Aware of the overhang

The separation of Allergan Ligand Retinoid Therapeutics' (ALRIZ) 3.25 million units shouldn't have a major impact on shares ofLigand Pharmaceuticals (LGND), even though exercise of the warrants could add 6.5 million shares (20 percent) to LGND's 32.5 million shares outstanding. Under the separation, ALRIZ shareholders receive a common share of Allergan Ligand and two warrants, each to purchase one common share of LGND. The warrants, which are exercisable over three years at $7.12, are well into the money. LGND closed at $13.25 on Friday, up 12 percent on the week, placing each warrant $6.13 in the black.

The company said that investors had built the shares into their models ever since ALRIZ's June 1995 IPO. The warrants have "been in Ligand's fully diluted number since the day we did Allergan Ligand Retinoid Therapeutics," said LGND spokesperson Susan Atkins. "So it's not like we're really issuing shares unless you've been sleeping."...