Ligand completes sale of Avinza to King

Ligand Pharmaceuticals has completed the sale of Avinza (morphine sulfate extended-release capsules) and associated assets to fellow USA-based King Pharmaceuticals, in exchange for cash and royalties (Marketletter September 18, 2006). With the closing of the transaction, Ligand's remaining commercial operations have transferred to King and the former says it is evaluating methods of returning cash to the shareholders from this and previous asset sales.

Ligand received $295.0 million in cash at the closing from King. The net cash amount represents a purchase price of $246.0 million which includes certain inventory-related adjustments, plus about $49.0 million in reimbursement of payments to Organon and others.

In addition to the cash consideration, King will pay Ligand a 15% royalty during the first 20 months after the closing of the asset sale. Subsequent royalties will be based on calendar year net sales. If King's calendar year net sales are less than $200.0 million, the royalty payment will be 5% but if they are between $200.0 million and $250.0 million, then the royalty payment will be 10% of sales. If they exceed $250.0 million, the royalty will be 10% up to $250 million and 15% of turnover above $250.0 million. King also assumed future royalty payments owed to Organon and all other existing Avinza royalty obligations.