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Sep 25, 2008

Ligand Inks Stock-for-Stock Purchase Deal with Pharmacopeia Worth $55M

  • Ligand Pharmaceuticals plans on acquiring Pharmacopeia in a stock-for-stock deal that has an equity value of $55 million. Pharmacopeia stockholders are also entitled to receive a cash payment of $15 million related to Ligand progressing Pharmacopeia’s hypertension and diabetic nephropathy program.

    The transaction is expected to close by the first quarter of 2009. The combined company is projected to have approximately $90 million in cash at time of closing. Operating cash burn rate in 2009 on a pro forma basis is expected to be $20 million. There will also be over $350 million in potential net operating loss.

    Ligand stockholders will own approximately 84% of the new entity. Ligand will issue approximately 17.5 million shares, or 0.58 shares for each outstanding Pharmacopeia share. Ligand’s share price of between $3.00 and $3.75 implies a purchase price of $1.81 per common share of Pharmacopeia.

    The offer represents a 52% premium over Pharmacopeia’s closing value yesterday of $1.19. Pharmacopeia’s stock shot up to $1.47 in early morning trading. The firm’s shares were trading around $5 at the beginning of the year but have since been dropping as the company restructured, first cutting 15% of its workforce in May and then 40% in August.

    The crux of Pharmacopeia’s restructuring efforts was to focus on its clinical- and late-stage discovery program. The company’s lead initiative is called DARA, which includes a compound in Phase II for diabetic nephropathy and hypertension. If Ligand enters into a license, sale, development, marketing, or option agreement related to the DARA program by December 31, 2011, Pharmacopeia stockholders will $15 million through the CVRs.

    The combined firm stands to earn royalties and $400 million in milestone fees from the nine pharmaceutical companies that are partnering with Pharmacopeia and Ligand. The partnership portfolio includes 15 programs in various stages of R&D.

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