A Done Deal: Ligand Diversifies its Drug Revenue With CyDex Acquisition

1/27/11Follow @bvbigelow

Investors showed little response this morning after San Diego’s Ligand Pharmaceuticals (NASDAQ: LGND) said yesterday it had acquired CyDex Pharmaceuticals for more than $36 million in mostly borrowed cash. After gaining a few cents a share, Ligand’s stock reversed course, and was down 9 cents a share at mid-day, to $8.67 a share in normal trading volume.

Ligand announced the deal in a statement after the market closed yesterday. The San Diego biotech said the deal diversifies its drug business by adding CyDex’s proprietary reformulation technology, existing royalty-bearing agreements, and collaborative partnerships with a variety of pharmaceutical companies. Privately held CyDex is based in suburban Kansas City.

The companies said CyDex’s Capistol technology helps to solve drug formulation problems, particularly in the area of intravenous and topical formulations. The technology surrounds drug molecules with sugar molecules that control the way medication is delivered in the body.

Ligand agreed to pay $31.2 million, with an additional $4.3 million promised on the anniversary of the deal. Ligand said it paid another $800,000 at the closing for an adjustment for working capital.

“Ligand will now combine the royalties from seven marketed drugs, along with the substantial revenue from the selling of Captisol, to advance Ligand toward its goal of turning cash-flow positive with substantial future growth opportunities,” Ligand CEO John Higgins said in a statement.

CyDex says Captisol is currently incorporated in five FDA-approved medications and marketed by three of the company’s licensees: Pfizer, Bristol-Myers Squibb and Prism Pharmaceuticals. CyDex also disclosed a couple of noteworthy collaborations:

—An agreement with Emeryville, CA-based Onyx Pharmaceuticals to develop a Captisol-enabled intravenous formulation of carfilzomib for refractory multiple myeloma.

—A deal with King of Prussia, PA-based Prism Pharmaceuticals, which recently received marketing approval from the FDA for its Captisol-enabled IV form of amiodarone, a drug usually administered to treat an irregular heartbeat.

Ligand said the CyDex deal is expected to more than double its 2011 revenue. Ligand, which has not yet announced its fourth-quarter financial results, reported $19.6 million in sales for the first nine months of 2010. CyDex said its sales amounted to $16.3 million last year.

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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