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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
MARK ONE
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______ TO ______.
COMMISSION FILE NUMBER: 0-20720
LIGAND PHARMACEUTICALS INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 77-0160744
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
10275 SCIENCE CENTER DRIVE 92121-1117
SAN DIEGO, CA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (619) 535-7500
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___
As of April 30, 1998 the registrant had 38,903,699 shares of Common Stock
outstanding.
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LIGAND PHARMACEUTICALS INCORPORATED
QUARTERLY REPORT
FORM 10-Q
TABLE OF CONTENTS
COVER PAGE...............................................................................................1
TABLE OF CONTENTS........................................................................................2
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1998 and December 31, 1997.............................3
Consolidated Statements of Operations for the three months ended March 31, 1998 and 1997...........4
Consolidated Statements of Cash Flows for the three months ended March 31, 1998 and 1997...........5
Notes to Consolidated Financial Statements.........................................................6
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.....7
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk................................*
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.........................................................................*
ITEM 2. Changes in Securities.....................................................................*
ITEM 3. Defaults upon Senior Securities...........................................................*
ITEM 4. Submission of Matters to a Vote of Security Holders.......................................*
ITEM 5. Other Information.........................................................................17
ITEM 6. Exhibits and Reports on Form 8-K..........................................................17
SIGNATURE................................................................................................18
* No information provided due to inapplicability of item.
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PART I. FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
LIGAND PHARMACEUTICALS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
March 31, December 31,
1998 1997
------------ ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 26,054 $ 62,252
Short-term investments 35,728 20,978
Other current assets 2,042 864
------------ ------------
Total current assets 63,824 84,094
Restricted short-term investments 2,809 3,057
Property and equipment, net 15,460 14,853
Notes receivable from officers and employees 575 559
Other assets 6,785 4,860
============ ============
$ 89,453 $ 107,423
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,074 $ 10,717
Accrued liabilities 4,841 5,609
Deferred revenue 2,886 2,616
Current portion of obligations under capital leases 2,723 2,753
------------ ------------
Total current liabilities 14,524 21,695
Long-term obligations under capital leases 8,574 8,501
Convertible note 6,250 6,250
Convertible subordinated debentures 37,296 36,628
Stockholders' equity:
Convertible preferred stock, $.001 par value; 5,000,000
shares authorized; none issued -- --
Common stock, $.001 par value; 80,000,000 shares
authorized; 38,621,882 shares and 38,504,459 shares issued
at March 31, 1998 and December 31, 1997, respectively 39 39
Paid-in capital 312,423 311,681
Adjustment for unrealized gains (losses) on available-for-sale securities 1,642 384
Accumulated deficit (291,284) (277,744)
------------ ------------
22,820 34,360
Less treasury stock, at cost (1,114 shares
at March 31, 1998 and December 31, 1997) (11) (11)
------------ ------------
Total stockholders' equity 22,809 34,349
============ ============
$ 89,453 $ 107,423
============ ============
See accompanying notes.
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LIGAND PHARMACEUTICALS INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended
March 31,
--------------------
1998 1997
-------- --------
Revenues:
Collaborative research and development:
Related parties $ -- $ 5,966
Unrelated parties 4,974 3,737
Other 92 109
-------- --------
5,066 9,812
Costs and expenses:
Research and development 14,907 16,626
Selling, general and administrative 2,769 2,319
-------- --------
Total operating expenses 17,676 18,945
-------- --------
Loss from operations (12,610) (9,133)
Interest income 1,052 1,069
Interest expense (1,982) (2,075)
-------- --------
Net loss $(13,540) $(10,139)
======== ========
Basic and diluted loss per share $ (.35) $ (.32)
======== ========
Shares used in computing net loss per share 38,565 31,994
======== ========
See accompanying notes.
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LIGAND PHARMACEUTICALS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Three Months Ended
March 31,
--------------------
1998 1997
-------- --------
OPERATING ACTIVITIES
Net loss $(13,540) $(10,139)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization 1,053 973
Amortization of notes receivable from officers and employees 50 56
Amortization of deferred compensation and consulting -- 108
Amortization of warrant subscription receivable -- 478
Accretion of debt discount 668 669
Change in operating assets and liabilities:
Other current assets (1,177) (181)
Receivable from a related party -- 795
Accounts payable and accrued liabilities (7,411) (1,294)
Deferred revenue 270 318
-------- --------
Net cash used in operating activities (20,087) (8,217)
INVESTING ACTIVITIES
Purchase of short-term investments (19,878) (10,145)
Proceeds from short-term investments 6,386 6,923
Increase in notes receivable from officers and employees (75) (50)
Payment of notes receivable from officers and employees 8 --
Increase in other assets (2,234) (3,670)
Decrease in other assets 309 30
Purchase of property and equipment (833) (52)
-------- --------
Net cash used in investing activities (16,317) (6,964)
FINANCING ACTIVITIES
Principal payments on obligations under capital leases (784) (696)
Net change in restricted short-term investment 248 231
Net proceeds from sale of common stock 742 3,593
-------- --------
Net cash provided by financing activities 206 3,128
-------- --------
Net decrease in cash and cash equivalents (36,198) (12,053)
Cash and cash equivalents at beginning of period 62,252 34,830
======== ========
Cash and cash equivalents at end of period $ 26,054 $ 22,777
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 2,327 $ 2,412
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Additions to obligations under capital leases $ 827 $ 944
Conversion of note to common stock -- $ 3,750
See accompanying notes.
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LIGAND PHARMACEUTICALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1998
1. BASIS OF PRESENTATION
The consolidated financial statements of Ligand Pharmaceuticals Incorporated
(the "Company") for the three months ended March 31, 1998 and 1997 are
unaudited. These financial statements reflect all adjustments, consisting of
only normal recurring adjustments which, in the opinion of management, are
necessary to fairly present the consolidated financial position as of March 31,
1998 and the consolidated results of operations for the three months ended March
31, 1998 and 1997. The results of operations for the period ended March 31, 1998
are not necessarily indicative of the results to be expected for the year ending
December 31, 1998. For more complete financial information, these financial
statements, and the notes thereto, should be read in conjunction with the
audited consolidated financial statements for the year ended December 31, 1997
included in the Ligand Pharmaceuticals Incorporated Form 10-K filed with the
Securities and Exchange Commission.
