San Diego’s Ligand Takes Advantage of the Great Recession to Build New Drug Pipeline

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employees and divesting unwanted assets to raise cash. The company raised $470 million in cash in late 2006 by selling all its commercial operations to two separate drug companies in Tennessee and Japan. About half of that was routed to stockholders in the form of dividends and share repurchases, Higgins says.

“We went from near-insolvency in 2006 to flush,” Higgins says, adding that the company built a cash stockpile of $150 million by 2008. As a result, Ligand was unusually well prepared when the Great Recession hit during the last three months of 2008. “It created a unique opportunity to consolidate,” Higgins said. “We began to look for distressed, quality companies, where we could come in and cut costs, rebuild the business, just keep a couple of high-value programs with no burn.”

In the case of Neurogen, acquired in late 2009, Higgins said Ligand did not have to draw on its available cash to close the deal. Rather, Ligand offered about $7 million in equity for the Branford, CT, biotech, which had just two employees, no debt, and about $8 million on their balance sheet. Neurogen had been developing small-molecule drugs to improve the lives of patients suffering from psychiatric and neurological disorders. “We only chose to run two out of their eight or 10 (drug development) programs,” Higgins said. “We got $180 million in net loss carry forwards (i.e. tax deductions) and a partnership with Merck.”

In other deals in recent years, Ligand:

—Acquired Pharmacopeia in a stock-for-stock exchange valued at $70 million, with “contingent value rights” that offered all Pharmacopeia shareholders additional payments that could total as much as $15 million. In exchange, Ligand got numerous deals with nine pharmaceutical companies, with $400 million in potential R&D and milestone payments, 15 drug development programs in various stages, and more than $350 million in potential net operating loss carry-forwards.

Acquired San Diego-based Metabasis Therapeutics in late 2009, gaining a … Next Page »

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5 responses to “San Diego’s Ligand Takes Advantage of the Great Recession to Build New Drug Pipeline”

  1. Anon says:

    Sad. Higgins quotes slam Robinson’s team more than even the worst of Loeb’s SEC letters.

    He’s conveniently forgetting the double body blows of the two PhIII failures on Targretin, which was to be Ligand’s blockbuster.

    But his lame attempts to re-write history are expected given his tenuous situation.

    When he took the reigns in Jan 2007, the stock was about $78, post reverse split adjusted.

    Today, it’s about $10.

    That is a WRETCHED 87% destruction of shareholder value completely under his watch.

    And with the broader markets back to even, he can’t even blame the economy anymore.

    Much of this was driven by his string of bad deals. One so bad that on the day announced, Ligand actually lost more in market cap than the total market cap of the company they acquired! Now that’s hard to do.

    Still, Ligand has a great set of under valued assets – the most valuable being those built by the prior team and their partners, which are now maturing.

    In 2007, two month after tapping Higgins to sell the company, Loeb sold out of Ligand.

    The clock is now clearly running down on his boy as well.

  2. mj poppe says:

    Only $10 for this stock? Did you say it trades on NASDAQ?

  3. SandyEggoJake says:

    >That is a WRETCHED 87% destruction of shareholder value completely under his watch.

    To be fair, some of the crash was due to $2.50 dividend that Third Point forced in the Spring of 2007. So one can’t blame ALL of the fall from $78 (adjusted) to $10 on Mr. Higgins.