<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 1
to
SCHEDULE 13E-3
RULE 13e-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934)
ALLERGAN LIGAND RETINOID THERAPEUTICS, INC.
- --------------------------------------------------------------------------------
(Name of the Issuer)
LIGAND PHARMACEUTICALS INCORPORATED
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Statement)
Callable Common Stock, par value $0.001 per share
- --------------------------------------------------------------------------------
(Title of Class of Securities)
035 01849 P107
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(CUSIP Number of Class of Securities)
William L. Respess, 9393 Towne Centre Drive, San Diego, CA 92121, (619) 535-3900
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(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of Person(s) Filing Statement)
This statement is filed in connection with (check the appropriate box):
[ ] a. The filing of solicitation materials or an information statement
subject to Regulation 14A [17 CFR 240.14a-1 to 240.14b-1],
Regulation 14C [17 CFR 240.14c-1] or Rule 13e-3(c)
[Section240.13e-3(c)] under the Securities Exchange Act of 1934.
[ ] b. The filing of a registration statement under the Securities Act
of 1933.
[ ] c. A tender offer.
[X] d. None of the above. [Exercise of Stock Purchase Option]
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies. [ ]
CALCULATION OF FILING FEE
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Transaction Valuation* Amount of Filing Fee**
$71,402,500.00 $14,280.50
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* For purposes of calculating the filing fee only. The Transaction
Valuation is based upon the exercise price of the Stock Purchase Option
(as defined below) of $71,402,500.00 for all issued and outstanding
shares of Callable Common Stock of Allergan Ligand Retinoid
Therapeutics, Inc.
** The amount of the Filing Fee, calculated in accordance with Section 13
of the Securities Exchange Act of 1934, as amended,
<PAGE> 2
equals 1/50th of one percent of the exercise price to be paid by Ligand
Pharmaceuticals Incorporated pursuant to the Stock Purchase Option to
acquire all of the issued and outstanding shares of Callable Common
Stock.
[ ] Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
Amount Previously Paid:_________________ Filing Party:__________________
Form or Registration No.:_______________ Date Filed:____________________
INTRODUCTION
This Rule 13e-3 Transaction Statement (the "Statement") relates
to the exercise by Ligand Pharmaceuticals Incorporated, a Delaware
corporation ("Ligand"), of the option (the "Stock Purchase Option")
granted to it under the Amended and Restated Certificate of
Incorporation (the "ALRT Certificate") of Allergan Ligand Retinoid
Therapeutics, Inc., a Delaware corporation ("ALRT" or the "Issuer"), to
purchase all of the issued and outstanding shares of Callable Common
Stock, par value $0.001 per share, of ALRT (the "Transaction").
Notwithstanding the filing of this Statement, Ligand does not admit that
the Transaction is subject to Rule 13e-3 of the Securities Exchange Act
of 1934, as amended.
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a) ALRT is the issuer of the equity security which is the subject
of the Transaction. The address of ALRT's principal executive
offices is 2525 Dupont Drive, Irvine, California 92612.
(b) The exact title of the equity security which is the subject of
this filing is the Callable Common Stock, par value $0.001 per
share, of ALRT (the "Callable Common Stock"). The number of
shares of Callable Common Stock outstanding as of November 10,
1997, the most recent practicable date, was 3,250,000 shares.
The approximate number of holders of record of the Callable
Common Stock was approximately 1056 as of that date.
(c) The principal market on which the Callable Common Stock is being
traded is the Nasdaq National Market. From its issuance on June
3, 1995 until June 3, 1997, the Callable Common Stock was not
traded separately, but was traded as part of units (the
"Units"), each Unit consisting of one share of Callable Common
Stock and two Warrants, each Warrant to purchase one share of
Ligand Common Stock. The Units traded under the symbol "ALRIZ."
The following chart sets forth the range of high and low sale
prices for the Units on the Nasdaq National Market for each
quarterly period from September 30, 1995 until November 14,
1997:
<TABLE>
<CAPTION>
Period Ending High Low
------------------- ---- ---
<S> <C> <C>
September 30, 1995 16 1/2 13 7/8
December 31, 1995 18 13 1/2
March 31, 1996 22 1/2 17
June 30, 1996 32 20 1/2
September 30, 1996 30 21 1/2
December 31, 1996 31 26 1/2
March 31, 1997 35 3/4 28
April 1, 1997-June 3, 1997 31 1/2 26 1/2
</TABLE>
After June 3, 1997, the Callable Common Stock traded separately
on the Nasdaq National Market under the symbol "ALRI". The
following chart sets forth the range of high and low sales
prices for the Callable Common Stock for each quarterly period
since June 3, 1997:
<PAGE> 3
<TABLE>
<CAPTION>
Period Ending High Low
------------------- ---- ---
<S> <C> <C>
June 4-June 30, 1997 20 17 1/4
September 30, 1997 23 1/2 17 5/8
December 31, 1997 (through Nov. 14) 22 19 1/2
</TABLE>
(d) To the best of Ligand's knowledge after making a reasonable
inquiry, ALRT has not paid any dividends on the Callable Common
Stock during the past two years. Section 4.4(c) of the ALRT
Certificate provides that ALRT cannot declare or pay dividends
to the holders of Callable Common Stock without the affirmative
vote of the holders of a majority of the issued and outstanding
shares of the Special Common Stock of ALRT.
(e) All outstanding shares of the Callable Common Stock were
initially issued on June 3 ,1995 in connection with a registered
offering under the Securities Act of 1933 (the "Offering"). Upon
completion of the Offering on June 3, 1995, 3,250,000 Units were
issued at an offering price of $10.00 per Unit. The Offering
raised net proceeds of $26.8 million for ALRT. Since the
Offering, there has been no underwritten public offerings of the
Callable Common Stock for cash registered under the Securities
Act of 1933 or exempt from registration thereunder pursuant to
Regulation A.
(f) None.
ITEM 2. IDENTITY AND BACKGROUND.
LIGAND
Ligand is the party filing this Statement. Ligand's principal
executive offices are located at 9393 Towne Centre Drive, San Diego CA
92121, and its principal business is the discovery and development of
small-molecule drugs which mimic or block the activities of various
hormones and cytokines to regulate gene activity and the genetic
processes affecting many diseases.
During the last five years, Ligand has not been convicted in a
criminal proceeding and has not been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction which resulted
in a judgment, decree or final order enjoining further violations of, or
prohibiting activities, subject to, federal or state securities laws or
finding any violation of such laws.
LIGAND'S DIRECTORS AND EXECUTIVE OFFICERS
DAVID E. ROBINSON
9393 Towne Centre Drive
San Diego, CA 92121
Mr. Robinson has served as President and Chief Executive Officer
and a Director of Ligand since 1991. Mr. Robinson has also served as
Chairman of the Company since May 1996. Prior to joining Ligand, he was
Chief Operating Officer at Erbamont, a pharmaceutical company. Prior to
that, Mr. Robinson was President of Adria Laboratories, Erbamont's North
American Subsidiary. He also was employed in various executive positions
for more than 10 years by Abbott Laboratories, most recently as Regional
Director of Abbott Europe. Mr. Robinson received his B.A. in political
science and history from MacQuaire University and his M.B.A. from the
University of South Wales, Australia. Mr. Robinson is a Director of the
Cancer Center Foundation of the University of California at San Diego
and the California Healthcare Institute (CHI), as well as Neurocrine
Biosciences Inc. and several private health care companies.
During the past five years, Mr. Robinson has not been convicted
in a criminal proceeding and has not been a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction which
resulted in a judgment, decree or final order enjoining further
violations of, or prohibiting activities, subject to, federal or state
securities laws or finding any violation of such laws. Mr. Robinson is a
citizen of the United States.
<PAGE> 4
HENRY F. BLISSENBACH
13911 Ridgedale Drive
Minnetonka, MN 55305
Mr. Blissenbach has served as a Director since May 1995 and
currently serves as a member of Ligand's Compensation Committee. Dr.
Blissenbach joined Diversified Pharmaceutical Services, a subsidiary
company of SmithKline Beecham, in August 1986 and served as President
until March 1997. Dr. Blissenbach was recently named Chief Pharmacy
Officer for SmithKline Beecham's Health Care Services. He earned his
Doctor of Pharmacy (Pharm.D.) degree at the University of Minnesota,
College of Pharmacy. He has held an academic appointment in the College
of Pharmacy, University of Minnesota, since 1981. He has vast experience
in managed health care, and has served in numerous advisory capacities
with pharmaceutical manufacturers and managed care entities over the
past many years. Dr. Blissenbach currently serves on the Board of
Directors for Chronimed, Inc., and is a member of Ligand's Compensation
Committee.
During the past five years, Mr. Blissenbach has not been
convicted in a criminal proceeding and has not been a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction which resulted in a judgment, decree or final order
enjoining further violations of, or prohibiting activities, subject to,
federal or state securities laws or finding any violation of such laws.