In June 1997, the Financial Accounting Standards Board issued SFAS 130,
Reporting Comprehensive Income and SFAS 131, Segment Information. Both of these
standards are effective for fiscal years beginning after December 15, 1997. SFAS
130 requires that all components of comprehensive income, including net income,
be reported in the financial statements in the period in which they are
recognized. SFAS 130 requires the change in net unrealized gains (losses) on
available-for-sale securities to be included in comprehensive income. As
adjusted for this item, comprehensive net loss for the three month periods ended
March 31, 1998 and 1997 are $(12.3) million and $(10.2) million respectively.
SFAS 131 amends the requirements for public enterprises to report financial and
descriptive information about its reportable operating segments. The Company
currently operates in one business and operating segment and does not believe
adoption of this standard will have a material impact on the Company's financial
statements as reported.
2. NET LOSS PER SHARE
Net loss per share is computed using the weighted average number of common
shares outstanding.
3. NEW COLLABORATIVE RESEARCH AGREEMENT
In April 1998, SmithKline Beecham plc. and the Company initiated a new
collaboration to develop small molecule drugs for the treatment or prevention of
obesity. As part of the collaboration, SmithKline Beecham plc. purchased 274,423
shares of Ligand Common Stock for $5.0 million ($18.22 per share, a 20 percent
premium over a 15-day trading average daily closing price of the Company's stock
prior to execution of the agreement) and also purchased for $1 million a warrant
to purchase 150,000 shares of Ligand Common Stock at $20 per share. The warrant
expires in five years, and Ligand may require SmithKline Beecham plc. to
exercise the warrant under certain circumstances after three years. SmithKline
Beecham plc. will also purchase additional Ligand Common Stock at a 20 percent
premium if a certain research milestone is achieved and will make cash payments
to Ligand if subsequent milestones are met.
The companies reached agreement on the collaboration in March 1998, however, due
to required regulatory approvals the agreements were not finalized until April.
Had the agreement, warrant and equity purchase closed as of March 31, 1998,
Ligand's cash, short-term investments and restricted cash would have been $70.6
million.
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PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This quarterly report may contain predictions, estimates and other
forward-looking statements that involve a number of risks and uncertainties,
including those discussed below at "Risks and Uncertainties." While this outlook
represents management's current judgment on the future direction of the
business, such risks and uncertainties could cause actual results to differ
materially from any future performance suggested below. The Company undertakes
no obligation to release publicly the results of any revisions to these
forward-looking statements to reflect events or circumstances arising after the
date hereof.
OVERVIEW
Since January 1989, the Company has devoted substantially all of its resources
to its intracellular receptor ("IR") and Signal Transducers and Activators of
Transcription ("STATs") drug discovery and development programs. The Company has
been unprofitable since its inception and expects to incur substantial
additional operating losses due to continued requirements for research and
development, preclinical testing, clinical trials, regulatory activities,
establishment of manufacturing processes and sales and marketing capabilities
until the approval and commercialization of the Company's products generate
sufficient revenues, expected in 1999. The Company expects that losses will
fluctuate from quarter to quarter as a result of differences in the timing of
expenses incurred and the revenues earned from collaborative arrangements. Some
of these fluctuations may be significant. As of March 31, 1998, the Company's
accumulated deficit was approximately $291.3 million.
On May 11, 1998, Ligand and Seragen, Inc., ("Seragen") announced the execution
of a definitive agreement under which a wholly owned subsidiary of Ligand will
merge with Seragen (the "Merger"). In addition, Ligand announced that it had
signed a definitive asset purchase agreement to acquire substantially all the
assets of Marathon Biopharmaceuticals, LLC ("Marathon"), which currently
provides services to Seragen under a service agreement (the "Asset Purchase").
Finally, Ligand announced that it had signed an agreement with Eli Lilly and
Company ("Lilly") and Seragen, to be effective upon the closing of the Merger or
under certain other circumstances, under which Lilly will assign to Ligand
Lilly's rights and obligations under its agreements with Seragen, including its
rights to Ontak(TM) (DAB389IL-2, Interleukin-2 Fusion Protein or denileukin
diftitox) (the Assignment and collectively, with the Merger and the Asset
Purchase, the "Proposed Transactions").
In December 1994, the Company and Allergan, Inc. ("Allergan") formed Allergan
Ligand Retinoid Therapeutics, Inc. ("ALRT") to continue the research and
development activities previously conducted by the Allergan Ligand Joint Venture
(the "Joint Venture"). In June 1995, the Company and ALRT completed a public
offering of 3,250,000 units (the "Units") with aggregate proceeds of $32.5
million (the "ALRT Offering") and cash contributions by Allergan and the Company
of $50.0 million and $17.5 million, respectively, providing for net proceeds of
$94.3 million for retinoid product research and development. Each Unit consisted
of one share of ALRT's callable common stock ("Callable Common Stock") and two
warrants, each warrant entitling the holder to purchase one share of the Common
Stock of the Company. In September 1997, the Company and Allergan exercised
their respective options to purchase all of the Callable Common Stock (the
"Stock Purchase Option") and certain assets (the "Asset Purchase Option") of
ALRT. The Company's exercise of the Stock Purchase Option required the issuance
of 3,166,567 shares of the Company's Common Stock along with cash payments
totaling $25.0 million, to holders of the Callable Common Stock in November
1997. Allergen's exercise of the Asset Purchase Option required a cash payment
of $8.9 million to ALRT in November 1997, which was used by the Company to pay a
portion of the Stock Purchase Option. Prior to September 1997, cash received
from ALRT was recorded as contract revenue. As a result of the ALRT buyback,
research expenditures incurred related to ALRT activities are no longer
reimbursed, eliminating the ALRT contract revenue recognition. The buyback of
ALRT was accounted for using the purchase method of accounting. The excess of
the purchase price over the fair value of net assets acquired was allocated to
in-process technology and written off resulting in a one time noncash charge to
results of operations of $65.0 million in 1997.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1998 ("1998"), as compared with Three Months Ended
March 31, 1997 ("1997")
The Company had revenues of $5.1 million for 1998 compared to revenues of $9.8
million for 1997. The decrease in revenues is primarily due to the buyback of
ALRT which resulted in reduced revenue recognition of $6.0 million compared
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to 1997, completion of the Glaxo-Wellcome, plc ("Glaxo") and Sankyo Company Ltd.
