UNITED STATES

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): January 26, 2011

 

 

LIGAND PHARMACEUTICALS

INCORPORATED

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-33093   77-0160744

(State or other jurisdiction

of Incorporation)

  (Commission File Number)  

(I.R.S. Employer

Identification No.)

 

 

11085 North Torrey Pines Road, Suite 300, La Jolla, California 92037

(Address of principal executive offices) (Zip Code)

(858) 550-7500

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

 

 

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:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ 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.

 

Item 8.01. Other Events.

On January 6, 2011, Ligand Pharmaceuticals Incorporated (“ Ligand ”) and Chiva Pharmaceuticals, Inc. (“ Chiva ”) entered into a License Agreement which grants Chiva licenses for clinical development, in China, of pradefovir in hepatitis B and MB07133 in hepatocellular carcinoma. Ligand also granted Chiva a non-exclusive HepDirect technology license for the discovery, development and worldwide commercialization of new compounds in hepatitis B, hepatitis C and hepatocellular carcinoma. HepDirect is a liver-specific drug targeting technology for chemically modifying the molecule to render it inactive until the modification is cleaved off by a liver-specific enzyme. Chiva, located in Los Altos Hills, California, is an affiliate of Hainan Kaihua Pharmaceutical Co., Ltd.

Under the terms of the License Agreement, Ligand is to receive an upfront licensing fee of $500,000 by April 6, 2011. Ligand is also entitled to receive an additional $500,000 licensing fee by December 31, 2011 and an annual licensing fee of $25,000 by January 30 of each year, beginning in 2011. Ligand also can potentially earn more than $100 million from milestones and royalties on potential sales. Ligand will also receive an undisclosed percentage of any revenue generated by Chiva from sublicensing collaboration compounds to third parties in a major market outside China. Ligand also has the potential to earn a 10% equity position in Chiva in the future as a milestone payment.

As previously announced, Ligand, pursuant to an Agreement and Plan of Merger (the “ Merger Agreement ”), acquired Metabasis Therapeutics, Inc. (“ Metabasis ”) on January 27, 2010 (the “ Merger ”).

Through the Merger, Ligand acquired (among other things) Metabasis’ pradefovir, MB07133 and HepDirect programs.

The Merger consideration paid to the former Metabasis stockholders included an aggregate of 35,147,294 “General” contingent value rights (“ General CVRs ”) governed by a “General” Contingent Value Rights Agreement dated January 27, 2010 (the “ General CVR Agreement ”). The General CVR Agreement provides (among other things) for the payment to the holders of the General CVRs, pro rata and after certain defined reductions, of 50% of any cash proceeds received in connection with licensing of programs such as pradefovir and HepDirect and 30% of any cash proceeds received in connection with licensing of MB07133.

When and if the first $500,000 licensing fee payment and $25,000 annual licensing fee are actually received by Ligand from Chiva, Ligand shall send Mellon Investor Services LLC, as Rights Agent under the General CVR Agreement (the “ Rights Agent ”), an achievement certificate or certificates certifying that the holders of General CVRs are entitled to receive pro rata $143,042 calculated as follows:

50% of the $150,000 gross licensing fee regarding pradefovir = $75,000; plus 30% of the $350,000 gross licensing fee regarding MB07133 = $105,000; plus 40% of the $25,000 gross annual licensing fee = $10,000; minus $45,513 of reasonable costs and expenses incurred in connection with the License Agreement (including reasonable attorneys fees and broker commissions); and then minus 1% of such $144,487 subtotal to be contributed to the Stockholders’ Representative Fund established pursuant to the Merger Agreement = $190,000 minus $45,513 and further minus $1,445 = $143,042;

and deliver the $143,042 to the Rights Agent. Then (assuming the first $500,000 licensing fee payment and $25,000 annual licensing fee are actually received by Ligand on a timely basis), on July 1, 2011, the Rights Agent shall distribute the $143,042 pro rata (i.e., approximately $0.004 cash for each General CVR) to the holders as of June 28, 2010 (the third business day before July 1, 2011) of the General CVRs.

When and if the second $500,000 licensing fee payment and $25,000 annual licensing fee are actually received by Ligand from Chiva, Ligand shall send the Rights Agent an achievement certificate or certificates certifying that the holders of General CVRs are entitled to receive pro rata $188,100 calculated as follows:

50% of the $150,000 gross licensing fee regarding pradefovir = $75,000; plus 30% of the $350,000 gross licensing fee regarding MB07133 = $105,000; plus 40% of the $25,000 gross annual licensing fee = $10,000; and then minus 1% of such $190,000 subtotal to be contributed to the Stockholders’ Representative Fund established pursuant to the Merger Agreement = $190,000 minus $1,900 = $188,100;

and deliver the $188,100 to the Rights Agent. Then (assuming the second $500,000 licensing fee payment and $25,000 annual licensing fee are actually received by Ligand on a timely basis), on July 1, 2012, the Rights Agent shall distribute the $188,100 pro rata (i.e., approximately $0.005 cash for each General CVR) to the holders as of June 26, 2012 (the third business day before July 1, 2012) of the General CVRs.