Mr. Blissenbach is a citizen of the United States.
ALEXANDER D. CROSS, PH.D.
149 Common Wealth
Menlo Park, CA 94025
Dr. Cross has served as a Director of Ligand since March 1991
and currently serves as a member of Ligand's Audit Committee. Dr. Cross
has been an independent consultant in the fields of pharmaceuticals and
biotechnology since January 1986. Dr. Cross was President and Chief
Executive Officer of Zoecon Corporation, a biotechnology company, from
April 1983 to December 1985, and Executive Vice President and Chief
Operating Officer from 1979 to 1983. Dr. Cross currently serves as
Chairman of the Board of Directors and Chief Executive Officer for
Cytopharm, Inc. He is a member of the Boards of Directors of Myelos
Neurosciences and Failure Group, Inc.
During the past five years, Dr. Cross has not been convicted in
a criminal proceeding and has not been a party to a civil proceeding of
a judicial or administrative body of competent jurisdiction which
resulted in a judgment, decree or final order enjoining further
violations of, or prohibiting activities, subject to, federal or state
securities laws or finding any violation of such laws. Dr. Cross is a
citizen of the United States.
JOHN GROOM
Lincoln House
Lincoln Place
Dublin 2 Ireland
Mr. Groom has served as a Director since May 1995 and currently
serves as a member of Ligand's Audit Committee and Compensation
Committee. Mr. Groom has served as President and Chief Operating Officer
of Elan Corporation, plc ("Elan") since January 1997, having previously
served from July 1996 to January 1997 as Chief Operating Officer and a
director on the Board of Directors of Elan. Previously, he was
President, Chief Executive Officer, and a director on the Board of
Directors of Athena Neurosciences, Inc. from 1987 until its acquisition
by Elan in July 1996. From 1960 until 1985, Mr. Groom was employed by
Smith Kline & French Laboratories (SK&F), the pharmaceutical division of
the then SmithKline Beechman Corporation. He held a number of positions
at SK&F including President of SK&F International, Vice President,
Europe, and Managing Director, United Kingdom. Mr. Groom has also served
as Chairman of the International Section of the Pharmaceutical
Manufacturers Association. Mr. Groom also serves as a director on the
Board of Directors of IDEC Pharmaceuticals Corporation and the
California Healthcare Institute and is a public trustee on the Board of
Trustees of the American Academy of Neurology Education and Research
Foundation. Mr. Groom is Fellow of the Association of Certified
Accountants (UK).
During the past five years, Mr. Groom has not been convicted in
a criminal proceeding and has not been a party to a civil proceeding of
a judicial or administrative body of competent jurisdiction which
resulted in a judgment, decree or final
<PAGE> 5
order enjoining further violations of, or prohibiting activities,
subject to, federal or state securities laws or finding any violation of
such laws. Mr. Groom is a citizen of the United States.
IRVING S. JOHNSON, PH.D.
Indian Point Road
RR1, Box 35
Stonington, ME 04681
Dr. Johnson has served as a Director of Ligand since March 1989.
Dr. Johnson is currently an independent consultant in biomedical
research. From 1953 until his retirement in November 1988, Dr. Johnson
held various positions with Eli Lilly & Company, a pharmaceutical
company, including Vice President of Research from 1973 until 1988. He
has published almost 90 scientific articles, contributed to over 30
books and has served on numerous editorial boards, society committees
and advisory committees of the National Academy of Sciences and the
National Institutes of Health including the Recombinant DNA Advisory
Committee (RAC), and was the recipient of the First Annual Congressional
Award in Science and Technology. Dr. Johnson is a member of the Board of
Directors of Agouron Pharmaceuticals, Inc. and Allelix
Biopharmaceuticals. He served on the Board of Directors of Glycomed,
Inc. (1990 to 1991) until its merger with Ligand and on the Board of
Directors of Athena Neurosciences (1989 to 1996) until its merger with
Elan. He currently serves on the Scientific Advisory Boards of both
Ligand and Elan.
During the past five years, Dr. Johnson has not been convicted
in a criminal proceeding and has not been a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction which
resulted in a judgment, decree or final order enjoining further
violations of, or prohibiting activities, subject to, federal or state
securities laws or finding any violation of such laws. Mr. Johnson is a
citizen of the United States.
CARL C. PECK, M.D.
3900 Reservoir Road NW
Room NE 405
Washington, DC 20007
Dr. Peck has served as a Directors of Ligand since March 1997.
Dr. Peck is currently Professor of Pharmacology and Medicine and
Director of the Center for Drug Development Science at Georgetown
University Medical Center. Dr. Peck was Boerhaave Professor of Clinical
Drug Research at Leiden University from November 1993 to July 1995. From
October 1987 to November 1993, Dr. Peck was Director, Center for Drug
Evaluation and Research of the Food and Drug Administration. He has held
many academic positions prior to October 1987, including Professor of
Medicine and Pharmacology, Uniformed Services University, from 1982 to
October 1987. He is author of more than 100 original research papers,
chapters and books with regard to his area of expertise.
During the past five years, Dr. Peck has not been convicted in a
criminal proceeding and has not been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction which resulted
in a judgment, decree or final order enjoining further violations of, or
prohibiting activities, subject to, federal or state securities laws or
finding any violation of such laws. Dr. Peck is a citizen of the United
States.
<PAGE> 6
LLOYD E. FLANDERS, PH.D.
9393 Towne Centre Drive
San Diego, CA 92121
Dr. Flanders joined Ligand in September 1992 as Vice President,
R&D Planning, Administration, Project Management, became Vice President,
Pre-Clinical Development and R&D Administration in August 1993 and
became Senior Vice President, Pre-Clinical Development and R&D Project
Management in March 1995. Prior to joining Ligand, Dr. Flanders was Vice
President, New Product Development--Cardiovascular Projects at
Parke-Davis Research Division of the Warner-Lambert Company where he
also previously served as Director, Research Planning and Administrative
Services. From 1971 to 1985, he served in various positions with G.D.
Searle and Company, including Director, Department of Project
Management. Dr. Flanders received a Ph.D. in comparative biochemistry
and biophysics from University of California, Davis, an M.B.A. from Lake
Forest College and a B.S. in biology from DePauw University.
During the past five years, Dr. Flanders has not been convicted
in a criminal proceeding and has not been a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction which
resulted in a judgment, decree or final order enjoining further
violations of, or prohibiting activities, subject to, federal or state
securities laws or finding any violation of such laws. Dr. Flanders is a
citizen of the United States.
WILLIAM L. RESPESS, PH.D., J.D.
9393 Towne Centre Drive
San Diego, CA 92121
Dr. Respess joined Ligand in December 1988 as Vice President and
General Counsel, became Senior Vice President and General Counsel in
August 1993 and assumed responsibility for Government Affairs in March
1995. Prior to joining Ligand, Dr. Respess was Vice President and
General Counsel at Gen-Probe, Inc., a biotechnology company, from 1987
to 1988. From 1983 to 1986, he served as Vice President and General
Counsel at Hybritech, Inc., a biotechnology company. From 1974 to 1983,
he was an attorney with the patent law firm of Lyon & Lyon of Los
Angeles, serving as Partner from 1980 to 1983. Dr. Respess received a
J.D. from George Washington University, a Ph.D. in organic chemistry
from the Massachusetts Institute of Technology and a B.S. in chemistry
from the Virginia Military Institute.
During the past five years, Dr. Respess has not been convicted
in a criminal proceeding and has not been a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction which
resulted in a judgment, decree or final order enjoining further
violations of, or prohibiting activities, subject to, federal or state
securities laws or finding any violation of such laws. Dr. Respess is a
citizen of the United States.
STEVEN D. REICH, M.D.
9393 Towne Centre Drive
San Diego, CA 92121
Dr. Reich joined Ligand in December 1995 as the Senior Vice
President, Clinical Research. Prior to joining Ligand, Dr. Reich was at
the clinical contract research organization PAREXEL International
Corporation, from 1987 to 1995, where he served as Senior Vice
President, Medical Affairs responsible for worldwide medical and
clinical affairs services including clinical trials management, medical
consulting and medical writing. From 1986 to 1987, Dr. Reich served as
worldwide Medical Research Director of Biogen, Inc. ("Biogen"), and held
various positions at Biogen from 1983 to 1986. Earlier in his career Dr.
Reich served as Associate Director of Clinical Cancer Research for
Bristol Laboratories (1978-1979). He is a Board certified Medical
Oncologist and has held academic positions as a clinical pharmacologist
at Northwestern University, SUNY-Upstate Medical School, and University
of Massachusetts Medical Center. Dr. Reich received an M.D. from the New
Jersey College of Medicine and an A.B. from Princeton University.
During the past five years, Dr. Reich has not been convicted in
a criminal proceeding and has not been a party to a civil proceeding of
a judicial or administrative body of competent jurisdiction which
resulted in a judgment, decree or final
<PAGE> 7
order enjoining further violations of, or prohibiting activities,
subject to, federal or state securities laws or finding any violation of
such laws. Dr. Reich is a citizen of the United States.