("Sankyo") collaborations in 1997, offset by increased revenues from a new
research and development collaboration with Lilly which began in November 1997.
Revenues in 1998 were derived from the Company's research and development
agreements with (i) Lilly of $2.5 million, (ii) SmithKline Beecham Corporation
("SmithKline Beecham") of $784,000, (iii) American Home Products Corporation
("AHP") of $705,000, (iv) Abbott Laboratories ("Abbott") of $300,000 as well as
an up-front license fee of $686,000 from Cytel Corporation ("Cytel") and product
sales of Ligand (Canada) in-licensed products of $92,000. Revenues for 1997 were
derived from the Company's research and development agreements with (i) ALRT of
$6.0 million, (ii) AHP of $1.2 million, (iii) Sankyo of $744,000, (iv) Abbott of
$540,000, (v) SmithKline Beecham of $711,000, (vi) Glaxo of $491,000 as well as
from product sales of Ligand (Canada) in-licensed products of $109,000.
For 1998, research and development expenses decreased to $14.9 million from
$16.6 million in 1997. These expenses decreased primarily due to completion of
the research portion of the Sankyo collaboration in October 1997 offset by
expansion of the Company's research, clinical and development personnel.
Selling, general and administrative expenses increased to $2.8 million in 1998
from $2.3 million in 1997. The increase was primarily attributable to personnel
additions and resource expansion in preparation for commercialization
activities. Interest income was $1.1 million for 1998 and 1997. Interest expense
decreased slightly to $2.0 million for 1998, from $2.1 million in 1997.
The Company has significant net operating loss carryforwards for federal and
state income taxes which are available subject to Internal Revenue Code 382 and
383 carryforward limitations.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations through private and public offerings of
its equity securities, collaborative research revenues, capital and operating
lease transactions, issuance of convertible notes, investment income and product
sales. From inception through March 31, 1998, the Company has raised $196.5
million from sales of equity securities: $78.2 million from the Company's public
offerings and an aggregate of $118.3 million from private placements and the
exercise of options and warrants.
As of March 31, 1998, the Company had acquired an aggregate of $26.3 million in
property, laboratory and office equipment, and $4.7 million in tenant leasehold
improvements, substantially all of which has been funded through capital lease
and equipment note obligations. In addition, the Company leases its office and
laboratory facilities under operating leases. In July 1994, the Company entered
into a long-term lease related to the construction of a new laboratory facility,
which was completed and occupied in August 1995. In March 1997, the Company
entered into a long-term lease, related to a second build-to-suit facility and
loaned the construction partnership $3.7 million at an annual interest rate of
8.5% which will be paid back monthly over a 10-year period. The second
build-to-suit facility was completed and occupied in December 1997. In February
1997, the Company signed a master lease agreement to finance future capital
equipment up to $1.5 million, and in July 1997, the master lease agreement was
extended to December 1998 to include up to an additional $4.5 million. Each
individual schedule under the extended master lease agreement will be paid back
monthly with interest over a five-year period. As of March 31, 1998, the company
had $2.8 million available to finance future capital equipment.
Working capital decreased to $49.3 million as of March 31, 1998, from $62.4
million at the end of 1997. The decrease in working capital resulted from a
decrease in cash due to increases in clinical trials and product development
expenses in late 1997, operating expenses and semi-annual interest payments due
on convertible subordinated debentures and convertible notes offset by a
decrease in accrued liabilities. For the same reasons, cash and cash
equivalents, short-term investments and restricted cash decreased to $64.6
million at March 31, 1998 from $86.3 million at December 31, 1997. The Company
primarily invests its cash in United States government and investment grade
corporate debt securities.
In April 1998, SmithKline Beecham plc. and the Company initiated a new
collaboration to develop small molecule drugs for the treatment or prevention of
obesity. As part of the collaboration, SmithKline Beecham plc. purchased 274,423
shares of Ligand Common Stock for $5.0 million ($18.22 per share, a 20 percent
premium over a 15-day trading average daily closing price of the Company's stock
prior to execution of the agreement) and also purchased for $1 million a warrant
to purchase 150,000 shares of Ligand Common Stock at $20 per share. The warrant
expires in five years, and Ligand may require SmithKline Beecham plc. to
exercise the warrant under certain circumstances after three years. SmithKline
Beecham plc. will also purchase additional Ligand Common Stock at a 20 percent
premium if a certain research milestone is achieved and will make cash payments
to Ligand if subsequent milestones are met.
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The companies reached agreement on the collaboration in March 1998, however, due
to required regulatory approvals the agreements were not finalized until April.
Had the agreement, warrant and equity purchase closed as of March 31, 1998,
Ligand's cash, short-term investments and restricted cash would have been $70.6
million.
The Company believes that its available cash, cash equivalents, marketable
securities and existing sources of funding will be adequate to satisfy its
anticipated capital requirements through 1999. The Company's future capital
requirements will depend on many factors, including the pace of scientific
progress in research and development programs, the magnitude of these programs,
the scope and results of preclinical testing and clinical trials, the time and
costs involved in obtaining regulatory approvals, the costs involved in
preparing, filing, prosecuting, maintaining and enforcing patent claims,
competing technological and market developments, the ability to establish
additional collaborations, changes in the existing collaborations, the cost of
manufacturing scale-up and the effectiveness of the Company's commercialization
activities.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21st century dates from
20th century dates. As a result, many companies' software and computer systems
may need to be upgraded or replaced in order to comply with such "Year 2000"
requirements. Certain of the Company's internal computer systems are not year
2000 compliant, and the Company utilizes third-party equipment and software that
may not be Year 2000 compliant. The Company has commenced taking actions to
correct or convert such internal systems and is in the early stages of
conducting an audit of its third-party suppliers as to the Year 2000 compliance
of their systems. The Company does not believe that the cost of these actions
will have a material adverse affect on the Company's business, financial
condition or operating results. However, there can be no assurance that a
failure of the Company's internal computer systems or of third-party equipment
or software used by the Company, or of systems maintained by the Company's
suppliers, to be Year 2000 compliant will not have a material adverse effect on
the Company's business, financial condition or operating results. In addition,
there can be no assurance that adverse changes in the purchasing patterns of the
Company's potential customers as a result of Year 2000 issues affecting such
customers will not have a material adverse effect on the Company's business,
financial condition or results of operations. These expenditures may result in
reduced funds available to purchase the Company's products which could have a
material adverse effect on the Company's business, operating results and
financial condition.
