Ligand Pharmaceuticals Inc. has signed a $44 million agreement withAmerican Home Products Corp. (AHP) to develop drugs aimed atestrogen and progesterone receptors for treatment of diseases affectingwomen.Under terms of the collaboration, AHP subsidiary Wyeth-AyerstLaboratories, of Radnor, Pa., will provide San Diego-based LigandPharmaceuticals with $19 million in research support and purchasemore than 430,000 shares of Ligand common stock for $5 million.In addition, AHP, of Madison, N.J., has agreed to provide Ligandanother $20 million through a convertible-to-equity loan over fiveyears at an interest rate equal to Wednesday's prime rate.Robert Stein, Ligand's senior vice president and chief scientific officer,told BioWorld the collaboration has two major components. "The firstpart," he said, "is that which is related to our primary work involvingfemale sex steroid compounds and modulators for estrogen andprogesterone receptors that are used in a variety of diseases affectingwomen's health." Among the potential targets are hormonereplacement, cancer, gynecological diseases, central nervous systemdisorders and contraception.The deal enables Ligand to apply its human intracellular receptortechnology to search Wyeth-Ayerst's large compound library toidentify drug candidates. Wyeth-Ayerst will retain rights to mostpotential drugs associated with the women's health collaboration andLigand will receive milestone payments and royalties on productscommercialized.However, Stein said the collaboration is expected to yield more leadcandidates than Wyeth-Ayerst can develop, so Ligand will receiverights to five compounds for its own cancer drug program. In addition,AHP has an option to expand the agreement to include treatment ofosteoporosis through estrogen receptor agonists on or after Jan. 1,1996.The second major part of the agreement, Stein said, is that Ligand getsaccess to the Wyeth-Ayerst library to search for non-estrogen and non-progesterone receptor targets and choose up to 24 compounds for drugdevelopment.Timothy Wilson, of Hambrecht & Quist Inc., of New York, said thatsecond component may be the most important. Although smallercompanies have screening technology, he said, they don't have thesmall molecules and have to go to larger companies to get them.Wilson also noted that the convertible loan is significant in that itallows Ligand to raise substantial money without diluting its stock. "Ifthings go well," he said, "AHP can convert to equity. If they don't,Ligand has a cheap loan."The loan from AHP, which will be issued in three installments, isconvertible to Ligand stock at $13.31 per share for the first twoinstallments and $14.47 a share for the third.Ligand initially will receive $15 million up front from Wyeth-Ayerst:the $5 million equity investment and $10 million in loan money. Theother half of the loan will be distributed based on variouscontingencies, including research milestones and a decision to extendthe agreement from three to five years.The collaboration also gives AHP the option to purchase rights toLigand's sex steroid compounds, which are anti-progestins calledLG1127 and LG1447, for $2.5 million per compound. The optionexpires July 1, 1995. If exercised, Ligand would receive milestone androyalty payments connected with development of the potential drugs.The agreement will give AHP about a 2.8 percent ownership interest inLigand. It's the California company's fifth corporate alliance. Ligand'sbiggest partner is Allergan Inc., of Irvine, Calif., which owns about 14percent and is collaborating with Ligand on development of retenoidcompounds for cancer treatment. Other corporate partners are PfizerInc., of New York, Glaxo Holdings plc, of London, and AbbottLaboratories, of Abbott Park, Ill.Ligand (NASDAQ:LGNDA) stock closed Wednesday at $11.50 ashare, down 50 cents. AHP (NYSE:AHP) stock closed at $59.38,unchanged. n

-- Charles Craig

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