PAUL V. MAIER
9393 Towne Centre Drive
San Diego, CA 92121
Mr. Maier joined Ligand in October 1992 as Vice President and
Chief Financial Officer and became Senior Vice President and Chief
Financial Officer in November 1996. Prior to joining Ligand, Mr. Maier
served as Vice President, Finance at DFS West, a division of DFS Group,
L.P., a private multinational retailer. From February 1990 to October
1990, Mr. Maier served as Vice President and Treasurer of ICN
Pharmaceuticals, Inc. Mr. Maier held various positions in finance and
administration at SPI Pharmaceuticals, Inc., a publicly held subsidiary
of ICN Pharmaceuticals Group, from 1984 to 1988, including Vice
President, Finance from February 1984 to February 1987. Mr. Maier
received an M.B.A. from Harvard Graduate School of Business and a B.S.
from Pennsylvania State University.
During the past five years, Mr. Maier has not been convicted in
a criminal proceeding and has not been a party to a civil proceeding of
a judicial or administrative body of competent jurisdiction which
resulted in a judgment, decree or final order enjoining further
violations of, or prohibiting activities, subject to, federal or state
securities laws or finding any violation of such laws. Mr. Maier is a
citizen of the United States.
ANDRES NEGRO-VILAR, M.D., PH.D.
9393 Towne Centre Drive
San Diego, CA 92121
Dr. Negro-Vilar joined Ligand in September 1996 as Senior Vice
President, Research, and Chief Scientific Officer. Prior to joining
Ligand, Dr. Negro-Vilar was Vice President of Research and Head of the
Women's Health Research Institute for Wyeth-Ayerst Laboratories, a
division of American Home Products, from 1993 to 1996. From 1983 to
1993, Dr. Negro-Vilar served at the National Institute of Environmental
Health Sciences of the National Institutes of Health as the Director of
Clinical Programs and Chief of the Laboratory of Molecular and
Integrative Neurosciences. Dr. Negro-Vilar received a Ph.D. in
physiology from the University of Sao Paulo, Brazil, an M.D. from the
University of Buenos Aires, Argentina, and a B.S. in science from
Belgrano College.
During the past five years, Dr. Negro-Vilar has not been
convicted in a criminal proceeding and has not been a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction which resulted in a judgment, decree or final order
enjoining further violations of, or prohibiting activities, subject to,
federal or state securities laws or finding any violation of such laws.
Dr. Negro-Vilar is a citizen of the United States.
WILLIAM A. PETTIT
9393 Towne Centre Drive
San Diego, CA 92121
Mr. Pettit joined Ligand in November 1996 as Senior Vice
President, Human Resources and Administration. Prior to joining Ligand,
Mr. Pettit was Senior Vice President, Human Resources at Pharmacia and
Upjohn, Inc. where he was employed from 1986 to 1996. From 1984 to 1986,
Mr. Pettit served as Corporate Director, Human Resources at Browning
Ferris Industries. From 1975 to 1984, Mr. Pettit served in various
positions at Bristol-Myers Company (now Bristol-Myers Squibb Company)
including Director, Human Resources. Mr. Pettit received a B.A. in
English from Amherst College.
During the past five years, Dr. Negro-Vilar has not been
convicted in a criminal proceeding and has not been a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction which resulted in a judgment, decree or final order
enjoining further violations of, or prohibiting activities, subject to,
federal or state securities laws or finding any violation of such laws.
Dr. Negro-Vilar is a citizen of the United States.
<PAGE> 8
RUSSELL L. ALLEN
9393 Towne Centre Drive
San Diego, CA 92121
Mr. Allen joined Ligand in February 1997 as Vice President,
Corporate Development and Strategic Planning. Prior to joining Ligand,
Mr. Allen was General Manager, Central America, Sanofi Winthrop Inc. and
previously served as Vice President, Business Development Strategic
Analysis at Sterling Winthrop Inc. where he was employed from 1985 to
1996. From 1980 to 1985, Mr. Allen served in various positions at
Bristol-Myers Company (now Bristol-Myers Squibb Company) and from 1973
to 1980, held various positions at Procter & Gamble. Mr. Allen received
an M.B.A. from Harvard Graduate School of Business and a B.A. from
Amherst College.
During the past five years, Mr. Allen has not been convicted in
a criminal proceeding and has not been a party to a civil proceeding of
a judicial or administrative body of competent jurisdiction which
resulted in a judgment, decree or final order enjoining further
violations of, or prohibiting activities, subject to, federal or state
securities laws or finding any violation of such laws. Mr. Allen is a
citizen of the United States.
SUSAN E. ATKINS
9393 Towne Centre Drive
San Diego, CA 92121
Ms. Atkins joined Ligand in June 1993 as Vice President,
Investor Relations and Corporate Communications. Prior to joining
Ligand, Ms. Atkins served as Vice President of Public Affairs at Rorer
Group Inc. (now Rhone-Poulenc Rorer), an international pharmaceutical
firm from 1986 to 1988. From 1985 to 1986, Ms. Atkins served as Director
of Corporate Communications at Genentech, Inc. ("Genentech"). Ms. Atkins
received an M.B.A. from Pepperdine University and received both an M.A.
in mass communications and B.A. in journalism from the University of
Oklahoma.
During the past five years, Ms. Atkins has not been convicted in
a criminal proceeding and has not been a party to a civil proceeding of
a judicial or administrative body of competent jurisdiction which
resulted in a judgment, decree or final order enjoining further
violations of, or prohibiting activities, subject to, federal or state
securities laws or finding any violation of such laws. Ms. Atkins is a
citizen of the United States.
GEORGE M. GILL, M.D.
9393 Towne Centre Drive
San Diego, CA 92121
Dr. Gill joined Ligand in September 1992 as Vice President,
Clinical Research and became Vice President, Medical Affairs in January
1996. Prior to joining Ligand, Dr. Gill was Senior Director, Clinical
Research at ICI Pharmaceutical Research and Development where he also
served as Director of Clinical Research, Clinical and Medical Affairs
from 1990 to 1992. From 1984 to 1990, Dr. Gill served in various
positions at Bristol-Myers Company (now Bristol-Myers Squibb Company),
including Vice President, Worldwide Regulatory Affairs. Dr. Gill
received an M.D. from the University of Pennsylvania and a B.S. in
chemistry from Dickinson College and is board certified in pediatrics.
During the past five years, Dr. Gill has not been convicted in a
criminal proceeding and has not been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction which resulted
in a judgment, decree or final order enjoining further violations of, or
prohibiting activities, subject to, federal or state securities laws or
finding any violation of such laws. Dr. Gill is a citizen of the United
States.
HOWARD T. HOLDEN, PH.D.
9393 Towne Centre Drive
San Diego, CA 92121
Dr. Holden joined Ligand in September 1992 as Vice President,
Regulatory Affairs and Compliance. Prior to joining Ligand, Dr. Holden
was Senior Director, Worldwide Regulatory Affairs at Parke-Davis
Pharmaceutical Research Division of the Warner-Lambert Company. From
1986 to 1988, Dr. Holden served as Director, Regulatory Affairs and
Compliance
<PAGE> 9
at Centocor Inc., a pharmaceutical company. Dr. Holden received a Ph.D.
in microbiology from the University of Miami and a B.A. in zoology from
Drew University.
During the past five years, Dr. Holden has not been convicted in
a criminal proceeding and has not been a party to a civil proceeding of
a judicial or administrative body of competent jurisdiction which
resulted in a judgment, decree or final order enjoining further
violations of, or prohibiting activities, subject to, federal or state
securities laws or finding any violation of such laws. Dr. Holden is a
citizen of the United States.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a)(1) The nature and approximate amount of any transactions occurring
between Ligand and ALRT since the commencement of ALRT's second
full fiscal year proceeding the date of this Statement are as
follows:
(i) Technology License Agreement. In connection with the
Offering, ALRT, Ligand and Allergan, Inc. ("Allergan")
entered into a Technology License Agreement under which
(i) Allergan granted ALRT a worldwide, exclusive (even
as to Allergan) right and license, terminable only as
set forth therein, to use the Core Technologies (as
defined therein) developed by Allergan in research,
development and commercialization of the Products (as
defined therein) and (ii) Ligand granted ALRT a
worldwide, exclusive (even as to Ligand) right and
license, terminable only as set forth therein, to use
the Core Technologies developed by Ligand in research,
development and commercialization of the Products. ALRT
then granted to Allergan and Ligand the licenses
required by them to perform their duties under the
Development Agreement and the Commercialization
Agreement. In addition, ALRT granted to Allergan and
Ligand a nonexclusive, royalty-free irrevocable license
(including the right to sublicense) to allow Allergan
and Ligand to perform the Permitted Activities (as
defined therein). No amounts have been paid by either
Ligand or ALRT to the other pursuant to the Technology
License Agreement.