The holders of the General CVRs could also become entitled to additional cash payments when, as and if Ligand/Metabasis receives any cash proceeds from any such potential milestones, royalties, percentage of sublicensing revenue and/or the 10% equity position.

On January 26, 2011, Ligand and the Rights Agent (with the consent of David F. Hale, the Stockholders’ Representative appointed under the Merger Agreement) entered into an Amendment of the General CVR Agreement, in order to clarify and confirm certain matters consistent with the description set forth above.

 

Item 9.01 Financial Statements and Exhibits

The following exhibits are attached to this Current Report on Form 8-K:

(d) Exhibits.

 

Exhibit
No.

  

Description

10.1    Amendment of “General” Contingent Value Rights Agreement, dated January 26, 2011 [original agreement was dated January 27, 2010]
99.1    Press release regarding License Agreement with Chiva Pharmaceuticals, Inc.—January 6, 2011

Forward-Looking Statements

This Current Report on Form 8-K contains forward-looking statements that involve risks and uncertainties. Ligand cautions readers that any forward-looking information is not a guarantee of future performance and actual results could differ materially from those contained in the forward-looking information. Words such as “will,” “potential,” and similar expressions are intended to identify such forward-looking statements. Such forward-looking statements include, but are not limited to, the expected timing and possibility of payments being made under the CVR agreement, and other statements that are not historical facts. Among the important factors that could cause actual results to differ materially from those in any forward-looking statements are the risks that payment events which would produce proceeds for the CVR holders may not occur on a timely basis, or ever; the requirement to obtain

approval to transfer funds from China; the limited resources of Chiva and its parent; and development, regulatory and commercialization risks related to the licensed technologies. Additional important factors that may affect future results are detailed in Ligand’s filings with the SEC, including its recent filings on Forms 10-K and 10-Q, or in information disclosed in public conference calls, the date and time of which are released beforehand. Ligand disclaims any obligation to update these forward-looking statements beyond the date of this release.

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: January 31, 2011     By:   /s/ Charles S. Berkman
   

Name:

  Charles S. Berkman
   

Title:

  Vice President, General Counsel and Secretary

Exhibit 10.1

AMENDMENT OF “GENERAL” CONTINGENT VALUE RIGHTS AGREEMENT

This Amendment (this “Amendment”) is dated January 26, 2011 and amends that certain “General” Contingent Value Rights Agreement dated as of January 27, 2010 (the “Agreement”) by and among Ligand Pharmaceuticals Incorporated, a Delaware corporation (“Buyer”), Metabasis Therapeutics, Inc., a Delaware corporation (“Target”), David F. Hale, as Stockholders’ Representative (the “Stockholders’ Representative”), and Mellon Investor Services LLC, a New Jersey limited liability company, as Rights Agent (the “Rights Agent”) and as initial General CVR Registrar. Pursuant to Section 5.2(a) of the Agreement, this Amendment is effective upon the signatures only of Buyer (authorized by a Board Resolution) and the Rights Agent, accompanied by the consent of the Stockholders’ Representative. Pursuant to Section 5.4 of the Agreement, every Holder shall be bound by this Amendment.

Capitalized terms not otherwise defined in this Amendment shall have the meanings ascribed to them in the Agreement.

1. The definition of “‘7133 Licensing Event” in Section 1.1 of the Agreement is hereby amended to read in full as follows:

“‘7133 Licensing Event” means the licensing by Buyer to any Person (other than to Buyer) of all or any portion of a drug candidate or technology or Intellectual Property from the ‘7133 Program.

2. With respect to the License Agreement dated January 6, 2011 between Buyer and Chiva Pharmaceuticals, Inc. (“Chiva”):

a. As to the definition of “Proceeds,” any equity of Chiva acquired by Buyer shall not be considered to be non-cash proceeds, but the receipt of cash from the payment of any dividends thereon or cash (or non-cash proceeds, other than private-company equity) from any sale or transfer of such equity shall be treated as cash proceeds if, as and when received. Moreover, any such cash (or non-cash proceeds, other than private-company equity) shall be treated as relating to a ’7133 Licensing Event, except that the ‘7133 Licensing Payment Amount with respect thereto shall be deemed to be the Fraction times 40% of such cash (or non-cash proceeds, other than private-company equity) actually received by Buyer, or any of its subsidiaries or Affiliates, at any time before the Outside Date.

b. The $25,000 annual license fees shall be treated as relating to a ’7133 Licensing Event, except that the ‘7133 Licensing Payment Amount with respect thereto shall be deemed to be the Fraction times 40% of each such $25,000 annual license fee actually received by Buyer, or any of its subsidiaries or Affiliates, at any time before the Outside Date.

