By Randall Osborne
In a deal valued at up to $67 million, Ligand Pharmaceuticals Inc. is taking over Seragen Inc. and buying the rights to the company's interleukin-2 fusion protein for cutaneous T cell lymphoma (CTCL), a disfiguring and potentially fatal cancer that starts in the skin and spreads throughout the body.
"This gives us, eventually, a franchise in this disease, where nothing in particular is working," said Susan Atkins, spokeswoman for San Diego-based Ligand, which plans to submit new drug applications (NDAs) for its Targretin (bexarotene) for CTCL late this year and early next.
Targretin is formulated in topical and oral versions.
"Topical would be for early-stage [disease], and capsules would be for the early years when it becomes systemic," Atkins said. Seragen's treatment, called Ontak, is designed for treating later-stage CTCL.
"This disease lasts 10 to 25 years after diagnosis," she said.
Last December, Seragen submitted its biologics license application to the FDA, and the agency gave it priority review designation in February. An advisory panel is expected to review the drug in June. (See BioWorld Today, Dec. 9, 1997, p. 1.)
Reed Prior, chairman and CEO of Seragen, said the two companies' capabilities "all fit together very nicely."
Under terms of the merger agreement, Ligand will pay $30 million at closing, $4 million of which will be in cash and $26 million of which will be in the form of about 1.8 million shares of Ligand stock at $13.99 per share.
The merger calls for $37 million more in cash and/or Ligand stock to be paid six months after the FDA's clearance to market Ontak. If the fusion protein is not cleared within two years of the initial closing of the deal, the $37 million will not be paid.
Ligand also is buying Marathon Biopharmaceuticals Inc., which was formed when Boston University took over Hopkinton, Mass.-based Seragen's manufacturing and research operations. In exchange for all of Marathon's assets, Ligand will pay $5 million, and will add $3 million six months after the FDA's approval of Ontak.
Marathon is required because fusion proteins are more complicated to turn out than Ligand's products, Atkins said.
Interleukin-2 (IL-2) fusion protein, or DAB389IL-2, is a diphtheria toxin fragment A-fragment B genetically fused to human IL-2 through amino acid 389 on the toxin chain. The construct targets high-affinity IL-2 receptors on activated T lymphocytes. Once bound, it enters the cell, where fragment A of the toxin acts to inhibit protein synthesis, thus killing the cell.
"It's not the kind of stuff we're making," Atkins said.
Targretin is a synthetic retinoid analogue that selectively activates a subclass of retinoid receptors called retinoid X receptors, which play an important role in several cellular activities, including apoptosis, or programmed cell death.
On closing the merger with Seragen, Ligand will enter an agreement with Seragen's collaborator, Indianapolis-based Eli Lilly and Co., under which Lilly will assign Ligand the rights to Ontak.
The transactions give Ligand worldwide rights to all six of Seragen's fusion proteins, as well as Seragen's intellectual property, which includes a potential royalty stream from U.S. sales of Simulect (basiliximab), a monoclonal antibody for acute organ transplant rejection.
Simulect blocks the receptor for a protein that stimulates the proliferation of white blood cells. Novartis AG, of Basel, Switzerland, which sublicensed rights to certain patents from Seragen in development of Simulect, filed an NDA for it with the FDA in November 1997.
Ligand has its own partnership with Lilly for Targretin, a $190 million pact signed last year. (See BioWorld Today, Oct. 21, 1997, p. 1.)
Seragen Sought 'Maximum Value'
Atkins said the deal makes sense for Ligand and Seragen, which has had cash problems. Despite a cash boost from a $32 million pact with Norwalk, Conn.-based U.S. Surgical, Seragen was delisted from Nasdaq last fall. (See BioWorld Today, Aug. 4, 1997, p. 1.)
On Monday, Seragen's shares (OTC Bulletin Board:SRGN) ended the day at $0.47, up $0.03. The deal with Ligand was made public after the market closed.
At the end of last year, Seragen had 13 employees. About 90 employees went to Marathon when it was sold to Boston University, and Seragen became a "virtual" firm.
Prior said it had become clear what Seragen needed to do.
"We've been a company with a technology we think is poised for success, but our structural arrangements — a lot of preferred stock on the balance sheet — and our partnerships are such that we could never be economically viable," he said.
"We didn't have a whole lot of leverage," he added. "This struck us as the maximum value we could get for our shareholders, while giving the appropriate share to the buyer."
Seragen had what Ligand wanted, Atkins said, and the price was right.
"There have been a lot of acquisitions where big pharma steps in and pays five times [the estimated sales for a lead product]," Atkins said. "We haven't been able to compete."
Ligand's stock (NASDAQ:LGND) closed Monday at $13.875, down $0.125. *