RISKS AND UNCERTAINTIES
In addition to the other business information contained herein, the following
are among the factors that should also be considered carefully in evaluating
Ligand, its wholly-owned subsidiaries, Glycomed Inc., Ligand (Canada) Inc. and
Allergan Ligand Retinoid Therapeutics, Inc.
("Ligand" or the "Company") and its business.
Uncertainty of Product Development and Commercialization and Related Technology.
Ligand was founded in 1987 and has not generated any revenues from the sale of
products developed by Ligand or its collaborative partners. To achieve
profitable operations, the Company, alone or with others, must successfully
develop, clinically test, market and sell its products. Any products resulting
from the Company's or its collaborative partners' product development efforts
are not expected to be available for sale for at least several years, if at all.
The development of new pharmaceutical products is highly uncertain and subject
to a number of significant risks. Potential products that appear to be promising
at early stages of development may not reach the market for a number of reasons.
Such reasons include the possibilities that potential products are found during
preclinical testing or clinical trials to be ineffective or to cause harmful
side effects, that they fail to receive necessary regulatory approvals, are
difficult or uneconomical to manufacture on a large scale, fail to achieve
market acceptance or are precluded from commercialization by proprietary rights
of third parties. To date, Ligand's resources have been substantially dedicated
to the research and development of potential pharmaceutical products based upon
its expertise in IR and STATs technologies. Even though certain pharmaceutical
products act through IRs, some aspects of the Company's IR technologies have not
been used to produce marketed products. In addition, the Company is not aware of
any drugs that have been developed and successfully commercialized that interact
directly with STATs. Much remains to be learned about the location and function
of IRs and STATs. Most of the Company's potential products will require
extensive additional development, including preclinical testing and clinical
trials, as well as regulatory approvals, prior to commercialization. No
assurance can be given that the Company's product development efforts will be
successful, that required regulatory approvals from the FDA or equivalent
foreign authorities for any indication will be obtained or that any products, if
introduced, will be capable of being produced in commercial quantities at
reasonable costs or will be successfully marketed. Further, the Company has no
sales and only limited marketing capabilities outside Canada, and even if the
Company's products in internal development are approved for
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marketing, there can be no assurance that the Company will be able to develop
such capabilities or successfully market such products.
History of Operating Losses; Accumulated Deficit; Future Capital Needs;
Uncertainty of Additional Funding. Ligand has experienced significant operating
losses since its inception in 1987. As of March 31, 1998, Ligand had an
accumulated deficit of approximately $291.3 million. To date, substantially all
of Ligand's revenues have consisted of amounts received under collaborative
arrangements. The Company expects to incur additional losses due to continued
requirements for research and development, preclinical testing, clinical trials,
regulatory activities, establishment of manufacturing processes and sales and
marketing capabilities until the approval and commercialization of the Company's
products generate sufficient revenues, expected in 1999.
The discovery, development and commercialization of products will require the
commitment of substantial resources to conduct research, preclinical testing and
clinical trials, to establish pilot scale and commercial scale manufacturing
processes and facilities, and to establish and develop quality control,
regulatory, marketing, sales and administrative capabilities. The future capital
requirements of the Company will depend on many factors, including the pace of
scientific progress in its research and development programs, the magnitude of
these programs, the scope and results of preclinical testing and clinical
trials, the time and costs involved in obtaining regulatory approvals, the costs
involved in preparing, filing, prosecuting, maintaining and enforcing patent
claims, competing technological and market developments, the ability to
establish additional collaborations, changes in existing collaborations, the
cost of manufacturing scale-up and the effectiveness of the Company's
commercialization activities. To date, Ligand has not generated any revenue from
the sales of products developed by Ligand or its collaborative partners. There
can be no assurance that Ligand independently or through its collaborations will
successfully develop, manufacture or market any products or ever achieve or
sustain revenues or profitability from the commercialization of such products.
Moreover, even if profitability is achieved, the level of that profitability
cannot be accurately predicted. Ligand expects that operating results will
fluctuate from quarter to quarter as a result of differences in the timing of
expenses incurred and the revenues received from collaborative arrangements and
other sources. Some of these fluctuations may be significant. The Company
believes that its available cash, cash equivalents, marketable securities and
existing sources of funding will be adequate to satisfy its anticipated capital
requirements through 1999.
Glycomed's outstanding indebtedness includes $50 million principal amount of 7
1/2% Convertible Subordinated Debentures Due 2003 (the "Debentures"). There can
be no assurance that Glycomed will have the funds necessary to pay the interest
on and the principal of the Debentures or, if not, that it will be able to
refinance the Debentures.
The Company expects that it will seek any additional capital needed to fund its
operations through new collaborations, the extension of existing collaborations,
or through public or private equity or debt financings. There can be no
assurance that additional financing will be available on acceptable terms, if at
all. Any inability of the Company to obtain additional financing or of Glycomed
to service its obligations under the Debentures could have a material adverse
effect on the Company.
Uncertainties Related to Clinical Trials. Before obtaining required regulatory
approvals for the commercial sale of each product under development, the Company
and its collaborators must demonstrate through preclinical studies and clinical
trials that such product is safe and efficacious for use. The results of
preclinical studies and initial clinical trials are not necessarily predictive
of results that will be obtained from large-scale clinical trials, and there can
be no assurance that clinical trials of any product under development will
demonstrate the safety and efficacy of such product or will result in a
marketable product. The safety and efficacy of a therapeutic product under
development by the Company must be supported by extensive data from clinical
trials. A number of companies have suffered significant setbacks in advanced
clinical trials, despite promising results in earlier trials. The failure to
demonstrate adequately the safety and efficacy of a therapeutic drug under
development would delay or prevent regulatory approval of the product and could
have a material adverse effect on the Company. In addition, the FDA may require
additional clinical trials, which could result in increased costs and
significant development delays.