(ii) Development Agreement. ALRT, Ligand and Allergan also
entered into the Development Agreement under which
Ligand and Allergan agreed to perform research and
development for ALRT on retinoid compounds and products
in accordance with annual budgets and development plans
jointly proposed by Ligand and Allergan. As of June 30,
1997, ALRT has paid approximately $44,064,000 to Ligand
pursuant to the Development Agreement.
(iii) Commercialization Agreement. ALRT, Ligand and Allergan
also entered into a Commercialization Agreement which
provides for the marketing, manufacture and sale by
Ligand and/or Allergan of the Products developed under
the Development Agreement which have received regulatory
approval for commercial sale. No payments have been made
by ALRT to Ligand pursuant to the Commercialization
Agreement.
(iv) Services Agreement. ALRT also entered into a Services
Agreement with Ligand and Allergan under which Ligand
and Allergan agreed to provide management and
administrative services to ALRT at 110% of direct and
indirect costs for any such services performed
internally by Ligand and Allergan, and on a cost
reimbursement basis for services performed by third
parties for Ligand and Allergan on ALRT's behalf. Such
costs include all expenses incurred by Ligand and
Allergan in connection with the Offering. As of June 30,
1997, ALRT has paid approximately $164,000 to Ligand
pursuant to the Services Agreement.
(v) Panretin (ALRT1057) Purchase Option. ALRT, Ligand and
Allergan also entered into the Panretin (ALRT1057)
Purchase Option Agreement pursuant to which ALRT granted
Ligand and Allergan an option to acquire the Panretin
(ALRT1057) Program Assets (as defined therein). Ligand
has not exercised this option.
(vi) Administrative Agreement. ALRT, Ligand and Allergan also
entered into an Administrative Agreement, under which
ALRT, at the written request of the party exercising the
Stock Purchase Option (the "Exercising Party") for the
purpose of enabling the Exercising Party to effect its
rights under the Stock
<PAGE> 10
Purchase Option or fulfill its obligations under the
Administrative Agreement, will prepare and deliver a
complete list of record holders of ALRT Common Stock.
The Exercising Party is required to give written notice
of its exercise of the Stock Purchase Option to the
other party and to ALRT and, upon the closing date for
the purchase of all of the shares of ALRT Common Stock,
ALRT is entitled to treat the Exercising Party as the
sole holder of all of such shares of ALRT Common Stock.
No payments by any party have been made pursuant to the
Administrative Agreement.
(vii) Asset Purchase Agreement. ALRT, Ligand and Allergan also
entered into an Asset Purchase Agreement (the "Asset
Purchase Agreement") whereby, if Ligand exercises the
Stock Purchase Option, Allergan has the right to acquire
certain assets from ALRT (the "Asset Purchase Option").
On September 24, 1997, Ligand and Allergan announced
that they had exercised their respective option to
purchase the Callable Common Stock and certain assets of
ALRT. Ligand's notice of exercise of the Stock Purchase
Option included stock purchase option exercise price of
$21.97 per share of outstanding Callable Common Stock,
the original exercise price designated for the exercise
of the Stock Purchase Option at any time prior to June
3, 1998. Allergan's notice of exercise of its Asset
Purchase Option included an aggregate asset purchase
price of $8.9 million (the "Asset Purchase Option
Exercise Price"), the original exercise price designated
for the exercise of the Asset Purchase Option at any
time prior to June 3, 1998 under the governing Asset
Purchase Agreement. The Asset Purchase Option Exercise
Price will be paid in cash to ALRT concurrently with the
payment to holders of ALRT Callable Common Stock of the
Stock Purchase Option Exercise Price and may be used to
pay a portion of such Stock Purchase Option Exercise
Price.
Ligand and Allergan also agreed to restructure the
terms and conditions relating to research, development,
commercialization and sublicense rights for the ALRT
compounds in the period following the closing of the
exercise of Ligand's Stock Purchase Option and
Allergan's Asset Purchase Option. Prior to the
restructuring and following the exercise of the Stock
Purchase Option and Asset Purchase Option, Ligand and
Allergan would have had equal, co-exclusive development,
commercialization and sublicense rights in the compounds
and assets developed by ALRT and a 50% interest in
ALRT's liabilities. Under the restructured arrangement,
however, Ligand will receive exclusive, worldwide
development, commercialization and sublicense rights to
Oral and Topical Panretin (ALRT1057) (currently in
pivotal Phase III clinical trials), ALRT1550 (currently
in Phase I/IIa clinical trials for oncology
applications) and ALRT268 and ALRT324 (two advanced
preclinical Retinoid X Receptor ("RXR") selective
compounds); Allergan will receive exclusive, worldwide
development, commercialization and sublicense rights to
ALRT4310, a Retinoic Acid Receptor ("RAR") antagonist
being developed for topical application against
mucocutaneous toxicity associated with currently
marketed retinoids as well as for psoriasis. Allergan
will also receive ALRT326 and ALRT4204 (two advanced
preclinical RXR selective compounds). In addition,
Ligand and Allergan have participated in a lottery for
each of the approximately 2,000 retinoid compounds
existing in the ALRT compound library as of the closing
date (the "Lottery"), with each party to acquire
exclusive, worldwide development, commercialization and
sublicense rights to the compounds which they select.
Ligand and Allergan will each pay the other a royalty
based on net sales of products developed from (i) the
compounds selected by each in the Lottery and (ii) the
other ALRT compounds to which each acquires exclusive
rights. Ligand will also pay to Allergan a royalty based
on Ligand's net sales of Targretin for uses other than
oncology and dermatology indications; in the event that
Ligand licenses commercialization rights to Targretin to
a third party, Ligand will pay to Allergan a percentage
of royalties payable to Ligand with respect to sales of
Targretin other than in oncology and dermatology
indications. Under the restructured arrangement, on the
closing of the exercise of the Stock Purchase Option
and the Asset Purchase Option, Ligand will pay to
Allergan a non-refundable cash payment in the amount of
$4.5 million.
(a)(2) None.
(b) None.
ITEM 4. TERMS OF THE TRANSACTION.
(a) The material terms of the Transaction are as follows:
This Statement relates to Ligand's exercise of the Stock
Purchase Option granted to it under the ALRT Certificate to
purchase all of the outstanding shares of Callable Common Stock.
ALRT is an off balance sheet entity formed by Ligand and
Allergan to discover, develop and commercialize pharmaceutical
products based on retinoids.
In May 1995, ALRT and Ligand commenced a registered
offering under the Securities Act of 1933 (the "Offering"),
which was completed on June 3, 1995, of 3,250,000 units (the
"Units"). Each Unit consisted of one share of Callable Common
Stock and two Warrants (the "Warrants"), each such Warrant
exercisable for one share of Ligand Common Stock. The Units that
were issued in connection with the Offering traded on the Nasdaq
National Market until June 3, 1997, at which time the Callable
Common Stock and the Warrants were separately listed on the
Nasdaq National Market.
The Offering raised net proceeds for ALRT of $26.8
million. At the completion of the Offering, Ligand contributed
$17.5 million in cash and the Warrants in exchange for (i) the
Stock Purchase Option and (ii) a right to acquire all rights to
the Panretin(TM)(ALRT1057) product currently under development
by ALRT. At the same time, Allergan contributed $50.0 million in
cash to ALRT in exchange for (i) the right to acquire one-half
of all of ALRT's technologies and other assets in the event
Ligand exercises the Stock Purchase Option, (ii) an option,
similar to the Stock Purchase Option to acquire all of the
Callable Common Stock if Ligand decides not to exercise the
Stock Purchase Option and (iii) a right similar to Ligand's to
acquire all rights to the Panretin(TM)(ALRT1057) product under
development by ALRT.
Ligand exercised the Stock Purchase Option granted to it
under the ALRT Certificate on September 24, 1997 by providing
written notice of its exercise (the "Stock Purchase Option
Exercise Notice") to ALRT, the holders of the outstanding shares
of Special Common Stock of ALRT and the holders of outstanding
shares of Callable Common Stock. The exercise price of the Stock
Purchase Option is
<PAGE> 11
$21.97 per share of outstanding Callable Common Stock, for an
aggregate exercise price of $71,402,500.00 (the "Stock Purchase
Option Exercise Price"). The Stock Purchase Option Exercise
Price was based on Section 5.2 of the ALRT Certificate which
provides that if the Stock Purchase Option is exercised on or
before June 3, 1998, the exercise price is $21.97 per share of
Callable Common Stock, and if it is exercised thereafter, the
exercise price increases over time in accordance with a schedule
set forth in such Section. The Stock Purchase Option Exercise
Notice specifies that 35 percent of the Stock Purchase Option
Exercise Price shall be paid in cash and the remaining 65
percent of the Stock Purchase Option Exercise Price shall be
paid in shares of Ligand Common Stock. The Stock Purchase Option
Exercise Notice also specifies that notwithstanding the
foregoing and in accordance with the terms of Article V of the
ALRT Certificate, Ligand reserves a right at any time prior to
the closing of the Stock Purchase Option, to make payment of a
greater amount of the Stock Purchase Option Exercise Price in
cash than set forth in the Stock Purchase Option Exercise
Notice. Should Ligand exercise the latter right, it would notify
stockholders by issuing a press release. The shares of Ligand
Common Stock will be valued based on the average of the closing
prices for such stock for the 20 trading days immediately
preceding the day prior to the Stock Purchase Option Closing
Date. The date on which all of the issued and outstanding shares
of Callable Common Stock will be purchased (the "Stock Purchase
Option Closing Date") is set for November 3, 1997, or such later
date as the registration statement filed by Ligand conveying the
issuance of the shares of Ligand Common Stock to be issued in
partial consideration of the Stock Purchase Option is declared
effective.
