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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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): September 6, 2006
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)
_______________________
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
|x| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under
the Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications
pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
_______________________________________________________________________________]
ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
PURCHASE AGREEMENT
On September 6, 2006, Ligand Pharmaceuticals Incorporated, a
Delaware corporation (the "COMPANY"), King Pharmaceuticals, Inc., a Tennessee
corporation ("KING PHARMACEUTICALS"), and King Pharmaceuticals Research and
Development, Inc., a Delaware corporation and wholly owned subsidiary of King
Pharmaceuticals ("KING R&D", and together with King Pharmaceuticals, "KING")
entered into a Purchase Agreement (the "PURCHASE AGREEMENT"), pursuant to which
King has agreed to acquire all of the Company's rights in and to Avinza(R)
(morphine sulfate extended-release capsules) in the United States, its
territories and Canada, including, among other things, all Avinza(R) inventory,
equipment, records and related intellectual property, and assume certain
liabilities as set forth in the Purchase Agreement (collectively, the
"TRANSACTION"). In addition, King has, subject to the terms and conditions of
the Purchase Agreement, agreed to offer employment following the closing of the
Transaction (the "CLOSING") to certain of the Company's existing sales
representatives that support the sale of Avinza(R) or otherwise reimburse the
Company for certain agreed upon severance arrangements offered to any such
non-hired representatives.
Pursuant to the Purchase Agreement, at Closing, the Company will
be paid a $265 million cash payment (the "CLOSING PAYMENT"), $15 million of
which will be funded into an escrow account to support any indemnification
claims made by King following the Closing, and King will assume certain
liabilities, including a product-related liability owed by the Company to
Organon Pharmaceuticals USA Inc. of approximately $48 million. The Closing
Payment is subject to adjustment based on the Company's ability to reduce
wholesale and retail inventory levels of Avinza(R) to certain targeted levels by
Closing in accordance with the Purchase Agreement.
King has also agreed to pay the Company, in addition to assuming
existing royalty obligations owed to Organon Pharmaceuticals USA Inc. and other
third parties, a 15% royalty on King's annual net sales of Avinza(R) or any
reformulation or derivation thereof for the first 20 months following the later
of the Closing or January 1, 2007, and, thereafter through November 25, 2017, as
follows:
o if annual net sales are $200 million or less, 5% of all such
net sales;
o if annual net sales exceed $200 million but do not exceed
$250 million, 10% of all such net sales; and
o if annual net sales exceed $250 million, 10% on all net
sales up to and including $250 million, plus 15% of net sales
in excess of $250 million.
In connection with the Transaction, King has committed to loan the
Company, at the Company's option, $37.75 million (the "LOAN"). If the Loan is
drawn by the Company, amounts outstanding thereunder would be subject to certain
market terms, including a 9.75% interest rate and a security interest in Company
assets other than those related to Avinza(R). Upon Closing, accrued interest on
the Loan would be forgiven and the outstanding principal amount due thereunder
would be credited against the Closing Payment. If the Loan is drawn by the
Company and the Closing does not occur, accrued interest and the outstanding
principal amount due thereunder would become due on January 1, 2007.
The Purchase Agreement may be terminated by either King or the
Company if the Closing has not occurred by December 31, 2006, or upon the
occurrence of certain customary matters. In addition, if the Purchase Agreement
is terminated under certain circumstances, including a determination by the
Company's board of directors to accept an acquisition proposal it deems superior
to the Transaction, the Company has agreed to pay King a termination fee of $12
million. The Closing is subject to certain closing conditions, including, but
not limited to, Company stockholder approval of the Transaction, the conversion
or redemption prior to Closing of all outstanding 6% Convertible Subordinated
Notes due 2007 of the Company, the expiration of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and certain
other customary closing conditions.
