By Debbie Strickland

Just a year after the release of promising preclinical data on its lead retinoid X receptor agonist, Ligand Pharmaceuticals Inc. has snagged a more than $190 million-plus-royalties collaboration deal with Eli Lilly and Co. for that drug — Oral Targretin — along with an array of related compounds and technologies based on Ligand's intracellular receptor research.

"We've moved quickly from the data released in the fall of last year to put Targretin in human diabetic patients," said David Robinson, chairman, president and CEO. Oral Targretin is currently in Phase II trials in Europe.

"Our goal would be to have at least one drug from this venture approved for diabetes by 2002," Robinson said.

Retinoid X receptor (RXR) compounds such as Oral Targretin have potential both as monotherapies and in combination with other oral antidiabetic compounds, including peroxisome proliferator activated receptor (PPAR) agonists such as recently approved thiazolidinediones (TZDs).

Human clinical data for Oral Targretin in diabetes have not yet been released.

Included in the disclosed financial terms of the Lilly deal are milestones, equity investment, research and development funding and a product option for Ligand. Up-front milestones and equity alone total $50 million.

For Ligand, the collaboration is the company's most lucrative "by a considerable factor," said Robinson, and will assist the "march toward profitability in 1999."

"We were expecting a deal, but this is a little bit bigger than expected," said analyst David Molowa, of Bear Sterns Co., in New York, calling the agreement "a great indicator" of the technology's potential.

"Lilly's one of the strongest companies in diabetes. They have a lot of experience in diabetes and they've placed their bets with Ligand with regard to the next generation of oral compounds."

As for the 1999 earnings projection, Molowa said, "Given management's history of delivering on its promises, we wouldn't bet against them."

Lilly, which first revolutionized diabetes treatment in 1923 by commercializing insulin, will acquire rights to an array of Ligand compounds and technologies, including Targretin, an oral therapy now in Phase II European trials for Type II diabetes.

Lilly also gains rights to the following:

* Two advanced preclinical compounds (LGD 1268 and LGD 1324).

* Rights to use Ligand's RXR and PPAR disease technologies to develop therapies in metabolic and cardiovascular indications.

* Exclusive rights to the HNF4 (hepatic nuclear factor 4 receptor and obesity gene promoter technology.

* Rights to use one Ligand RXR anticancer compound in combination with a selective estrogen receptor modulator (breast cancer prevention and treatment is the most likely indication).

Ligand retains exclusive rights to independently research, develop and commercialize Targretin and other intracellular receptor compounds in the fields of cancer and dermatology, with the exception of Lilly's rights to one anticancer therapeutic. Ligand is currently testing Targretin in cancer.

In exchange for its rights, Lilly, of Indianapolis, will provide San Diego-based Ligand the following:

* Up to $49 million in research funding over five years, plus a possible three-year extension of research support, though likely at a lower level.

* $37.5 million in an equity investment at $17.23 per share — a 20 percent premium over the market average during the 20 trading days ending Sept. 12.

* $12.5 million in up-front milestones.

* Up to $75 million in additional milestone payments — exclusive of milestones payable to Ligand's former joint-venture partner, Irvine, Calif.-based Allergan Inc. — paid over eight years, contingent on the successful progress of Oral Targretin and five other compounds. (The bulk of the milestones — $45 million — are loaded into the first four years of the agreement.)

* Double-digit royalties (after Allergan's cut, where applicable) for most advanced products and single-digit royalties on earlier stage compounds.

* Ligand's choice within 90 days of either rights to one Lilly niche cancer product, or an additional $20 million equity investment (again, at a 20 percent premium) and higher royalties on one of three advanced products, which may be selected as late as the initiation of Phase III trials for one of the drugs.

* Milestones, royalties and options to obtain co-development and co-promotion rights for a Lilly-selected RXR compound to be used in combination with a selected estrogen receptor modular in cancer.

It's been a busy summer and fall at Ligand, which last month agreed to buy for $71.4 million in cash and stock all of the common stock in Allergan Ligand Retinoid Therapeutics (ALRT), a joint venture the companies formed in 1995. (See BioWorld Today, Sept. 26, 1997, p. 1.)

Allergan will receive $4.5 million and a third of milestone payments for LGD 1268 and LGD 1324, along with 50 percent of royalties payable to Ligand, and additional royalties may result if Lilly chooses to develop more compounds from the 1,000-compound ALRT chemistry pool. Though Targretin was developed outside the joint venture, one-third of royalties from that drug will go to Allergan as well.

Ligand, which specializes in oncology and dermatology, has five oncology products in Phase II and Phase III trials — "the richest pipeline in biotech," said Robinson. The CEO expects the company to submit its first new drug application (NDA) within four months and to submit two NDAs per year for oncology during the next two or three years. Ligand will market these products independently in Europe and the U.S.

Ligand's shares (NASDAQ:LGND) closed Monday at $16.50, a gain of $0.438. *

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