Ebb & Flow

Last week's low-money down acquisition of Metabasis Therapeutics Inc. (NASDAQ:MBRX) by cancer and inflammation play Ligand Pharmaceuticals Inc. (NASDAQ: LGND) is the latest example of a structured acquisition with contingent payouts over time.

Ligand could get the infectious disease and metabolic company essentially for free, since the $3.2 million cash payment up front would be largely offset by its share of an undisclosed cash milestone upcoming from Roche (SIX:ROG; OTCQX:RHHBY) under a 2008 deal to apply Metabasis' HepDirect liver-targeting technology to the pharma's nucleosides to treat HCV.

Metabasis shareholders will get about two-thirds of a potential $191 million in total milestones under the Roche deal, and two-thirds of royalties or other proceeds under the partnership.

They would also get 50-90% of any proceeds related to other Metabasis programs, some of which would drop to 10% over time.

Ligand would receive the other one-third of payments under the Roche deal and the remainder of the proceeds of other programs.

Metabasis shareholders will receive about $1.8 million in cash after the company's net liabilities. Stockholders also will receive four tradable contingent value rights for each Metabasis share. The CVRs will entitle the shareholder to cash payments as often as every six months as cash is received from various triggering events.

Ligand has committed to spending at least $8 million on R&D for Metabasis' other programs within 42 months of the transaction closing, unless both a glucagon antagonist program and a thyroid receptor beta agonist program fail or a licensing event occurs for at least one of the two programs. The most advanced thyroid receptor beta agonist is MB07811, which is in Phase Ib for hyperlipidemia. The glucagon program is in preclinical development.

Separately, GlaxoSmithKline plc (LSE:GSK; NYSE:GSK) disclosed in its 3Q09 earnings that it suspended the Phase III ELEVATE trial of Ligand's Promacta eltrombopag after interim data showed an imbalance in the risk of thrombotic events.

The trial was evaluating the ability of Promacta to reduce the need for platelet transfusions in patients with chronic liver disease undergoing elective invasive procedures. GSK has worldwide rights to the compound (see B30).

On the week, Ligand shares fell $0.32 (16%)

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