CONTRACT SALES FORCE AGREEMENT
Also on September 6, 2006, the Company entered into a Contract
Sales Force Agreement (the "SALES AGREEMENT") with King, pursuant to which King
has agreed to conduct a detailing program to promote the sale of Avinza(R) for
an agreed upon fee, subject to the terms and conditions of the Sales Agreement.
Pursuant to the Sales Agreement, King has agreed to perform certain minimum
monthly product details, which are to commence no later than October 1, 2006 and
continue for a period of six months following such date or until the Closing or
earlier termination of the Purchase Agreement. The Company estimates that,
assuming the Closing were to occur at the end of December 2006, the amount due
to King under the Contract Sales Force Agreement would be approximately $4
million.
The foregoing descriptions of the Purchase Agreement and the Sales
Agreement do not purport to be complete and are qualified in their entirety by
reference to such agreements. The Purchase Agreement is filed as Exhibit 2.1
hereto and is incorporated herein by reference.
IMPORTANT ADDITIONAL INFORMATION WILL BE FILED WITH THE SEC
The Company and its board of directors intend to file with the
Securities and Exchange Commission and mail to its stockholders a Proxy
Statement in connection with the Transaction. The Proxy Statement will contain
important information about the Company, King, the Transaction and related
matters. Investors and security holders are urged to read the Proxy Statement
carefully when it is available.
Investors and security holders will be able to obtain copies of
the Proxy Statement and other documents filed with the SEC by the Company and
King free of charge through the web site maintained by the SEC at WWW.SEC.GOV.
In addition, investors and security holders will be able to obtain copies of the
Proxy Statement free of charge from the Company by contacting Ligand
Pharmaceuticals Incorporated, Attn: Investor Relations, 10275 Science Center
Drive, San Diego, California 92121-1117, (858) 550-7500.
The Company and its directors and executive officers may be deemed
to be participants in the solicitation of proxies in respect of the Transaction.
Information regarding the Company's directors and executive officers is
contained in the Company's Form 10-K for the year ended December 31, 2005 and in
Reports on Form 8-K filed with the SEC from time to time. As of August 31, 2006,
the Company's directors and executive officers beneficially owned approximately
9,695,891 shares, or 11.99%, of the Company's common stock. A more complete
description will be available in the Proxy Statement. Investors and security
holders are urged to read the Proxy Statement and the other relevant materials
(when they become available) before making any voting or investment decision
with respect to the Transaction.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(d) Exhibits
EXHIBIT NUMBER DESCRIPTION
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2.1 Purchase Agreement, by and between Ligand Pharmaceuticals
Incorporated, King Pharmaceuticals, Inc. and King
Pharmaceuticals Research and Development, Inc., dated as
of September 6, 2006*
* Schedules 1.1(b) (Pre-Existing Assigned Contracts), 2.6 (Royalties) and 2.8(b)
(Inventory Value Adjustments) are attached to end of the Purchase Agreement. All
other schedules to the Purchase Agreement are not material and have been omitted
in reliance on Item 601(b)(2) of Regulation S-K. The Company agrees to furnish
supplementally a copy of any omitted schedule to the Securities and Exchange
Commission upon request.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
LIGAND PHARMACEUTICALS INCORPORATED
Date : September 11, 2006 By: /s/ Warner R. Broaddus
_______________________________________
Name: Warner R. Broaddus
Title: Vice President, General Counsel &
Secretary
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
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2.1 Purchase Agreement, by and between Ligand Pharmaceuticals
Incorporated, King Pharmaceuticals, Inc. and King
Pharmaceuticals Research and Development, Inc., dated as
of September 6, 2006*
* Schedules 1.1(b) (Pre-Existing Assigned Contracts), 2.6 (Royalties) and 2.8(b)
(Inventory Value Adjustments) are attached to the end of the Purchase Agreement.
All other schedules to the Purchase Agreement are not material and have been
omitted in reliance on Item 601(b)(2) of Regulation S-K. The Company agrees to
furnish supplementally a copy of any omitted schedule to the Securities and
Exchange Commission upon request.