Ligand Pharmaceuticals plans to sell $135 million of convertibles

By Ronda Fears

Nashville, Nov. 12-

Ligand Pharmaceuticals Inc. announced plans to offer approximately $135 million of five-year convertible subordinated notes in the Rule 144A market in the next several weeks.

The drug research and development company said it intends to use proceeds "to complete the restructuring of its Avinza license and supply agreement with Elan Corp. plc, to buy back Ligand shares owned by Elan and for general corporate purposes," said Paul V. Maier, Ligand's senior vice president and chief financial officer, in a news release.

Ligand issued the shares to Elan as security for notes that are part of the license and supply agreement for the first two years of the arrangement.

In a statement Tuesday, the companies said the new agreement calls for Elan and affiliates to receive $100 million in cash in exchange for a reduction in the Avinza royalty rate to about 10% from the current rate of 30%. Also, Elan will forgo the option for a co-promotion agreement with Ligand for Avinza in the U.S. and Canada.

Elan will continue to manufacture the drug, which is a form of morphine.

The change will be effective if Ligand is successful in raising funds to make the cash payment to Elan. At Sept. 30, Ligand had $35.3 million in cash, cash equivalents and short-term investments.

Elan recorded revenue of about $4.7 million from royalties on Avinza since the drug's launch in the second quarter, and the carrying value of the Avinza intangible asset totaled $16.2 million at Sept. 30. Elan posted 2001 revenue of $1.86 billion.

Ligand reported Tuesday that its 45% increase in third quarter drug sales to $16.5 million was driven by the launch of Avinza drug in the second quarter. Avinza's launch, however, also contributed to a 50% increase in expenses.

The company posted a net loss for third quarter of $7 million, or 10c per share, compared to a net loss of $7.7 million, or 13c per share, for third quarter 2001. Total revenues were $25.3 million, up from $19.2 million.

Ligand has an earnings call scheduled for Wednesday at 8:30 a.m.

Ligand shares ended up 24c to $7.14.

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