In accordance with the terms of the ALRT Certificate,
the holders of the Callable Common Stock are obligated to sell
such shares to Ligand. These stockholders have absolutely no
investment discretion in connection with Ligand's purchase of
such outstanding shares of Callable Common Stock. Title to the
Callable Common Stock will automatically vest in Ligand on the
Stock Purchase Option Closing Date. The holders of the Callable
Common Stock may obtain payment of their pro rata portion of the
Stock Purchase Option Exercise Price from ChaseMellon
Shareholder Services, L.L.C. (the "Payment Agent") on or within
5 days after the Stock Purchase Option Closing Date upon
surrender of their certificates representing their shares of the
Callable Common Stock. Upon receipt of certificates from the
holders of the Callable Common Stock, the Payment Agent shall
pay such holders by mail to their respective addresses set forth
in ALRT's records or at the addresses otherwise provided by such
record holders or, if no such addresses are set forth in ALRT's
records or not otherwise provided, to such record holders at the
address of ALRT.
(b) Not applicable.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
Following Ligand's purchase of all of the outstanding Callable
Common Stock, ALRT will be a wholly-owned subsidiary of Ligand. Ligand
anticipates de-listing ALRT from the Nasdaq National Market and
suspending its reporting requirements with the Securities and Exchange
Commission by filing a Form 15. Ligand also intends to replace ALRT's
officers and Board of Directors with Ligand employees.
Ligand and Allergan also agreed to restructure the terms and
conditions relating to research, development, commercialization and
sublicense rights for the ALRT compounds in the period following the
closing of the exercise of Ligand's Stock Purchase Option and
Allergen's Asset Purchase Option. Prior to the restructuring and
following the exercise of the Stock Purchase Option and Asset Purchase
Option, Ligand and Allergan would have had equal, co-exclusive
development, commercialization and sublicense rights in the compounds
and assets developed by ALRT and a 50% interest in ALRT's liabilities.
Under the restructured arrangement, however, Ligand will receive
exclusive, worldwide development, commercialization and sublicense
rights to Oral and Topical Panretin (ALRT1057) (currently in pivotal
Phase III clinical trials), ALRT1550 (currently in Phase I/IIa clinical
trials for oncology applications) and ALRT268 and ALRT324 (two advanced
preclinical RXR selective compounds); Allergan will receive exclusive,
worldwide development, commercialization and sublicense rights to
ALRT4310, an RAR antagonist being developed for topical application
against mucocutaneous toxicity associated with currently marketed
retinoids as well as for psoriasis. Allergan will also receive ALRT326
and ALRT4204 (two advanced preclinical RXR selective compounds). In
addition, Ligand and Allergan have participated in the Lottery for each
of the approximately 2,000 retinoid compounds existing in the ALRT
compound library as of the closing date, with each party to acquire
exclusive, worldwide development, commercialization and sublicense
rights to the compounds which they select. Ligand and Allergan will
each pay the other a royalty based on net sales of products developed
from (i) the compounds selected by each in the Lottery and (ii) the
other ALRT compounds to which each acquires exclusive rights. Following
commercialization of Targretin, Ligand will also pay to Allergan a
royalty based on Ligand's net sales of Targretin for uses other than
oncology and dermatology indications; in the event that Ligand licenses
commercialization rights to Targretin to a third party, Ligand will pay
to Allergan a percentage of royalties payable to Ligand with respect to
sales of Targretin other than in oncology and dermatology indications.
Under the restructured arrangement, on the closing of the exercise of
the Stock Purchase Option and the Asset Purchase Option, Ligand will
pay to Allergan a non-refundable cash payment in the amount of $4.5
million.
ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The total consideration for the purchase by Ligand of all of the
issued and outstanding Callable Common Stock is $71,402,500.00.
The source of this consideration will be shares of Ligand Common
Stock (65%) and cash payments (35%) from Ligand. The Company
may use the Asset Purchase Option Exercise Price to pay a
portion of the cash payments. The outstanding portions of such
cash payment shall be made with the Company's existing cash and
cash equivalents.
(b) The following is an itemized statement of the expenses which are
expected to be incurred by Ligand in connection with the
Transaction:
Filing Fees: $30,000.00
Legal Fees: $100,000.00
Accounting Fees: $25,000.00
Printing Costs: $30,000.00
Miscellaneous: $35,000.00
Total: $220,000.00
ALRT will not be responsible for paying any of such expenses
associated with the Transaction.
<PAGE> 12
(c) Not applicable.
(d) Not applicable.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a) The purpose of the Transaction is to acquire the rights to all
products and product candidates developed or under development
by ALRT pursuant to the Development Agreement dated June 3, 1995
between Ligand, ALRT and Allergan. Concurrently with the closing
of the Transaction, Allergan will acquire rights to certain
assets of ALRT. Ligand believes that it is in the best interests
of Ligand and Ligand's stockholders to exercise the Stock
Purchase Option at this time. Ligand believed that based upon
ALRT's accelerated product development and spending rate and
pursuant to the terms of the ALRT Certificate, the Stock
Purchase Option would have been triggered by late 1997 to early
1998. Thus, rather than having the option triggered
automatically, Ligand believed that it was in the best interest
of its stockholders to exercise the Stock Purchase Option and
restructure the utilization of the ALRT assets so that Ligand
could focus upon and accelerate its research, development and
commercialization efforts on specific ALRT asset and compounds.
(b) As Ligand is exercising certain previously granted rights, no
other options were considered. ALRT's Board of Directors had
previously approved a research and development plan for the year
ending December 31, 1997 which represented an acceleration in
spending on ALRT's retinoid programs. ALRT had previously
announced that it anticipated the acceleration in spending could
result in the use of substantially all of the funds available
for research and development remaining in ALRT in late 1997 or
early 1998. Such an acceleration in spending would have resulted
in the triggering of the Stock Purchase Option under the terms
of the ALRT Certificate in late 1997 or early 1998.
Ligand and Allergan together were granted an option (the
"ALRT1057 Option") to acquire all of ALRT's right, title and
interest in the ALRT assets related to Panretin (ALRT1057) (the
"ALRT1057 Assets"). The ALRT1057 Option was exercisable from
June 3, 1997 through the earlier of June 3, 2000 or 90 days
following receipt of regulatory approval in certain major
markets. Before June 3, 1998, the exercise price for the
ALRT1057 Option was $21.4 million (the "ALRT1057 Purchase
Price"). In order to exercise the ALRT1057 Option, both Allergan
and Ligand would have had to decide it was in the best interest
of their respective stockholders to exercise the ALRT1057
Option. Ligand determined such an exercise would not be in its
stockholders best interests since the ALRT1057 Purchase Price
could not have been used by ALRT to further develop any other
ALRT compounds. The Stock Purchase Option would be triggered in
late 1997 or early 1998 regardless of the exercise of the
ALRT1057 Option.
(c) The Transaction is structured pursuant to the terms of the
previously granted Stock Purchase Option as set forth in the
ALRT Certificate. This Transaction is being undertaken at this
time because based on the current levels of product development
expenditures, ALRT has announced that it could use substantially
all of the funds available for research and development in late
1997 or early 1998, which would require Ligand to exercise the
Stock Purchase Option within a certain period of time or provide
operating funds to ALRT, or Ligand would lose rights to products
being developed by ALRT. Pursuant to the terms of the ALRT
Certificate, unless Ligand exercised its rights under the Stock
Purchase Option, Ligand would lose all rights to all ALRT
compounds and other assets. Allergan would then have the ability
to acquire an exclusive interest in such compounds and other
assets by exercising the Stock Purchase Option. Upon exercise of
the Stock Purchase Option by Allergan, the Development Agreement
would terminate, and Ligand would have no further rights to ALRT
products and product candidates under such agreement.
(d) The Transaction will cause ALRT to become a wholly-owned
subsidiary of Ligand. ALRT will be de-listed from the Nasdaq
National Market and will have its public reporting obligations
suspended. The federal tax consequences to ALRT are that
utilization of ALRT's losses and other tax carryovers may be
limited under Section 382 of the Internal Revenue Code of 1986,
as amended (the "Code").