3. Except as expressly set forth herein, the Agreement remains unchanged and in full force and effect.

4. Buyer represents and warrants that it is authorized by a Board Resolution to enter into this Amendment.

5. This Amendment shall be governed by and construed in accordance with the laws of the State of California without regard to its rules of conflicts of laws; provided, however, that all provisions, regarding the rights, duties, obligations and liabilities of the Rights Agent shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such state.

6. In case any one or more of the provisions contained in this Amendment shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Amendment, but this Amendment shall be construed as if such invalid or illegal or unenforceable provisions had never been contained herein; provided, however, that if any such excluded term, provision, covenant or restriction shall adversely affect the rights, immunities, duties or obligations of the Rights Agent, the Rights Agent shall be entitled to resign immediately. Upon such determination that any term or other provisions is invalid, illegal or unenforceable, the court or other tribunal making such determination is authorized and instructed to modify this Amendment so as to effect the original intent of the parties as closely as possible so that the transactions and agreements contemplated herein are consummated as originally contemplated to the fullest extent possible.

7. This Amendment may be signed in any number of counterparts (which may be effectively delivered by facsimile or other electronic means), each of which shall be deemed to constitute but one of the same instrument.

IN WITNESS WHEREOF, the undersigned parties have executed and entered into this Amendment as of the date first written above.

 

LIGAND PHARMACEUTICALS INCORPORATED
By:  

/s/ Charles Berkman

Name:  

Charles Berkman

Title:  

Vice President, General Counsel & Secretary

MELLON INVESTOR SERVICES LLC
By:  

/s/ Mark Cano

Name:  

Mark Cano

Title:  

Relationship Manager

 

Consented to:
/s/ David F. Hale

DAVID F. HALE

(as Stockholders’ Representative)

Exhibit 99.1

LOGO

Ligand Forms Strategic Drug Development Alliance with Chiva Pharmaceuticals

Ligand to potentially receive over $100 million in milestone and royalty payments and expects to receive a 10% equity position in Chiva

Chiva to develop selected clinical stage HepDirect programs of Ligand in China

SAN DIEGO—(BUSINESS WIRE)— Ligand Pharmaceuticals Incorporated (NASDAQ: LGND) announced today that it has entered into a strategic relationship with Chiva Pharmaceuticals, Inc. to develop multiple Ligand assets and technology in China and potentially worldwide. Chiva is being granted licenses to begin immediate development in China of Ligand’s two clinical-stage HepDirect programs, Pradefovir for hepatitis B and MB01733 for hepatocellular carcinoma. Additionally, Ligand is granting Chiva a non-exclusive HepDirect technology license for the discovery, development and worldwide commercialization of new compounds in hepatitis B (HepB), hepatitis C (HepC) and hepatocellular carcinoma (HCC).

Chiva is developing these programs to address the high unmet medical need in China’s fast growing pharmaceutical market. The Chinese government is offering financial support to pharmaceutical companies like Chiva who can develop innovative therapies in China for public health needs such as infectious disease and oncology.

Under the terms of the agreement, Ligand has the potential to earn over $100 million in milestones and royalties on potential sales. In addition, Ligand has the potential to receive a 10% equity position in Chiva and will also receive an undisclosed percentage of any sublicensing revenue generated from sublicensing of collaboration compounds to third parties in a major world market. Ligand is entitled to receive initial 2011 license payments that total $1 million.

“This strategic partnership with Chiva is a major event as it creates our first significant opportunity to introduce Ligand’s products and drug discovery capability in China, which is the world’s fastest-growing pharmaceuticals market. In addition, this is a substantive transaction where we have created new value and upside potential from recently acquired assets. Less than a year ago, we brought into Ligand a basket of assets through our acquisition of Metabasis, and now this deal validates our ability to leverage our acquisitions and business platform to generate new deals and upside,” said John L. Higgins, President and Chief Executive Officer of Ligand Pharmaceuticals.

“The assets and technology that we have licensed to Chiva are especially well-suited to address unmet medical needs in China. After speaking with multiple Chinese companies about this type of alliance, we selected Chiva based on the quality of its U.S.-trained development team. Chiva’s leadership also includes senior scientists who have extensive development experience with novel drugs. We look forward to a productive, long-term relationship with Chiva, and are excited about the potential to add development alliances throughout Asia,” added Higgins.

Ligand-Chiva Programs

The following technology and programs are included in Ligand’s license to Chiva:

 

  •  

Pradefovir is a HepDirectTM pro-drug of PMEA, which is the same active metabolite, produced by the FDA-approved HepB drug adefovir dipivoxil (Hepsera ® ). The pro-drug enables higher concentrations of the drug in the liver, the primary site of replication for the hepatitis B virus, and lower concentrations in the kidney where significant dose-limiting toxicities arise. Pradefovir displayed strong anti-HepB activity in Phase II studies conducted in the U.S. and Ligand has been attempting to find a partner for further development.

