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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.
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