Following the Transaction, Ligand will own 100% of the Callable
Common Stock. As a result, Ligand will indirectly own all of the
assets of ALRT. Accordingly, Ligand will report 100% of the net
book value and net earnings of ALRT. There will be no
significant federal tax consequences to Ligand as a result of
the exercise of the Stock Purchase Option. Concurrently with the
closing of the Transaction, Allergan will acquire an undivided
one-half interest in the assets of ALRT.
Under the Transaction, the holders of Callable Common Stock will
be required to dispose of all their outstanding shares of
Callable Common Stock for consideration equal to each holder's
pro rata share of the Stock Purchase Option Exercise Price
identified in Item 4(a) above.
The following is a discussion of the U.S. federal income tax
consequences to the holders of Callable Common Stock resulting
from the exercise of the Stock Purchase Option by Ligand and the
issuance of shares of Ligand Common Stock and cash for the
shares of Callable Common Stock pursuant to the Stock Purchase
Option. This discussion does not deal with all aspects of
federal taxation that may be relevant to a particular holder of
Callable Common Stock, or to certain types of holders
(including, for example, insurance companies, tax-exempt
organizations, financial institutions or broker-dealers, foreign
corporations and persons who are not citizens or residents of
the United States) subject to special treatment under the U.S.
federal income tax laws. This discussion also does not deal with
the effects of state, local or foreign income taxation. The
statements in this discussion are based on current provisions of
the Internal Revenue Code of 1986, as amended (the "Code"),
existing, temporary, and currently proposed Treasury
regulations, existing administrative interpretations and
judicial decisions. Future legislative, judicial, or
administrative changes could significantly change such
authorities either prospectively or retroactively. Neither
Ligand nor ALRT has requested a ruling from the Internal Revenue
Service (the "Service") in connection with the Transaction.
IN VIEW OF THE INDIVIDUAL NATURE OF TAX CONSEQUENCES, HOLDERS OF
CALLABLE COMMON STOCK ARE URGED TO CONSULT WITH THEIR OWN TAX
ADVISORS REGARDING THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE
TRANSACTION, INCLUDING THE APPLICABILITY OF UNITED
<PAGE> 13
STATES FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS.
Holders of Callable Common Stock will recognize a capital gain
or loss due to the Transaction equal to the difference between
(a) the amount realized on the Transaction, which will generally
be equal to the value of the Ligand Common Stock plus any cash
received and (b) their basis in the Callable Common Stock
surrendered.
The gain or loss recognized should be mid-term if the Callable
Common Stock has been held for more than one year at the time of
the Transaction and long-term if the Callable Common Stock has
been held for more than 18 months at the time of the
Transaction. The Internal Revenue Service ("IRS") may assert,
however, that the holding period of the Callable Common Stock
does not begin until such date as the Stock Purchase Option is
exercised and that capital gain or loss upon exercise of the
Stock Purchase Option is therefore short-term. Limitations may
apply to deduction of capital loss.
To the extent that holders of Callable Common Stock have not
provided appropriate taxpayer identification numbers on IRS Form
W-9 or a substitute therefore, such stockholders may be subject
to backup withholding by Ligand.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a) Ligand reasonably believes that the Transaction, including the
Company's right to allocate payment of the Stock Purchase Option
Exercise Price between cash and Ligand Common Stock, is fair to
the holders of the Callable Common Stock. Ligand chose to
allocate payment of the exercise price between cash and Ligand
Common Stock so that it could make payment based upon a
balancing of its capital needs at the time of exercise against
certain other factors, such as dilution or other impact of any
shares of Ligand Common Stock to be issued by Ligand as payment
of the Stock Purchase Option Exercise Price. None of Ligand's
directors dissented to the Transaction. William C. Shepherd, who
was at the time a director of Ligand and a director and
executive officer of Allergan, abstained from voting on the
Transaction.
(b) The material factors upon which Ligand bases its belief stated
in Item 8(a) are as follows:
(1) Ligand's Stock Purchase Option, including the Company's
right to allocate payment of the Stock Purchase Option
Exercise Price between cash and Ligand Common Stock, was
disclosed to the holders of Callable Common Stock at the
time the Callable Common Stock was offered to the public
pursuant to the registered Offering, and was described
in the prospectus distributed in connection with the
Offering. Ligand's Stock Purchase Option, including the
Company's right to allocate payment of the Stock
Purchase Option Exercise Price between cash and Ligand
Common Stock, also was set forth in the ALRT Certificate
which was publicly filed both with the Delaware
Secretary of State and the Commission prior to the
distribution of the Callable Common Stock. Further,
pursuant to the ALRT Certificate, the stock certificates
for the Callable Common Stock were legended to provide
notice to the holders thereof of the Stock Purchase
Option. Holders of the Callable Common Stock have also
been advised of the Stock Purchase Option in each Form
10-K and Form 10-Q filed since the Offering. As a
result, every holder of Callable Common Stock received
substantial notice as to the terms of the Stock Purchase
Option, including the Company's right to allocate
payment of the Stock Purchase Option Exercise Price
between cash and Ligand Common Stock, both prior to
making any investment decision with respect to the
Callable Common Stock and subsequently.
(2) The ALRT Certificate sets forth the terms of the Stock
Purchase Option. Ligand's exercise of the Stock Purchase
Option is consistent with the terms set forth in the
ALRT Certificate.
(3) In accordance with the ALRT Certificate, all holders of
Callable Common Stock, regardless of whether affiliated
or not, will receive the same consideration and method
of payment per share of Callable Common Stock from
Ligand.
(4) Under the terms of the ALRT Certificate, the holders of
the outstanding shares of Callable Common Stock are
obligated to deliver their shares to Ligand once Ligand
notifies such holders of its intention to exercise the
Stock Purchase Option and complies with the procedural
requirements set forth in the ALRT Certificate.
(c) The ALRT Certificate does not require any approval of the
stockholders of ALRT for the exercise by Ligand of the Stock
Purchase Option.
(d) After making reasonable inquiry, Ligand believes that the
directors of ALRT have not retained an unaffiliated
representative to act solely on behalf of any unaffiliated
holder of Callable Common Stock.
(e) Under the ALRT Certificate, no action is required by either
ALRT's directors or the holders of the Callable Common Stock to
effect the Stock Purchase Option.
<PAGE> 14
(f) Not applicable.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a) Neither Ligand nor, to the best of Ligand's knowledge after
reasonable inquiry of management of ALRT, ALRT, has received any
report, opinion (other than opinion of counsel) or appraisal
from an outside party which is materially related to the
Transaction.
(b) Not applicable.
(c) Not applicable.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a) As of September 22, 1997, no shares of Callable Common Stock
were beneficially owned by Ligand, by any pension, profit
sharing or similar plan of Ligand, by any executive officer or
director of Ligand, or by any associate or majority owned
subsidiary of Ligand or, to Ligand's knowledge after reasonable
inquiry of management of ALRT, by ALRT, by any pension, profit
sharing or similar plan of ALRT, by any executive officer or
director of ALRT or by any associate or majority owned
subsidiary of ALRT, except as set out in the following table:
<PAGE> 15
<TABLE>
<CAPTION>
Name of Holder Position Number of Shares Owned Percentage Ownership(1)
-------------- -------- ---------------------- -----------------------
<S> <C> <C> <C>
Alexander D. Cross Director of Ligand 746 *
Irving S. Johnson Director of Ligand 10 *
David E. Robinson Director, Chairman, President and 5,067 *
Chief Executive Officer of Ligand;
Director of ALRT
William C. Shepherd Director of Ligand; Director of 1,721(2) *
ALRT(2)
Susan E. Atkins Vice President of Ligand, Investor 1,075 *
Relations and Corporate
Communications
George M. Gill Vice President of Ligand, Clinical 259(3) *
Research and Medical Affairs
Howard T. Holden Vice President of Ligand, 81 *
Regulatory Affairs and Compliance
Paul V. Maier Senior Vice President, Chief 3,263(4) *
Financial Officer and Treasurer of
Ligand
William L. Respess Senior Vice President and General 8,093 *
Counsel of Ligand; Secretary of
ALRT
Glenn F. Kiplinger Director of ALRT 300 *
Marvin E. Rosenthale President and Chief Executive 5,000 *
Officer of ALRT
Dwight J. Yoder Chief Financial Officer of ALRT 13 *
</TABLE>
* Less than one percent (1%)
(1) Based on 3,250,000 outstanding shares of Callable Common Stock.
(2) Mr. Shepherd resigned from the Board of Directors of Ligand,
effective October 3, 1997. Included in this amount are 1,156
shares of Callable Common Stock held in Tenancy-in-Common with
Mr. Shepherd's wife.
(3) Included in this amount are 196 shares of Callable Common Stock
held as Community Property.
(4) Included in this amount are 1,535 shares of Callable Common
Stock held by Mr. Maier's wife and 153 shares of Callable Common
Stock held in Tenancy-in-Common with Mr. Maier's wife.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES.