The rate of completion of clinical trials of the Company's potential products is
dependent upon, among other factors, obtaining adequate clinical supplies and
the rate of patient accrual. Patient accrual is a function of many factors,
including the size of the patient population, the proximity of patients to
clinical sites and the eligibility criteria for the trial. Delays in planned
patient enrollment in clinical trials may result in increased costs, program
delays or both, which could have a material adverse effect on the Company. In
addition, some of the Company's current collaborative partners have certain
rights to control the planning and execution of product development and clinical
programs, and there can be no assurance that such corporate partners' rights to
control aspects of such programs will not impede the Company's ability to
conduct
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such programs in accordance with the schedules and in the manner currently
contemplated by the Company for such programs. There can be no assurance that,
if clinical trials are completed, the Company or its collaborative partners will
submit an NDA with respect to any potential products or that any such
application will be reviewed and approved by the FDA in a timely manner, if at
all.
Reliance on Collaborative Relationships. The Company's strategy for the
development, clinical testing, manufacturing and commercialization of certain of
its potential products includes entering into collaborations with corporate
partners, licensors, licensees and others. To date, Ligand has entered into drug
discovery and development collaborations with Lilly, SmithKline Beecham, AHP,
Abbott, Sankyo, Glaxo, Allergan and Pfizer. These collaborations provide Ligand
with funding and research and development resources for potential products for
the treatment or control of metabolic diseases, hematopoiesis, women's health
disorders, inflammation, cardiovascular disease, cancer and skin disease, and
osteoporosis, respectively. The Company's collaborative agreements allow its
collaborative partners significant discretion in electing to pursue or not to
pursue any development program. There can be no assurance that the Company's
collaborations will continue or that the collaborations will be successful. In
addition, there can be no assurance that Ligand's collaborators will not pursue
alternative technologies either on their own or in collaboration with others as
a means of developing drugs competitive with the types of drugs currently being
developed in collaboration with Ligand, and any such action may result in the
withdrawal of support and increased competition for the Company's programs. In
addition, if products are approved for marketing under these programs, any
revenues to Ligand from these products will be dependent on the manufacturing,
marketing and sales efforts of its collaborators, which generally retain
commercialization rights under the collaborative agreements. Ligand's current
collaborators also generally have the right to terminate their respective
collaborations under certain circumstances. If any of the Company's
collaborative partners were to breach or terminate its agreements with the
Company or otherwise fail to conduct its collaborative activities successfully,
the development of the Company's products under such agreements would be delayed
or terminated. The delay or termination of any of the collaborations could have
a material adverse effect on Ligand.
There can be no assurance that disputes will not arise in the future with
Ligand's collaborators, including with respect to the ownership of rights to any
technology developed. For example, the Company was involved in litigation with
Pfizer, which was settled in April 1996, with respect to Ligand's rights to
receive milestones and royalties based on the development and commercialization
of droloxifene. These and other possible disagreements between collaborators and
the Company could lead to delays in the achievement of milestones or receipt of
milestone payments or research revenue, to delays or interruptions in, or
termination of, collaborative research, development and commercialization of
certain potential products, or could require or result in litigation or
arbitration, which could be time consuming and expensive and could have a
material adverse effect on the Company.
No Assurance that Recently Announced Transactions Can Be Completed. On May 11,
1998, Ligand announced the Proposed Transactions. The obligations of Ligand and
Seragen to consummate the Merger, the obligations of Ligand and Marathon to
consummate the Asset Purchase and the obligations of Ligand and Lilly to
consummate the Assignment are each subject to the satisfaction of a number of
conditions, including the approval of Seragen's shareholders, the effectiveness
of a Registration Statement and the accuracy of representations and warranties
of each of Ligand, Seragen and Marathon at the respective closings. In addition,
each of the agreements may be terminated under certain circumstances prior to
the effective date of the Merger. Ligand may not consummate the Asset Purchase
until the Merger is consummated. In addition, the Assignment is not effective
until the Merger is consummated, or under certain other circumstances. In
certain circumstances, Seragen will pay to Ligand a termination fee of $5
million plus a percentage of amounts realized in a competing transaction. There
can be no assurance that all of the conditions to the obligations of the parties
under the agreements will be satisfied, that the agreements will not be
terminated or that the Proposed Transactions will be consummated.
Uncertainty of Patent Protection; Dependence on Proprietary Technology. The
patent positions of pharmaceutical and biopharmaceutical firms, including
Ligand, are uncertain and involve complex legal and technical questions for
which important legal principles are largely unresolved. In addition, the
coverage sought in a patent application can be significantly reduced before or
after a patent is issued. This uncertain situation is also affected by revisions
to the United States patent law adopted in recent years to give effect to
international accords to which the United States has become a party. The extent
to which such changes in law will affect the operations of Ligand cannot be
ascertained. In addition, there is currently pending before Congress legislation
providing for other changes to the patent law which may adversely affect
pharmaceutical and biopharmaceutical firms. If such pending legislation is
adopted, the extent to which such changes would affect the operations of the
Company cannot be ascertained.
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Ligand's success will depend in part on its ability to obtain patent protection
for its technology both in the United States and other countries. A number of
pharmaceutical and biotechnology companies and research and academic
institutions have developed technologies, filed patent applications or received
patents on various technologies that may be related to Ligand's business. Some
of these patent applications, patents or technologies may conflict with Ligand's
technologies or patent applications. Any such conflict could limit the scope of
the patents, if any, that Ligand may be able to obtain or result in the denial
of Ligand's patent applications. In addition, if patents that cover Ligand's
activities are issued to other companies, there can be no assurance that Ligand
would be able to obtain licenses to such patents at a reasonable cost, if at
all, or be able to develop or obtain alternative technology. The Company has
from time to time had, continues to have and may have in the future discussions
with its current and potential collaborators regarding the scope and validity of
the Company's patent and other proprietary rights to its technologies, including
the Company's co- transfection assay. If a collaborator or other party were
successful in having substantial patent rights of the Company determined to be
invalid, it could adversely affect the ability of the Company to retain existing
collaborations beyond their expiration or could where contractually permitted,
encourage their termination. Such a determination could also adversely affect
the Company's ability to enter into new collaborations. If any disputes should
arise in the future with respect to the rights in any technology developed with
a collaborator or with respect to other matters involving the collaboration,
there could be delays in the achievement of milestones or receipt of milestone
payments or research revenues, or interruptions or termination of collaborative
research, development and commercialization of certain potential products, and
litigation or arbitration could result. Any of the foregoing matters could be
time consuming and expensive and could have a material adverse effect on the
Company.
