Ligand Exercises Final Option to Buy Down ONTAK Royalties

    Business Editors/Health/Medical Writers
    BIOWIRE2K

    SAN DIEGO--(BUSINESS WIRE)--April 7, 2005--Ligand Pharmaceuticals Incorporated (NASDAQ:LGNDE) announced today it has exercised the final option under its November 2004 agreement with Eli Lilly and Company (NYSE:LLY) to buy down a further portion of the royalties payable to Lilly on sales of Ligand's marketed cancer drug ONTAK(R) (denileukin diftitox) in the United States.
    Ligand will make a one-time cash payment of $13 million to Lilly in exchange for elimination of the ONTAK royalties due to Lilly on net sales in the U.S. in 2006, and a reduced, reverse-tiered royalty scale on net sales in the U.S. thereafter.
    In January 2005 Ligand exercised the first option which provided for a one-time payment of $20 million to Lilly in exchange for the elimination of ONTAK royalty obligations in 2005, and a reduced, reverse-tiered royalty scale on ONTAK sales in the U.S. thereafter. Because both options were exercised, beginning in 2007 and throughout the remaining ONTAK patent life (2014), Ligand will pay no royalties to Lilly on U.S. sales up to $38 million. Thereafter, Ligand will pay royalties to Lilly at a rate of 20% on net U.S. sales between $38 million and $50 million, at a rate of 15% on net U.S. sales between $50 million and $72 million, and at a rate of 10% on net U.S. sales in excess of $72 million.
    Sales outside the U.S. (if ONTAK gains marketing approval in other geographies) are excluded from this agreement and will continue at the previous non-tiered contract royalty rate of 20%.
    "The exercise of this second option provides additional strategic and financial value for Ligand and our stockholders," said Paul V. Maier, Ligand's senior vice president and chief financial officer. "We believe the reduced royalty obligations will be accretive to earnings beginning in this year. Additionally, we believe the improved gross margins, together with the improved CMS reimbursement environment in 2005 compared to 2004, will provide ONTAK with a more attractive brand profit profile incentivizing the company to make further development and commercial investments to expand its market potential."
    Under the agreement between the two companies, Ligand and Lilly each had two options related to ONTAK royalties. In addition to the independent options exercised by Ligand, Lilly had options in 2005 to trigger the same royalty buydown on Ligand's part for a total consideration of up to $37 million, depending on whether Ligand had exercised one or both of its options and ONTAK had achieved certain sales levels. With Ligand's latest exercise, there are no remaining options under the agreement.

    About ONTAK

    In February 1999 the U.S. Food and Drug Administration granted Seragen, Inc., a wholly owned subsidiary of Ligand, marketing approval for ONTAK for the treatment of patients with persistent or recurrent cutaneous T-cell lymphoma (CTCL) whose malignant cells express the p55 (CD25) component of the IL2 receptor. Lilly's royalty interest in ONTAK arises out of Lilly's prior relationship with Seragen, which was renegotiated in connection with Ligand's acquisition of Seragen in 1998. Recent and current ONTAK development programs include Phase II clinical trials in patients with chronic lymphocytic leukemia, peripheral T-cell lymphoma, B-cell non-Hodgkin's lymphoma, non-small cell lung cancer, and graft-versus-host disease, indications that represent significantly larger market opportunities than CTCL.

    About Ligand

    Ligand discovers, develops and markets new drugs that address critical unmet medical needs of patients in the areas of cancer, pain, skin diseases, men's and women's hormone-related diseases, osteoporosis, metabolic disorders, and cardiovascular and inflammatory diseases. Ligand's proprietary drug discovery and development programs are based on its leadership position in gene transcription technology, primarily related to intracellular receptors. For more information, go to www.ligand.com.

    Caution Regarding Forward-Looking Statements

    This news release contains certain forward-looking statements by Ligand that involve risks and uncertainties and reflect Ligand's judgment as of the date of this release. These include statements regarding strategic and financial value, the accretiveness of the transaction; gross margins, profit profile, development and commercial investments, market potential, and the CMS reimbursement environment; exercise of options and related payments and royalty reductions; results of ongoing ONTAK clinical studies and further marketing approvals. Actual events or results may differ from Ligand's expectations. There can be no assurance that our strategic or financial value will increase, that the transaction will be accretive; that profits or margins will improve, that CMS reimbursement policies will not change; that ONTAK sales or the market will continue to grow; that Ligand will make further investments in the development of ONTAK; that clinical studies will be successful or that further marketing approvals will be granted. Additional information concerning these and other risk factors affecting Ligand's business can be found in prior press releases as well as in Ligand's public periodic filings with the Securities and Exchange Commission, available at www.ligand.com. Ligand disclaims any intent or obligation to update these forward-looking statements beyond the date of this release. This caution is made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

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CONTACT: Ligand Pharmaceuticals Paul V. Maier, 858-550-7573 Abe Wischnia, 858-550-7850

KEYWORD: CALIFORNIA INDUSTRY KEYWORD: BANKING PHARMACEUTICAL MEDICAL BIOTECHNOLOGY MARKETING AGREEMENTS SOURCE: Ligand Pharmaceuticals

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