The ALRT Certificate sets forth the terms of the Transaction
involving Ligand and ALRT. The ALRT Certificate provides Ligand with the
Stock Purchase Option under which Ligand obtained the right to purchase
all, but not less than all, of the issued and outstanding shares of
Callable Common Stock. The basic terms of the Stock Purchase Option, as
set forth in the ALRT Certificate, have been described in Items 1, 4 and
6. See Items 1, 4 and 6 above.
As of the date of this filing, Ligand and Allergan each own 50
percent of the issued and outstanding shares of Special Common Stock of
ALRT. Section 4.4 of the ALRT Certificate provides that upon exercise of
the Stock Purchase Option, the rights of the holders of Special Common
Stock to, among other things, elect two directors of ALRT, approve
certain extraordinary corporate transactions involving ALRT, and approve
the transfer of any shares of Special Common Stock shall
<PAGE> 16
terminate. As the Stock Purchase Option has now been exercised by
Ligand, such rights of the holders of Special Common Stock described in
the foregoing sentence have accordingly terminated.
Section 4.5 of the ALRT Certificate provides that ALRT may, on
and after the exercise of the Stock Purchase Option, redeem all of the
outstanding shares of Special Common Stock by paying in cash $1.00 per
share for each redeemed share (the "Redemption Price"). At least 15 days
before the date of redemption, a written redemption notice shall be
given to each holder of Special Common Stock by first-class mail,
postage prepaid, at the holder's address as shown on ALRT's records,
stating: (i) all of the shares of Special Common Stock to be redeemed,
(ii) the date fixed for the redemption (the "Redemption Date"), (iii)
the Redemption Price, and (iv) the place of payment of the Redemption
Price. On or before the date fixed for redemption, each holder of shares
of Special Common Stock to be redeemed shall surrender the certificates
representing these shares to ALRT at the place designated for payment in
the redemption notice and shall then be entitled to receive payment of
the Redemption Price. If the redemption notice is given in the manner
provided in Article IV of the ALRT Certificate, and if on the Redemption
Date the Redemption Price is available for payment, whether or not the
certificates covering these shares are surrendered, all rights with
respect to the redeemable shares shall terminate except the right of the
holders to receive the Redemption Price without interest on the
surrender of the certificates. Ligand has agreed to cause ALRT to redeem
the shares of Special Common Stock held by Allergan immediately
following the closing of the Stock Purchase Option.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO
THE TRANSACTION.
(a) Not applicable.
(b) Not applicable.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) Appraisal rights are not afforded to the holders of Callable
Common Stock under either applicable law or the ALRT Certificate
with respect to the exercise of the Stock Purchase Option, and
no appraisal rights will be afforded by either Ligand or ALRT.
Ligand is not aware of any rights available to objecting holders
of Callable Common Stock under applicable law.
(b) Ligand is unaware, after making reasonable inquiry of management
of ALRT, of any grant of access to unaffiliated security holders
to the corporate files of either ALRT or Ligand or the
appointment of counsel or appraisal services for unaffiliated
security holders at the expense of either ALRT or Ligand.
(c) Not applicable.
ITEM 14. FINANCIAL INFORMATION.
(a)(1) The Annual Report on Form 10-K for the fiscal year ending
December 31, 1996 is the latest Annual Report filed by ALRT.
Financial information extracted from ALRT's Form 10-Ks for the
fiscal years ending December 31, 1995 and December 31, 1996 are
attached to this Statement as Exhibits 99.1 and 99.2,
respectively.
(a)(2) The Quarterly Report on Form 10-Q for the quarterly period
ending June 30, 1997 is the latest Quarterly Report filed by
ALRT. Financial information extracted from this Quarterly Report
is attached to this Statement as Exhibit 99.3.
(a)(3) Not applicable.
(a)(4) The book value per share of Callable Common Stock was $14.42 as
of December 31, 1996, the most recent fiscal year end, and $5.48
as of September 30, 1997, the end of the most recent quarterly
period.
(b) Not applicable.
<PAGE> 17
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a) Not applicable.
(b) None.
ITEM 16. ADDITIONAL INFORMATION.
Ligand does not believe that any additional information is
necessary to make the required disclosures in this Statement, in light
of the circumstances under which they are made, not materially
misleading.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
+(c) Amended and Restated Certificate of Incorporation of ALRT as
filed with the Secretary of State of the State of Delaware on
June 2, 1995.
+(d) Stock Purchase Option Notice of Exercise materials, including:
(1) a cover letter from Ligand to the holders of Callable Common
Stock; (2) the Notice of Exercise of Stock Purchase Option; and
(3) the Letter of Transmittal.
+99.1 Financial information extracted from ALRT's Form 10-K for the
year ended December 31, 1995.
99.2 Financial information extracted from ALRT's Form 10-K, as
amended, for the year ended December 31, 1996.
99.3 Financial information extracted from ALRT's Form 10-Q for the
quarterly period ended September 30, 1997.
+ Previously Filed.
<PAGE> 18
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
LIGAND PHARMACEUTICALS INCORPORATED
By: /s/ Paul V. Maier
--------------------------------
Paul V. Maier
Senior Vice President, Chief
Financial Officer and Treasurer
Date: November 17, 1997
The original Statement shall be signed by each person on whose behalf
the Statement is filed or his authorized representative. If the Statement is
signed on behalf of a person by his authorized representative (other than an
executive officer or general partner of the person filing this Statement),
evidence of the representative's authority to sign on behalf of such person
shall be filed with the Statement. The name and title of each person who signs
the Statement shall be typed or printed beneath his or her signature.
<PAGE> 1
Exhibit 99.2
FINANCIAL INFORMATION EXTRACTED FROM ALRT'S
ANNUAL REPORT FILED ON FORM 10-K, AS AMENDED,
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
Report of Independent Auditors
The Board of Directors and Shareholders
Allergan Ligand Retinoid Therapeutics, Inc.
We have audited the accompanying balance sheets of Allergan Ligand Retinoid
Therapeutics, Inc. as of December 31, 1996 and 1995, the related statement of
operations for the period June 3, 1995 (date operations commenced) through
December 31, 1995 and the year ended December 31, 1996, and the statements of
stockholders' equity, and cash flows for the period December 16, 1994 (date of
incorporation) through December 31, 1995 and the year ended December 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statements presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Allergan Ligand Retinoid
Therapeutics, Inc. at December 31, 1996 and 1995, and the results of its
operations for the period June 3, 1995 (date operations commenced) through
December 31, 1995 and the year ended December 31, 1996, and its cash flows for
the period December 16, 1994 (date of incorporation) through December 31, 1995
and the year ended December 31, 1996, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Orange County, California
March 26, 1997
<PAGE> 2
FINANCIAL INFORMATION EXTRACTED FROM ALRT'S
ANNUAL REPORT FILED ON FORM 10-K, AS AMENDED,
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
Allergan Ligand Retinoid Therapeutics, Inc.
Balance Sheets
<TABLE>
<CAPTION>
December 31,
1996 1995
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 29,897,327 $ 79,792,554
Marketable securities 20,394,182 --
Interest receivable and other current assets 720,009 335,001
------------ ------------
Total current assets $ 51,011,518 $ 80,127,555
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable to Allergan, Inc. $ 812,710 $ 1,038,409
Accounts payable to Ligand Pharmaceuticals Incorporated 3,076,478 1,847,825
Accrued offering costs -- 434,759
Other accounts payable and accrued liabilities 260,733 330,611
------------ ------------
Total current liabilities 4,149,921 3,651,604
Stockholders' equity:
Callable Common Stock, $.001 par value, 3,250,000 shares
authorized, issued and outstanding 3,250 3,250
Special Common Stock, $1 par value, 1,000 shares authorized,
200 shares issued and outstanding 200 200
Additional paid-in capital 94,256,046 94,256,046
Unrealized holding loss on marketable securities (169,753) --
Accumulated deficit (47,228,146) (17,783,545)
------------ ------------
Total stockholders' equity 46,861,597 76,475,951
------------ ------------
$ 51,011,518 $ 80,127,555
============ ============
</TABLE>
See accompanying notes.
<PAGE> 3
FINANCIAL INFORMATION EXTRACTED FROM ALRT'S
ANNUAL REPORT FILED ON FORM 10-K, AS AMENDED,
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
Allergan Ligand Retinoid Therapeutics, Inc.
Statements of Operations
<TABLE>
<CAPTION>
June 3, 1995 (date
operations commenced)
1996 to December 31, 1995
---- --------------------
<S> <C> <C>
Interest income $ 3,626,713 $ 2,863,989
Costs and expenses:
Research and development expenses 31,726,438 19,495,346
General and administrative expenses 1,344,876 1,152,188
------------- --------------
Total costs and expenses 33,071,314 20,647,534
------------ -------------
Net loss $(29,444,601) $(17,783,545)
============ ============
Net loss per callable common share $(9.06) $(5.47)
====== ======
Weighted average callable common shares outstanding 3,250,000 3,250,000
============ ============
</TABLE>
See accompanying notes.
