Editor

Last week's agreement between Ligand Pharmaceuticals Inc. and Organon Pharmaceuticals USA Inc. to end their co-promotion deal for the oral morphine product Avinza renewed chatter related to Ligand's takeover prospects - and talk already was active about other potential buyouts, as the pharma industry moves ever more aggressively to beef up its pipelines and capabilities.

The effective date of the Ligand/Organon parting was Jan. 1, but the companies have agreed to work together through Sept. 30, with Organon making a minimum of 100,000 sales calls per quarter and Ligand making at least 30,000. During the transition period, Ligand is paying Organon 23 percent of Avinza net sales, while taking over all other expenses.

Resolved is the fight over prior fees, and Ligand has agreed to pay Organon $14.75 million by the end of this month, with another $37.75 million on or before Oct. 15, and $10 million more by Jan. 15, 2007, provided that Organon makes its required level of sales calls. After the deal ends, Ligand will make quarterly royalty payments to Organon equal to 6.5 percent of Avinza net sales through Dec. 31, 2012, and thereafter 6 percent through patent expiration, expected in late 2017.

Ligand's road lately has proved bumpy, uphill and every other cliché adjective that might be attached to a thoroughfare. There's been legal action by shareholders, an SEC probe (based on restated financial data from the past several years) and the relegation of Ligand's stock to "PK," or pink sheet, status. A skirmish with its largest shareholder, Third Point LLC, ended late last year when Ligand agreed to install three members of the investment firm on its eight-member board. In November, UBS Securities was hired to help the company line up a range of strategic options.

Although potentially lucrative deals for Ligand are hardly scarce, not all have fared well. A bit of bright news came from partner GlaxoSmithKline plc, which in December reported positive Phase II results with eltrombopag, or SP-497115, a small-molecule drug designed to mimic the activity of thrombopoetin. Data showed that the drug significantly raised platelet counts in adult patients. GSK has Phase II studies under way testing eltrombopag in idiopathic thrombocytopenic purpura, hepatitis C and chemotherapy-induced thrombocytopenia.

With Pfizer Inc., Ligand has laxofoxifene, a selective estrogen receptor modulator brand named Oporia and the first of Ligand's royalty-bearing products to get to the NDA submission stage. The FDA gave it a thumbs-down last fall as a treatment for osteoporosis, but the drug still might win approval for vaginal atrophy and is being investigated for breast cancer.

There's also an osteoporosis compound, bazedoxifene, in the works with Wyeth. (Apart from Ligand's woes, the osteoporosis space has been marked by conflict lately. Earlier this month, Procter & Gamble Pharmaceuticals Inc. and Sanofi-Aventis Group sued Roche Pharmaceuticals Inc. and GSK, claiming that the latter pair's ads for its once-per-month osteoporosis pill Boniva [ibandronate sodium] - launched last spring - overstates its benefits with regard to non-spinal fractures. The competing drug from P&G and Sanofi is Actonel [risedronate]. Amgen Inc., separately from Ligand and this dispute, has AMG 162, for which the firm is expected to disclose pivotal Phase III data later this year. Amgen's compound is for postmenopausal osteoporosis and treatment-induced bone loss in non-metastatic breast cancer and prostate cancer.

In July, Ligand reaped a $1.6 million milestone payment from Eli Lilly and Co. with Lilly's start of Phase II studies on LY674, a peroxisome proliferation activated receptor modulator atherosclerosis. LY674 was discovered through the research agreement between the firms.

Analyst coverage of Ligand has dwindled, but still hanging on is James Reddoch, of Friedman Billings Ramsey, who upgraded the stock to "market perform" from "underperform" on the Organon news. He predicted a wider net loss per share next year (41 cents per share compared to the previous estimate of 7 cents) but profitability in 2008, with EPS of 5 cents that year. Reddoch pegged the EPS at 30 cents and 51 cents in 2009 and 2010, respectively, and forecast eltrombopag would reach the market by 2008.

He called that drug and Ligand's platelet booster LGD4665 (still preclinical) the main drivers of the pipeline.

Reddoch told BioWorld Financial Watch he did not want to offer additional comment on Ligand, similar to other analysts who have backed away to watch and wait. Ligand did not return a phone call seeking comment.

Also the subject of acquisition talk lately were biotech and pharma firms overseas, including Berna Biotech AG, the Swiss company that compatriot Novartis AG, an aggressive buyer, had been sniffing around. Novartis decided not to bid on Berna, which paved the way for Crucell NV, of Leiden, the Netherlands, to make a move.

Crucell said earlier this month that its shareholders approved the exchange offer to acquire Berna in an estimated $448 million deal first made public in December. Crucell agreed to issue up to 18 million ordinary shares to holders of Berna stock, which means Crucell shareholders will own about 73 percent, with Berna's shareholders owning the remaining 27 percent of the combined company.

Analysts overseas speculated that Novartis may have turned away from vaccine maker Berna because, on inspection, Berna lacked an ideal fit with Chiron Corp., the company for which Novartis offered in October to pay $5.1 billion for the 56 percent of Chiron shares it does not already own.

The Chiron buyout is not entirely glitch-free. ValueAct Capital, which owns 5 percent, or 9.8 million shares, of Chiron, said in December it intends to vote against the deal and called Novartis' bid too low. (One partner at ValueAct said the price of $45 per share "would be tantamount to stealing" Chiron. Novartis first had offered $40 per share.)

Novartis' takeover of Chiron is expected to close in the first half of this year. Meanwhile, with Berna set aside, industry watchers are speculating on whether the pharma giant will next turn its attention to Serono SA, yet another Swiss firm.

In November, about a month after Serono agreed to pay $704 million as part of its guilty plea to fraud charges, the firm hired Goldman, Sachs & Co. to "explore various strategic alternatives." The Wall Street Journal reported that Serono officials had spoken with four pharma giants about a possible $15 billion takeover: Novartis, GSK, Sanofi-Aventis and Pfizer.

Serono, which describes itself as the third largest biotech company in the world, brings antitrust worries to any would-be buyer and has admitted to paying kickbacks to doctors, including free trips to Cannes, France, for using Serono's AIDS-wasting drug Serostim, a form of somatropin.

But Serono has a particularly attractive feature for would-be suitors: Rebif, its beta interferon for multiple sclerosis, which rose more than 54 percent in the fourth quarter of last year to sell $86 million, still the market leader.

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