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Biotech / Medical : Ligand (LGND) Breakout! -- Ignore unavailable to you. Want to Upgrade?

To: Henry Niman who wrote (24468)	8/13/1998 4:51:00 PM
From: J Stone	Read Replies (1) \| Respond to of 32384

Henry, As I stated earlier, I believe LGND liked SRGN's production facilities. Correct me if I'm wrong, but if LGND hopes to sell Targretin and Panretin for off-label usage the rights to which I believe are not owned by LLY et al, then SRGN's production facilities become more important because LGND can make their own drugs for sale rather than having to resell drugs produced by LLY for them. This production capability would be consistent with the addition of salespeople. Jeff

To: Henry Niman who wrote (24468)	8/13/1998 5:10:00 PM
From: growthvalue	Read Replies (1) \| Respond to of 32384

"The SRGN acquisition is supposed to be accretive next year, meaning that they are going to MAKE MONEY on the deal next year (which is why the ONTAK approval is part of the profitability formula for 1999)." Henry: "accretive" to earnings doesn't mean that it is adding economic value to Ligand. "LGND opted for the deal that would generate the most cash the soonest. They are buying SRGN with mostly stock and I believe that the future payment to LLY will also be as stock. Thus, LGND has elected to, in effect, sell some stock (at a premium) to generate cash." THIS makes sense. LGND has certain capital requirements that they need to meet. The SRGN option may be the least expensive way for them to raise the capital they need when they need it. But make sure you understand the difference between generating cash and generating economic profit. If LGND didn't need to raise this cash, the extra royalty would OBVIOUSLY be the better option. This would be added value to Ligand - extra royalty without giving up anything for it is instant value.

To: Henry Niman who wrote (24468)	8/14/1998 8:29:00 AM
From: Mudcat	Read Replies (1) \| Respond to of 32384

<I think that there is some misunderstanding of LGND's options> Here is Lgnd's option in Lilly deal: The Company has the option to obtain selected rights to one Lilly specialty pharmaceutical product. The product would fit into a current area of strategic focus for the Company. Should the Company elect to obtain selected rights to the product, Lilly could receive milestones of up to $20 million in the Company stock. In the event that the Company does not exercise this product option during the first 90 days after the effective date of the agreements, currently anticipated to occur one business day following the closing of the exercise of the Stock Purchase Option, the Company will sell an additional $20 million in equity to Lilly at a 20% premium to the then market price, and the Company will qualify for certain additional royalties of up to 1.5% on net sales of the Company's choice of Targretin (LGD1069), ALRT268 (LGD1268) or ALRT324 (LGD1324).