Ligand Pharmaceuticals To Buy Neurogen

SAN DIEGO (AP) -- Ligand Pharmaceuticals Inc. said Monday it has agreed to buy Neurogen for $11 million in stock as well as certain future cash payments based on licensing deals, real estate sales and other milestones.

Neurogen develops drugs to treat psychiatric and neurological disorders. Ligand's drug portfolio focuses on patients with muscle-wasting, osteoporosis, anemia, asthma, rheumatoid arthritis, psoriasis and other disorders.

Ligand CEO John Higgins said the buyout gives shareholders "an attractive partnership with Merck, additional pipeline assets and drug discovery resources."

Under the deal, Ligand will issue about 4 million new shares to Neurogen shareholders giving them a 3 percent stake in Ligand after the transaction closes. This translates to a value of about 16 cents per share of Neurogen stock, with the potential for cash to be paid later.

Both company boards have approved the deal, but it still requires approval by Neurogen's shareholders. Holders of about 33 percent of outstanding Neurogen shares have already voted in favor of the transaction, Ligand said.

Under Neurogen's partnership with Merck, Neurogen shareholders are entitled to a $3 million milestone payment if Merck starts a late-stage study with one of Neurogen's compounds. Alternatively, they can get half of the net proceeds Ligand receives if it sells the program before the start of late-stage studies. The compounds in question are being tested for the treatment of acute and chronic pain.

The deal is expected to close by the fourth quarter.

Ligand shares fell 5 cents to $2.71 in midday trading. Neurogen shares rose 1.3 cents, or 6.3 percent, to 21.3 cents.