Ligand owns or has exclusive rights to more than 150 currently pending patent
applications in the United States relating to Ligand's technology, as well as
foreign counterparts of certain of these applications in many countries. There
can be no assurance that patents will issue from any of these applications or,
if patents do issue, that claims allowed will be sufficient to protect Ligand's
technology. In addition, Ligand is the owner or exclusive licensee of rights
covered by approximately 200 worldwide patents issued or allowed to it or to The
Salk Institute of Biological Studies ("The Salk Institute"), Baylor College of
Medicine ("Baylor") and other licensors. Further, there can be no assurance that
any patents issued to Ligand or to licensors of Ligand's technology will not be
challenged, invalidated, circumvented or rendered unenforceable based on, among
other things, subsequently discovered prior art, lack of entitlement to the
priority of an earlier, related application, or failure to comply with the
written description, best mode, enablement or other applicable requirements, or
that the rights granted under any such patents will provide significant
proprietary protection or commercial advantage to Ligand. The invalidation,
circumvention or unenforceability of any of Ligand's patent protection could
have a material adverse effect on the Company.
The commercial success of Ligand will also depend in part on Ligand's not
infringing patents issued to competitors and not breaching technology licenses
that cover technology used in Ligand's products. It is uncertain whether any
third-party patents will require Ligand to develop alternative technology or to
alter its products or processes, obtain licenses or cease certain activities. If
any such licenses are required, there can be no assurance that Ligand will be
able to obtain such licenses on commercially favorable terms, if at all. Failure
by Ligand to obtain a license to any technology that it may require to
commercialize its products could have a material adverse effect on Ligand.
Litigation, which could result in substantial cost to Ligand, may also be
necessary to enforce any patents issued or licensed to Ligand or to determine
the scope and validity of third-party proprietary rights. There can be no
assurance that Ligand's patents or those of its licensors, if issued, would be
held valid by a court or that a competitor's technology or product would be
found to infringe such patents. If any of its competitors have filed patent
applications in the United States which claim technology also invented by
Ligand, Ligand may be required to participate in interference proceedings
declared by the U.S. Patent and Trademark Office ("PTO") in order to determine
priority of invention and, thus, the right to a patent for the technology, which
could result in substantial cost to Ligand to determine its rights.
Ligand has learned that a United States patent has been issued to, and foreign
counterparts have been filed by, Hoffman LaRoche ("Roche") that include claims
to a formulation of 9-cis-Retinoic acid (Panretin) and use of that compound to
treat epithelial cancers. Ligand had previously filed an application which has
an earlier filing date than the Roche patent and which has claims that the
Company believes are broader than but overlap in part with claims under the
Roche patent. Ligand is currently investigating the scope and validity of this
patent to determine its impact upon the Panretin Capsules and Gel products. The
PTO has informed Ligand that the overlapping claims are patentable to Ligand and
initiated an interference proceeding to determine whether Ligand or Roche is
entitled to a patent by having been first to invent the common subject matter.
The Company cannot be assured of a favorable outcome in the interference
proceeding because of factors not known at this time upon which the outcome may
depend. In addition, the interference proceeding may delay the decision of the
PTO regarding the Company's application with claims covering the Panretin
Capsules and Gel products. While the Company believes that the Roche patent does
not cover the use of Panretin Capsules and Gel to treat leukemias such as APL
and sarcomas such as KS, or the treatment of skin diseases such as psoriasis, if
the Company does not prevail
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in the interference proceeding, the Roche patent might block the Company's use
of Panretin Capsules and Gel in certain cancers, and the Company may not be able
to obtain patent protection for the Panretin Capsules and Gel products.
Ligand also relies upon trade secrets, know-how, continuing technological
innovations and licensing opportunities to develop and maintain its competitive
position. There can be no assurance that others will not independently develop
substantially equivalent proprietary information or otherwise gain access to or
disclose such information regarding Ligand. It is Ligand's policy to require its
employees, certain contractors, consultants, members of its Scientific Advisory
Board and parties to collaborative agreements to execute confidentiality
agreements upon the commencement of employment or consulting relationships or a
collaboration with Ligand. There can be no assurance that these agreements will
not be breached, that they will provide meaningful protection of Ligand's trade
secrets or adequate remedies in the event of unauthorized use or disclosure of
such information or that Ligand's trade secrets will not otherwise become known
or be independently discovered by its competitors.
Lack of Manufacturing Capability; Reliance on Third-Party Manufacturers. Ligand
currently has no manufacturing facilities and, accordingly, relies on third
parties, including its collaborative partners, for clinical or commercial
production of any compounds under consideration as products. Ligand is currently
constructing and validating a cGMP pilot manufacturing capability in order to
produce sufficient quantities of products for preclinical testing and initial
clinical trials. If Ligand is unable to develop or contract on acceptable terms
for manufacturing services, Ligand's ability to conduct preclinical testing and
human clinical trials will be adversely affected, resulting in the delay of
submission of products for regulatory approval and delay of initiation of new
development programs, which in turn could materially impair Ligand's competitive
position. Although drugs acting through IRs and STATs have been manufactured on
a commercial scale by other companies, there can be no assurance that Ligand
will be able to manufacture its products on a commercial scale or that such
products can be manufactured by Ligand or any other party on behalf of Ligand at
costs or in quantities to make commercially viable products.
Limited Sales and Marketing Capability. The creation of infrastructure to
commercialize pharmaceutical products is a difficult, expensive and
time-consuming process. Ligand currently has no sales and only limited marketing
capability outside Canada. In Canada, Ligand has been appointed as the sole
distributor of two oncology products, Proleukin, which was developed by Cetus
Oncology Corporation and PHOTOFRIN, which was developed by QLT
PhotoTherapeutics, Inc. To market any of its products directly, the Company will
need to develop a marketing and sales force with technical expertise and
distribution capability or contract with other pharmaceutical and/or health care
companies with distribution systems and direct sales forces. There can be no
assurance that the Company will be able to establish direct or indirect sales
and distribution capabilities or be successful in gaining market acceptance for
proprietary products or for other products. To the extent the Company enters
into co-promotion or other licensing arrangements, any revenues received by the
Company will be dependent on the efforts of third parties, and there can be no
assurance that any such efforts will be successful.
