Ligand Pharmaceuticals Incorporated (NASDAQ:LGND) and Neurogen Corporation (NASDAQ:NRGN) announced today they have entered into a definitive merger agreement under which Ligand will acquire Neurogen. Under the transaction, Neurogen stockholders will receive an estimated $11 million in Ligand common stock and will be granted Contingent Value Rights (“CVRs”) under four CVR agreements. The CVRs would entitle Neurogen shareholders to cash payments for the sale or licensing of certain assets and the achievement of a specified clinical milestone. The Ligand and Neurogen Boards of Directors have unanimously voted in favor of this transaction.
“We are very pleased to be combining Neurogen with Ligand and believe this transaction benefits the stockholders of both companies,” said John L. Higgins, President and Chief Executive Officer of Ligand Pharmaceuticals. “Ligand stockholders will gain access to an attractive partnership with Merck, additional pipeline assets and drug discovery resources, approximately $7 million in net cash and NOLs. Neurogen’s stockholders will receive equity in a well-capitalized company with royalty streams from approved pharmaceutical products, numerous fully funded partnerships with the world’s leading pharmaceutical companies, an expanded internal pipeline and financial liquidity.”
“We are committed to running Ligand as a company with a broad array of royalty bearing assets and early stage pipeline programs, backed by a strong balance sheet and staunch spending discipline,” added Higgins. “The acquisition of Neurogen will complement our long roster of partnerships, strengthen our research assets and expand our discovery resources.”
Details of the Proposed Transaction
- Under the terms of the agreement, Ligand will issue to Neurogen stockholders shares of Ligand common stock with an aggregate market value of approximately $11 million, subject to certain conditions relating to the price of Ligand’s shares and as adjusted to reflect Neurogen’s net cash balance, in each case as measured shortly before closing. At the last market price (August 21, 2009) this would result in Ligand issuing approximately 4.0 million shares, or 0.06 shares for each outstanding Neurogen share such that Neurogen stockholders would own approximately 3% of the combined company. This implies a purchase price of $0.16 per common share of Neurogen, in addition to the potential for cash consideration to be paid under each of four CVR agreements described below.
- In addition to Ligand stock, the Neurogen stockholders will receive Contingent Value Rights payable in cash as follows:
- Net proceeds from any sale of Neurogen’s real estate within six months of closing.
- Net proceeds from any sale of Neurogen’s Aplindore program within six months of closing. Aplindore is a dopamine D2 partial agonist that Neurogen has developed for the treatment of Parkinson’s disease and Restless Legs Syndrome.
- $3 million upon Merck initiating a Phase III clinical trial for Neurogen’s VR1 antagonist program or 50% of the net proceeds Ligand receives if it sells the program prior to the initiation of Phase III studies.
- $4 million if Ligand partners Neurogen’s H3 antagonist program or 50% of the net proceeds if it sells the IP related to this program.
- The transaction is expected to close by the fourth quarter of 2009 and is subject to approval by Neurogen’s stockholders and other customary closing conditions as well as a closing condition providing that Ligand is not required to deliver more than 4,200,000 shares and that Neurogen can terminate the agreement if that cap is reached and Ligand does not waive the cap.
- Stockholders of Neurogen representing approximately 33% of shares outstanding have signed voting agreements in support of the transaction. Neurogen’s financial advisor MTS Securities, LLC, an affiliate of MTS Health Partners, has delivered to Neurogen’s Board of Directors their opinion that the transaction is fair to Neurogen stockholders from a financial point of view.
Neurogen Brings to Ligand the Following: