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Ligand Drops on Earnings Miss, Auditor Exit

The company sees expenses rise as it markets its Avinza pain drug.

Shares of Ligand Pharmaceuticals (LGND) - Get Ligand Pharmaceuticals Incorporated Report plummeted after the company said its second-quarter loss widened, missing analysts' expectations by a huge margin, while also announcing its independent auditor resigned after a four-year relationship.

The company's shares had recently lost $3.95, or 29.1%, to $9.63, on volume of nearly 15 million shares, well above its recent average of 1.3 million shares traded daily.

The San Diego-based drug company said it lost $14.2 million, or 19 cents a share, compared with a loss of $12 million, or 17 cents a share, in the same period last year.

Revenue was $40.5 million, up from $29.1 million in the prior year, with product sales rising to $37.5 million from $25.2 million in the same period last year.

Analysts had forecast a loss of 6 cents a share on revenue of $49.9 million.

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Despite higher revenue, selling, general and administrative expenses rose 22%, due primarily to costs associated with hiring more sales representatives to promote its Avinza chronic pain medication, and higher advertising and promotion expenses for the drug in connection with the company's agreement with Organon, a global pharmaceutical company.

However, the company said its SG&A expenses were in line with expectations for the first half of the year.

Sales of Avinza doubled to $23.3 million from $11.6 million in the previous year.

For the full year, the company said it expects product sales to accelerate and now anticipates 2004 earnings of 12 cents to 17 cents a basic share on revenue of $235 million to $255 million.

Analysts were expecting the company to earn 3 cents a share on revenue of $234.3 million.

Separately, Ligand said independent auditor Deloitte and Touche resigned after four years. There were no disagreements between the two parties with regard to accounting principles or financial disclosures, the company said.