Hepatitis B is a potentially fatal disease that can lead to complications such as cirrhosis and primary liver cancer. Approximately 2 billion people worldwide are estimated to have hepatitis B, with 350 million to 400 million people estimated to be chronically infected. (Source: WHO hepatitis B prevalence 2008) . In China, where the infection rate is rapidly growing, it is estimated that 8% of the population is infected, with nearly 30 million people requiring treatment.

 

  •  

MB07133 is a HepDirect pro-drug of the intermediate form of cytarabine (araC) 5’-monophosphate, which is designed to deliver a high concentration of the active form of the drug for the treatment of hepatocellular carcinoma. MB07133 displayed a strong response rate on intra-hepatic tumor regression in a Phase I/II study conducted in the U.S.

HCC is the most common form of liver cancer, and is responsible for approximately 90% of the primary liver cancers in

adults. Liver cancer is the sixth most common cancer in the world and the third leading cause of cancer-related deaths globally. (Source: Hepatitis Foundation International Web site; Liver Cancer Consequence of Hepatitis) .

 

  •  

HepDirect TM is a pro-drug technology that targets delivery of certain drugs to the liver by using a proprietary chemical modification that renders a drug biologically inactive until cleaved by a liver-specific enzyme. HepDirect may improve efficacy and/or safety of certain drugs and can be applied to marketed or new drug products.

About Metabasis

Ligand acquired Pradefovir, MB07133 and the HepDirect technology through its acquisition of Metabasis in January 2010. Individuals and entities who hold the General Contingent Value Rights (CVR) that were issued at the time of Ligand’s acquisition of Metabasis are expected to receive cash payments at or shortly after July 1, 2011, pursuant to the terms of the General CVR agreement. The holders of the General CVRs would also become entitled to additional cash amounts if and after Ligand receives actual milestone payments, royalties or sublicensing revenue under the License Agreement with Chiva. The General CVRs entitle holders to potential future cash payments with the sale or partnering of specified Metabasis programs, among other triggering events.

About Chiva Pharmaceuticals, Inc.

With headquarters in Los Altos Hills, Calif., Chiva Pharmaceuticals, Inc. is an affiliate of Hainan Kaihua Pharmaceutical Co., Ltd. (“Hainan”), a global pharmaceutical company specializing in bringing the best standard of care to the Chinese market, and on making drugs developed in China available to the world. Chiva’s and Hainan’s goal is to build a leading pharmaceutical company in China that competes on the world stage.

About Ligand Pharmaceuticals

Ligand discovers and develops novel drugs that address critical unmet medical needs of patients for a broad spectrum of diseases including hepatitis, muscle wasting, Alzheimer’s disease, dyslipidemia, diabetes, anemia, COPD, asthma, rheumatoid arthritis and osteoporosis. Ligand’s proprietary drug discovery and development programs are based on advanced cell-based assays, tissue-specific receptor ligand interactions and gene-expression tools. Among our peers, we believe Ligand has assembled one of the largest portfolio of assets including commercial therapies developed in partnership with pharmaceutical companies. Ligand has established multiple alliances with the world’s leading pharmaceutical companies including GlaxoSmithKline, Merck, Pfizer, Bristol-Myers Squibb and AstraZeneca, and more than 30 programs in various stages of development. For more information, please visit www.ligand.com .

Caution Regarding Forward-Looking Statements

This news release may contain certain forward-looking statements by Ligand which involve risks and uncertainties and reflect the parties’ judgment as of the date of this release. Actual events or results may differ from these expectations. There can be no assurance that the license and stock purchase agreements will be successful or continued; that the equity position in Chiva will be of any value; that Ligand will receive any future payments for the development, licensing and/or commercialization of any active compounds and/or candidates; that product candidates will receive required regulatory approvals or that they will be commercially successful therapies, provide new options or be successfully marketed; or that our business will grow or that shareholder value will increase. Results will be dependent on the efforts of Chiva over which Ligand has no control. The failure to meet expectations with respect to any of the foregoing matters may reduce Ligand’s stock price. Additional important factors that may affect future results are detailed in prior press releases available via www.ligand.com as well as in Ligand’s public periodic filings with the Securities and Exchange Commission at www.sec.gov . Ligand disclaims any intent or obligation to update these forward-looking statements beyond the date of this release. This caution is made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Ligand Pharmaceuticals Incorporated

John L. Higgins, President and

CEO

Erika Luib, Investor Relations

858-550-7896

or

Lippert/Heilshorn

& Associates

Don Markley

310-691-7100

dmarkley@lhai.com