In a move market analysts described as a good deal for bothcompanies, Ligand Pharmaceuticals Inc. agreed to acquire strugglingGlycomed Inc. in a stock swap worth about $57 million.

Under terms of the merger, Ligand will issue 6.78 million newshares, trading .5301 shares for each of Glycomed's 12.79 millionoutstanding shares. Based on Ligand's stock (NASDAQ:LGND)price at closing Tuesday of $8.37 per share, the swap would be worth$56.8 million. As a result of the exchange, Glycomed shareholderswill end up owning about 27 percent of Ligand's approximately 25.2million shares outstanding.

The major benefit to Ligand, analysts said, is the acquisition ofGlycomed's $63.5 million in cash and investments. However,Ligand also must assume Glycomed's $50 million in outstandingconvertible debentures, which are due in 2003. Ligand said it willcarry the debt by issuing a supplemental indenture convertible ineight years to 1.89 million Ligand shares at $26.52 per share.

For its part, Glycomed got about $4.43 per share, a 42 percentpremium to the stock price (NASDAQ:GLYC) Tuesday of $3.12 pershare. The merger was announced after the market closed.

In addition, analysts pointed out, Glycomed combines its resourceswith a promising company in Ligand, which has extensive corporatecollaborations and numerous products in development.

Ligand officials observed that, as of Dec. 31, the companies wouldhave had a combined cash reserves of $100 million. They declined toestimate the aggregate burn rate.

"Even though Glycomed was not distressed financially," said DavidStone, of Cowen & Co. in Boston, "they didn't have the resources tomount a competitive effort on products they wanted to get into theclinic."

In addition, Stone said, with its stock value so low, Glycomed was ata disadvantage in negotiating on its own for corporate partnerships.

Ed Hurwitz, of Robertson Stephens & Co. in San Francisco, said,"Of all the early-stage biotechnology companies to get [Glycomed's]cash, Ligand has the best chance to be successful with it."

A Tax-Free Deal

Officials of Ligand and Glycomed said they expected the merger tobe a "tax-free reorganization." Ligand, of San Diego, will be theparent company and Glycomed, of Alameda, Calif., will retain itsname and operations as a wholly-owned subsidiary.

The officials said Glycomed will continue operating "for anunspecified time," adding it was too early to speculate on work forceor program reductions.

In addition to getting considerable cash, Ligand will assumeGlycomed's product pipeline, which includes Galardin MPI forcorneal perforations _ a cell adhesion inhibitor in Phase III studies_ as well as numerous compounds in preclinical development forcancer and inflammatory diseases. Glycomed's technology is basedon complex carbohydrates.

Ligand and Glycomed indicated they will be looking for a corporatepartner for Galardin, and will focus their efforts and resources ondeveloping anti-cancer and anti-inflammatory small molecule drugcandidates.

Ligand's technology involves the use of intracellular receptors aswell as signal transducers and activators of transcription fordeveloping compounds to treat a variety of disorders, includingcancer and inflammatory diseases.

It has signed numerous collaborations recently, including a potential$21.5 million deal Monday with SmithKline Beecham Corp., ofPhiladelphia, and a $100 million joint venture with Allergan Inc., ofIrvine, Calif. in December.

Glycomed's business fortunes were fading last year when itdiscontinued development of its lead product, Astenose forprevention of restenosis, in May 1994. Two months later thecompany restructured and cut its work force by 30 percent.

Analysts noted Glycomed's looming debt repayment was key to thecompany seeking a merger. With the value of its stock hoveringaround $3, it was doubtful the price would have reached the $14.03per share needed to convert the $50 million debt by 2003.

If Ligand becomes a successful company, the analysts added, itshould have no trouble reaching its $26.52 per share conversionprice. n

-- Charles Craig

(c) 1997 American Health Consultants. All rights reserved.