SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 9, 2004
LIGAND PHARMACEUTICALS INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
000-20720
(Commission File Number)
10275 SCIENCE CENTER DRIVE,
SAN DIEGO, CALIFORNIA
(Address of principal executive offices)
(858) 550-7500
(Registrant's telephone number, including area code)
77-0160744
(I.R.S. Employer Identification No.)
92121-1117
(Zip Code)
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
On November 5, 2004, Ligand Pharmaceuticals Incorporated, or Ligand,
and Royalty Pharma Finance Trust, or Royalty Pharma, entered into an amendment
to their existing selective estrogen receptor modulator, or SERM, royalty
agreements. Ligand and Royalty Pharma are parties to previously disclosed
royalty option and purchase agreements covering SERM royalties, as well as
Ligand's Targretin capsules product. Under the SERM agreement amendment Royalty
Pharma will purchase for $32.5 million an additional 1.625% of the SERM
products' net sales. This reflects an acceleration of the previous option
timetable and an increase in the royalty amount and aggregate purchase price.
Previously, two options were exercisable as NDA acceptance and approval
milestones were achieved in 2004 and 2005 for a total of $26.5 million in two
equal payments for a total of 0.8% of the SERM products' net sales. Pfizer's
recent NDA filing for lasofoxifene for osteoporosis triggered the first of the
two previous options during the fourth quarter of 2004. Under the terms of the
revised agreement, payments from the royalty purchase are non-refundable,
regardless of whether the products are ever successfully registered or marketed.
Milestone payments owed by Ligand's partners as the products complete
development and registration are not included in the Royalty Pharma agreement
and will be paid to Ligand as earned. As a result of this transaction, Royalty
Pharma increased its rights to a total of 3.0125% of net sales of each of the
three SERM products for a period of ten years following first commercial sale of
each product and has no further options. Ligand retains an approximately equal
portion of lasofoxifene and other SERM's net sales going forward and for periods
that may exceed ten years. For the royalties just purchased, the royalty rates
owed to Royalty Pharma may be reduced by one third if SERM product sales exceed
certain thresholds.
On November 8, 2004, Ligand and Eli Lilly & Company entered into an
amendment to their existing royalty agreement for ONTAK, Ligand's marketed
cancer drug. Ligand and Lilly have also been partners in a research
collaboration since 1997, the terms of which were not amended. Under the revised
ONTAK agreement, Ligand and Lilly will each have two options. Ligand will have
an independent option exercisable in January 2005 and another independent option
exercisable in April 2005 to buy down a portion of the ONTAK royalty stream on
net sales in the United States for a total consideration of $33 million. Lilly
will have options in 2005 to trigger the same royalty buydown on Ligand's part
for a total consideration of up to $37 million, dependent on whether Ligand has
exercised one or both of its options and ONTAK has achieved certain sales
levels.
Ligand's first option provides that Ligand will make to Lilly a
one-time cash payment of $20 million in exchange for elimination of the ONTAK
royalties due to Lilly on net sales in the United States in 2005, and a reduced
reverse-tiered royalty scale on net sales in the United States thereafter. The
second option in April 2005 provides that Ligand will make a one-time cash
payment of $13 million in exchange for the elimination of the ONTAK royalties
due to Lilly on net sales in the United States in 2006 and a reduced
reverse-tiered royalty scale thereafter. If both Ligand options are exercised,
Ligand would make total payments of $33 million for elimination of all royalty
payments due on U.S. sales through year-end 2006 and elimination of all
royalties on U.S. sales of $38 million or less going forward. Thereafter,
beginning in 2007, Ligand would pay royalties to Lilly on a reverse-tiered scale
(from 20% to 10%) only on annual U.S. sales in excess of $38 million for the
minimum tier and in excess of $72 million for the maximum tier threshold for the
remaining patent life (through 2014). Sales outside the U.S. (if ONTAK gains
marketing approval in other geographies) will be excluded from this restructured
agreement and will continue at the previous non-tiered contract royalty rate of
20%. Neither party is obligated to exercise either of its options and the
options will expire if not exercised by the specified dates.
ITEM 9.01 EXHIBITS
EXHIBIT NUMBER DESCRIPTION
99.1 Press Release of the Company dated November 9, 2004
99.2 Press Release of the Company dated November 9, 2004
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned.
LIGAND PHARMACEUTICALS INCORPORATED
Date : November 9, 2004 By: /S/WARNER BROADDUS
Name: Warner Broaddus
Title: Vice President, General Counsel & Secretary