Exhibit 99.1
Contact:
Paul V. Maier
Senior VP and CFO
(858) 550-7573
LIGAND RESTRUCTURES ONTAK ROYALTY STREAM WITH LILLY
-- OPTIONS, IF EXERCISED, ARE EXPECTED TO BE ACCRETIVE TO LIGAND IN
2005 AND BEYOND --
SAN DIEGO, CA, NOVEMBER 9, 2004 - Ligand Pharmaceuticals (Nasdaq: LGND)
announced today it has restructured its agreement with Eli Lilly and Company
(NYSE: LLY) with respect to the royalties payable to Lilly on sales of Ligand's
marketed cancer drug ONTAK(R) (denileukin diftitox) in the United States. Ligand
recorded sales of $34.3 million for ONTAK in calendar year 2003.
Under the revised agreement, Ligand and Lilly will each have two options.
Ligand will have an independent option exercisable in January 2005 and another
independent option exercisable in April 2005 to buy down a portion of the ONTAK
royalty stream on net sales in the United States for a total consideration of
$33 million. Lilly will have options in 2005 to trigger the same royalty buydown
on Ligand's part for a total consideration of up to $37 million, dependent on
whether Ligand has exercised one or both of its options and ONTAK has achieved
certain sales levels.
Ligand's first option provides that Ligand will make to Lilly a one-time
cash payment of $20 million in exchange for elimination of the ONTAK royalties
due to Lilly on net sales in the United States in 2005, and a reduced
reverse-tiered royalty scale on net sales in the United States thereafter. The
second option in April 2005 provides that Ligand will make a one-time cash
payment of $13 million in exchange for the elimination of the ONTAK royalties
due to Lilly on net sales in the United States in 2006 and a reduced
reverse-tiered royalty scale thereafter. If both Ligand options are exercised,
Ligand would make total payments of $33 million for elimination of all royalty
payments due on U.S. sales through year-end 2006 and elimination of all
royalties on U.S. sales of $38 million or less going forward. Thereafter,
beginning in 2007, Ligand would pay royalties to Lilly on a reverse-tiered scale
(from 20% to 10%) only
on annual U.S. sales in excess of $38 million for the minimum tier and in excess
of $72 million for the maximum tier threshold for the remaining patent life
(through 2014). Sales outside the U.S. (if ONTAK gains marketing approval in
other geographies) will be excluded from this restructured agreement and will
continue at the previous non-tiered contract royalty rate of 20%. Neither party
is obligated to exercise either of its options and the options will expire if
not exercised by the specified dates.
"The restructuring of the ONTAK royalty stream to Lilly has important
strategic and financial value for Ligand and our stockholders," said Paul V.
Maier, Ligand's senior vice president and chief financial officer. "We believe
this restructured ONTAK arrangement provides flexibility to Ligand to make the
commercial and development investments to continue to grow the brand while also
contributing to improved EPS. This transaction will be financed from increased
other revenue (recent Royalty Pharma option exercise and cash) to increase
future earnings. The reduced royalty obligations if any options are exercised
are expected to be accretive to earnings beginning in 2005. Additionally, we
believe the improved gross margins, going forward, will provide ONTAK with a
more attractive brand profit profile incentivizing the company to make further
development investments to expand its market potential."
ABOUT ONTAK
In February 1999, the U.S. Food and Drug Administration granted Seragen,
Inc., a wholly owned subsidiary of Ligand, marketing approval for ONTAK for the
treatment of patients with persistent or recurrent cutaneous T-cell lymphoma
(CTCL) whose malignant cells express the p55 (CD25) component of the IL2
receptor. Lilly's royalty interest in ONTAK arises out of Lilly's prior
relationship with Seragen, which was renegotiated in connection with Ligand's
acquisition of Seragen in 1998. Recent and current ONTAK development programs
include Phase II clinical trials in patients with chronic lymphocytic leukemia,
peripheral T-cell lymphoma, B-cell non-Hodgkin's lymphoma, non-small cell lung
cancer, and graft-versus-host disease, indications that represent significantly
larger market opportunities than CTCL
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ABOUT LIGAND
Ligand discovers, develops and markets new drugs that address critical
unmet medical needs of patients in the areas of cancer, pain, skin diseases,
men's and women's hormone-related diseases, osteoporosis, metabolic disorders,
and cardiovascular and inflammatory diseases. Ligand's proprietary drug
discovery and development programs are based on its leadership position in gene
transcription technology, primarily related to Intracellular Receptors (IRs) and
Signal Transducers and Activators of Transcription (STATs). For more
information, go to www.ligand.com.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This news release contains certain forward-looking statements by Ligand
that involve risks and uncertainties and reflect Ligand's judgment as of the
date of this release. These include statements regarding the accretiveness of
the transaction; exercise of options and related payments and royalty
reductions; improved profitability, EPS, and gross margins; future product
growth, development and market potential, and results of ongoing ONTAK clinical
studies. Actual events or results may differ from Ligand's expectations. There
can be no assurance that the options will be exercised and thus payments made
and royalties reduced; that the transaction will be accretive; that profits, EPS
or margins will improve or that ONTAK will continue to be successful; that ONTAK
sales or the market will continue to grow, or that Ligand will make further
investments in the development of ONTAK. Additional information concerning these
and other risk factors affecting Ligand's business can be found in prior press
releases as well as in Ligand's public periodic filings with the Securities and
Exchange Commission, available at WWW.LIGAND.COM. 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.
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