptions for the calculation of the fair value of the contingent liability related to what Ligand potentially owes Prism Pharmaceuticals (now Baxter International) and CyDex Contingent Value Rights holders out of the total proceeds due from MedCo. The initial valuation and subsequent mark-to-market adjustments are non-cash accounting estimates based on the probability of various future conditions being met.
Ligand’s management believes the initial fair value of the contingent liability was overstated by an estimated $1.6 million resulting in an initial overstatement of goodwill and other intangible assets by $2.0 million, an overstatement of deferred tax liability of $0.7 million and an understatement of income tax benefit of $0.4 million. Additionally, as changes in the estimated fair value of the contingent liability are recorded as non-cash adjustments in Ligand’s statements of operations, management believes the decrease (increase) in contingent liabilities and income tax benefit were understated by an aggregate of $0.6 million and $0.4 million, respectively, for the year ended December 31, 2011 and an aggregate of $0.5 million and $0, respectively, for the six months ended June 30, 2012.
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