Substantial Competition; Risk of Technological Obsolescence. Some of the drugs
which Ligand is developing will compete with existing therapies. In addition, a
number of companies are pursuing the development of novel pharmaceuticals which
target the same diseases that Ligand is targeting as well as IR-related and
STAT-related approaches to drug discovery and development. Many of Ligand's
existing or potential competitors, particularly large pharmaceutical companies,
have substantially greater financial, technical and human resources than Ligand
and may be better equipped to develop, manufacture and market products. In
addition, many of these companies have extensive experience in preclinical
testing and human clinical trials, obtaining FDA and other regulatory approvals
and manufacturing and marketing pharmaceutical products. Academic institutions,
governmental agencies and other public and private research organizations are
conducting research to develop technologies and products that may compete with
those under development by the Company. These institutions are becoming
increasingly aware of the commercial value of their findings and are becoming
more active in seeking patent protection and licensing arrangements to collect
royalties for the use of technology that they have developed. These institutions
also may market competitive commercial products on their own or through joint
ventures and will compete with the Company in recruiting highly qualified
scientific personnel. Any of these companies, academic institutions, government
agencies or research organizations may develop and introduce products and
processes competitive with or superior to those of Ligand. The development by
others of new treatment methods for those indications for which Ligand is
developing products could render Ligand's products noncompetitive or obsolete.
Ligand's products under development target a broad range of markets. Ligand's
competition will be determined in part by the potential indications for which
Ligand's products are developed and ultimately approved by regulatory
authorities. For certain of Ligand's potential products, an important factor in
competition may be the timing of market introduction of Ligand's or competitors'
products. Accordingly, the relative speed at which Ligand or its existing or
future corporate partners can develop products, complete the clinical trials and
regulatory approval processes, and supply commercial
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quantities of the products to the market is expected to be an important
competitive factor. Ligand expects that competition among products approved for
sale will be based, among other things, on product efficacy, safety,
reliability, availability, price and patent position.
Ligand's competitive position also depends upon its ability to attract and
retain qualified personnel, obtain patent protection or otherwise develop
proprietary products or processes, and secure sufficient capital resources.
Extensive Government Regulation; No Assurance of Regulatory Approval. The
manufacturing and marketing of Ligand's products and its ongoing research and
development activities are subject to and regulation for safety and efficacy by
numerous governmental authorities in the United States and other countries.
Prior to marketing, any drug developed by the Company must undergo rigorous
preclinical and clinical testing and an extensive regulatory approval process
mandated by the FDA and equivalent foreign authorities. These processes can take
a number of years and require the expenditure of substantial resources.
The time required for completing such testing and obtaining such approvals is
uncertain, and there is no assurance that any such approval will be obtained.
The Company or its collaborative partners may decide to replace a compound in
testing with a modified or optimized compound, thus extending the test period.
In addition, delays or rejections may be encountered based upon changes in FDA
policy during the period of product development and FDA review of each submitted
new drug application or product license application. Similar delays may also be
encountered in other countries. There can be no assurance that even after such
time and expenditures, regulatory approval will be obtained for any products
developed by the Company. Moreover, prior to receiving FDA or equivalent foreign
authority approval to market its products, the Company may be required to
demonstrate that its products represent improved forms of treatment over
existing therapies. If regulatory approval of a product is granted, such
approval may entail limitations on the indicated uses for which the product may
be marketed. Further, even if such regulatory approval is obtained, a marketed
product, its manufacturer and its manufacturing facilities are subject to
continual review and periodic inspections, and subsequent discovery of
previously unknown problems with a product, manufacturer or facility may result
in restrictions on such product or manufacturer, including withdrawal of the
product from the market.
Dependence on Third-Party Reimbursement and Health Care Reform. Ligand's
commercial success will be heavily dependent upon the availability of
reimbursement for the use of any products developed by the Company or its
collaborative partners. There can be no assurance that Medicare and third-party
payors will authorize or otherwise budget reimbursement for the prescription of
any of Ligand's potential products. Additionally, third-party payors, including
Medicare, are increasingly challenging the prices charged for medical products
and services and may require additional cost-benefit analysis data from the
Company in order to demonstrate the cost-effectiveness of its products. There
can be no assurance that the Company will be able to provide such data in order
to gain market acceptance of its products with respect to pricing and
reimbursement.
In the United States, the Company expects that there will continue to be a
number of federal and state proposals to implement government control of pricing
and profitability of prescription pharmaceuticals. In addition, increasing
emphasis on managed health care will continue to put pressure on such pricing.
Cost control initiatives could decrease the price that the Company or any of its
collaborative partners or other licensees receives for any drugs it or they may
discover or develop in the future and, by preventing the recovery of development
costs, which could be substantial, and an appropriate profit margin, could have
a material adverse effect on the Company. Further, to the extent that cost
control initiatives have a material adverse effect on the Company's
collaborative partners, the Company's ability to commercialize its products and
to realize royalties may be adversely affected. Furthermore, federal and state
regulations govern or influence the reimbursement to health care providers of
fees and capital equipment costs in connection with medical treatment of certain
patients. If any actions are taken by federal and/or state governments, such
actions could adversely affect the prospects for sales of the Company's
products. There can be no assurance that action taken by federal and/or state
governments, if any, with regard to health care reform will not have a material
adverse effect on the Company.
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Product Liability and Insurance Risks. Ligand's business exposes it to potential
product liability risks which are inherent in the testing, manufacturing and
marketing of human therapeutic products. Certain of the compounds the Company is
investigating could be injurious to humans. For example, retinoids as a class
are known to contain compounds which can cause birth defects. Ligand currently
has limited product liability insurance; however, there can be no assurance that
Ligand will be able to maintain such insurance on acceptable terms or that such
insurance will provide adequate coverage against potential liabilities. The
Company expects to procure additional insurance when its products progress to a
later stage of development and if any rights to later-stage products are
in-licensed in the future. To the extent that product liability insurance, if
available, does not cover potential claims, the Company will be required to
self-insure the risks associated with such claims. A successful product
liability claim or series of claims brought against the Company could have a
material adverse effect on the Company.
Dependence on Key Employees. Ligand is highly dependent on the principal members
of its scientific and management staff, the loss of whose services might impede
the achievement of development objectives. Furthermore, Ligand is currently
experiencing a period of rapid growth which requires the hiring of significant
numbers of scientific, management and operational personnel. Accordingly,
recruiting and retaining qualified management, operations and scientific
personnel to perform research and development work in the future will also be
critical to Ligand's success. Although Ligand believes it will be successful in
attracting and retaining skilled and experienced management, operational and
scientific personnel, there can be no assurance that Ligand will be able to
attract and retain such personnel on acceptable terms given the competition
among numerous pharmaceutical and biotechnology companies, universities and
other research institutions for such personnel.
Use of Hazardous Materials. Ligand's research and development involves the
controlled use of hazardous materials, chemicals and various radioactive
compounds. For example, retinoids as a class are known to contain compounds
which can cause birth defects. Although the Company believes that its current
safety procedures for handling and disposing of such materials, chemicals and
compounds comply with the standards prescribed by state and federal regulations,
the risk of accidental contamination or injury from these materials cannot be
completely eliminated. In the event of any accident, the Company could be held
liable for any damages that result and any such liability could be significant.
The Company may incur substantial costs to comply with environmental
regulations. Any such event could have a material adverse effect on the Company.
Volatility of Stock Price. The market prices and trading volumes for securities
of emerging companies, like Ligand, have historically been highly volatile and
have experienced significant fluctuations unrelated to the operating performance
of such companies. Future announcements concerning the Company or its
competitors may have a significant impact on the market price of the Common
Stock. Such announcements might include the results of research, development
testing, technological innovations, new commercial products, government
regulation, developments concerning proprietary rights, litigation or public
concern as to the safety of the products.
Absence of Cash Dividends. No cash dividends have been paid on the Company's
Common Stock to date, and Ligand does not anticipate paying cash dividends in
the foreseeable future.
Effect of Shareholder Rights Plan and Certain Anti-Takeover Provisions. In
September 1996, the Company's Board of Directors adopted a preferred shares
rights plan (the "Shareholder Rights Plan") which provides for a dividend
distribution of one preferred share purchase right (a "Right") on each
outstanding share of the Company's Common Stock. Each Right entitles
stockholders to buy 1/1000th of a share of Ligand Series A Participating
Preferred Stock at an exercise price of $100, subject to adjustment. The Rights
will become exercisable following the tenth day after a person or group
announces acquisition of 20% or more of the Company's Common Stock, or announces
commencement of a tender offer, the consummation of which would result in
ownership by the person or group of 20% or more of the Company's Common Stock.
The Company will be entitled to redeem the Rights at $0.01 per Right at any time
on or before the earlier of the tenth day following acquisition by a person or
group of 20% or more of the Company's Common Stock and September 13, 2006.
Ligand's Amended and Restated Certificate of Incorporation (the "Certificate of
Incorporation") includes a provision that requires the approval of the holders
of 66 2/3% of Ligand's voting stock as a condition to a merger or certain other
business transactions with, or proposed by, a holder of 15% or more of Ligand's
voting stock, except in cases where certain directors approve the transaction or
certain minimum price criteria and other procedural requirements are met (the
"Fair Price Provision"). The Certificate of Incorporation also requires that any
action required or permitted to be taken by stockholders of Ligand must be
effected at a duly called annual or special meeting of stockholders and may not
be effected by any consent in writing. In addition, special meetings of the
stockholders of Ligand may be called only by the Board of Directors,
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the Chairman of the Board or the President of Ligand or by any person or persons
holding shares representing at least 10% of the outstanding Common Stock of the
Company. The Shareholder Rights Plan, the Fair Price Provision and other charter
provisions may discourage certain types of transactions involving an actual or
potential change in control of Ligand, including transactions in which the
stockholders might otherwise receive a premium for their shares over then
current market prices, and may limit the ability of the stockholders to approve
transactions that they may deem to be in their best interests. In addition, the
Board of Directors has the authority to fix the rights and preferences of and
issue shares of preferred stock, which may have the effect of delaying or
preventing a change in control of Ligand without action by the stockholders.
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PART II. OTHER INFORMATION
ITEM 5 OTHER INFORMATION
On May 11, 1998, Ligand and Seragen announced the execution of a definitive
agreement under which a wholly owned subsidiary of Ligand will merge with
Seragen (the "Merger"). In addition, Ligand announced that it had signed a
definitive asset purchase agreement to acquire substantially all the assets of
Marathon Biopharmaceuticals, LLC, which currently provides services to Seragen
under a service agreement. Finally, Ligand announced that it had signed an
agreement with Eli Lilly and Company ("Lilly") and Seragen, to be effective upon
the closing of the Merger or under certain other circumstances, under which
Lilly will assign to Ligand Lilly's rights and obligations under its agreements
with Seragen, including its rights to Ontak(TM) (DAB389IL-2, Interleukin-2
Fusion Protein or denileukin diftitox). See "Part I-Item 2-Management's
Discussion and Analysis of Financial Condition and Results of Operations-Risks
and Uncertainties."
ITEM 6 (A) EXHIBITS
Exhibit 10.173 Ninth Addendum to Amended Registration Rights Agreement,
dated June 24, 1994, between the Company and SmithKline
Beecham plc., and is effective as of April 24, 1998.
Exhibit 10.174 (1) Leptin Research, Development and License Agreement, dated
March 17, 1998, between the Company and SmithKline Beecham,
plc.
Exhibit 10.175 (1) Stock and Warrant Purchase Agreement, dated March 17, 1998,
among the Company, SmithKline Beecham, plc. and SmithKline
Beecham Corporation.
Exhibit 27.1 Financial Data Schedule
ITEM 6 (B) REPORTS ON FORMS 8-K
None.
(1) Certain confidential portions of this Exhibit were omitted by
means of marking such portions with an asterisk (the "Mark"). This
Exhibit has been filed separately with the Secretary of the
Commission without the Mark pursuant to the Company's Application
Requesting Confidential Treatment under Rule 24b-2 of the Securities
Exchange Act of 1934.
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LIGAND PHARMACEUTICALS INCORPORATED
March 31, 1998
SIGNATURE
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 thereunto duly authorized.
Ligand Pharmaceuticals Incorporated
Date: May 14, 1998 By /s/ PAUL V. MAIER
------------------------------ ---------------------------------
Paul V. Maier
Senior Vice President and
Chief Financial Officer
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