<PAGE> 4
FINANCIAL INFORMATION EXTRACTED FROM ALRT'S
ANNUAL REPORT FILED ON FORM 10-K, AS AMENDED,
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
Allergan Ligand Retinoid Therapeutics, Inc.
Statements of Stockholders' Equity
December 16, 1994 (date of incorporation) to December 31, 1996
<TABLE>
<CAPTION>
UNREALIZED
CALLABLE SPECIAL HOLDING
COMMON STOCK COMMON STOCK ADDITIONAL LOSS ON TOTAL
---------------- --------------- PAID-IN MARKETABLE ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL SECURITIES DEFICIT EQUITY
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares issued upon incorporation
- December 16, 1994
(date of incorporation) -- $ -- 200 $200 $ -- $ -- $ -- $ 200
----------------------------------------------------------------------------------------------
Balance at December 31, 1994 -- -- 200 200 -- -- -- 200
Issuance of callable common
stock in initial public
offering, net of offering
costs of $5,740,704 3,250,000 3,250 -- -- 26,756,046 -- -- 26,759,296
Contribution from Allergan, Inc. -- -- -- -- 50,000,000 -- -- 50,000,000
Contribution from Ligand
Pharmaceuticals Incorporated -- -- -- -- 17,500,000 -- -- 17,500,000
Net loss -- -- -- -- -- -- (17,783,545) (17,783,545)
----------------------------------------------------------------------------------------------
Balance at December 31, 1995 3,250,000 3,250 200 200 94,256,046 -- (17,783,545) 76,475,951
Net loss -- -- -- -- -- -- (29,444,601) (29,444,601)
Unrealized holding loss
on marketable securities -- -- -- -- -- (169,753) -- (169,753)
----------------------------------------------------------------------------------------------
Balance at December 31, 1996 3,250,000 $3,250 200 $200 $94,256,046 $(169,753) $(47,228,146) $46,861,597
==============================================================================================
</TABLE>
See accompanying notes.
<PAGE> 5
FINANCIAL INFORMATION EXTRACTED FROM ALRT'S
ANNUAL REPORT FILED ON FORM 10-K, AS AMENDED,
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
Allergan Ligand Retinoid Therapeutics, Inc.
Statements of Cash Flows
December 16, 1994 (date of incorporation) to December 31, 1996
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Operating activities:
Net loss $(29,444,601) $(17,783,545)
Adjustments to reconcile net loss to net cash used
in operating activities:
Changes in operating assets and liabilities:
Interest receivable and other current assets (385,008) (335,001)
Accounts payable to Allergan, Inc. (225,699) 1,038,409
Accounts payable to Ligand Pharmaceuticals
Incorporated 1,228,653 1,847,825
Accrued offering costs (434,759) 434,759
Other accounts payable and accrued liabilities (69,878) 330,611
------------ ------------
Net cash used in operating activities (29,331,292) (14,466,942)
Investing activities:
Purchase of marketable securities (20,563,935) --
Financing activities:
Proceeds from issuance of callable common stock
in initial public offering, net -- 26,759,296
Proceeds from issuance of special common stock -- 200
Contribution from Allergan, Inc. -- 50,000,000
Contribution from Ligand Pharmaceuticals
Incorporated -- 17,500,000
------------ ------------
Net cash provided by financing activities -- 94,259,496
------------ ------------
Net increase (decrease) in cash and cash equivalents (49,895,227) 79,792,554
Cash and cash equivalents at beginning of period 79,792,554 --
------------ ------------
Cash and cash equivalents at end of period $ 29,897,327 $ 79,792,554
============ ============
</TABLE>
See accompanying notes.
<PAGE> 6
FINANCIAL INFORMATION EXTRACTED FROM ALRT'S
ANNUAL REPORT FILED ON FORM 10-K, AS AMENDED,
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
Allergan Ligand Retinoid Therapeutics, Inc.
Notes to Financial Statements
December 31, 1996
1. ORGANIZATION AND BUSINESS OPERATIONS
BUSINESS
Allergan Ligand Retinoid Therapeutics, Inc. (the Company) was incorporated in
Delaware in 1994 and commenced operations on June 3, 1995 to continue the
efforts of the Allergan Ligand Joint Venture (Joint Venture), established by
Allergan, Inc. (Allergan) and Ligand Pharmaceuticals Incorporated (Ligand) in
June 1992, to discover, develop and commercialize drugs based on retinoids (the
Products).
On June 3, 1995, the Company and Ligand completed a public offering (the
Offering) of 3.25 million units, each unit consisting of one share of the
Company's callable common stock and two warrants, each to purchase one share of
Ligand common stock. The Offering raised net proceeds for the Company of $26.8
million. At the completion of the Offering, Ligand contributed $17.5 million
in cash, as well as warrants in exchange for (i) a right to acquire all of the
Callable Common Stock at specified future dates and amounts and (ii) a right to
acquire all rights to the Panretin (ALRT1057) products, jointly with Allergan,
currently under development by the Company. At the same time, Allergan
contributed $50.0 million in cash to the Company in exchange for (i) the right
to acquire one-half of all technologies and other assets in the event Ligand
exercises its right to acquire all of the Callable Common Stock, (ii) a similar
right to acquire all of the Callable Common Stock if Ligand does not exercise
its right and (iii) a right to acquire all rights to the Panretin (ALRT1057)
products, jointly with Ligand.
ALRT's Board of Directors recently approved a research and development
plan for the year ending December 31, 1997 which represents an acceleration in
spending on ALRT's retinoid programs. The accelerated spending is the result
of more rapid discovery and development of a significantly larger library of
viable retinoid compounds than anticipated at the time of formation of ALRT.
ALRT anticipates the acceleration in spending could result in the use of
substantially all of the funds available for research and development remaining
in ALRT in late 1997 or early 1998. Ligand and Allergan have certain purchase
options over the Callable Common Stock and the assets of ALRT which could be
triggered by the use of substantially all of ALRT's funds. There can be no
assurance that Ligand or Allergan will exercise these options.
2. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the accompanying financial statements.
Actual results could differ from those estimates.
<PAGE> 7
FINANCIAL INFORMATION EXTRACTED FROM ALRT'S
ANNUAL REPORT FILED ON FORM 10-K, AS AMENDED,
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
Allergan Ligand Retinoid Therapeutics, Inc.
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONCENTRATIONS OF BUSINESS RISK
The Company conducts research and development for the purpose of identifying
and developing retinoid drugs for therapeutic uses and is subject to intense
competition and technological changes in the biotechnology industry. The
Company is also dependent upon Allergan and Ligand who are primarily
responsible for research, development, marketing and manufacturing on behalf of
the Company.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consists of demand deposits and bank certificates of
deposit carried at cost which approximates fair value.
MARKETABLE SECURITIES
Marketable securities consist of United States Treasury Bills and debt
instruments of financial institutions and corporations with strong credit
ratings. The Company determines the fair value of marketable securities based
upon quoted market values. At December 31, 1996, the fair value of marketable
securities was $169,753 less than cost. Such reduction in value was recorded
as a charge in stockholders' equity as the marketable securities are available
for sale.
CONCENTRATION OF CREDIT RISKS
The Company invests its excess cash in certificates of deposit and marketable
securities. The Company has established guidelines with respect to
diversification and maturities designed to maintain safety and liquidity.
RESEARCH AND DEVELOPMENT EXPENSES
The Company contracts with Allergan and Ligand to conduct research, development
and initial clinical testing. The costs of such work are expensed as incurred.
INCOME TAXES
The Company utilizes the liability method of accounting for income taxes.
Under the liability method, deferred taxes are determined based on the
differences between the financial statement and tax bases of assets and
liabilities using enacted tax rates.
<PAGE> 8
FINANCIAL INFORMATION EXTRACTED FROM ALRT'S
ANNUAL REPORT FILED ON FORM 10-K, AS AMENDED,
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
Allergan Ligand Retinoid Therapeutics, Inc.
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NET LOSS PER CALLABLE COMMON SHARE
Net loss per callable common share is calculated by dividing the net loss by
the number of callable common shares outstanding, which was 3,250,000 at all
times during the period from commencement of operations following the closing
of the initial public offering on June 3, 1995 to December 31, 1996.
3. RELATIONSHIP WITH ALLERGAN AND LIGAND
TECHNOLOGY LICENSE AGREEMENT
Under a technology license agreement (the License), the Company has an
exclusive license to use the retinoid technologies developed first by Allergan
and Ligand and subsequently by the Joint Venture. The License granted is
subject to certain exceptions that allow Allergan and Ligand to pursue limited
research activities and development and commercialization of certain products.
In consideration for the License, the Company will pay to Allergan and Ligand a
royalty aggregating 3% of net sales of Products under the License during the
life of applicable patents or, in certain circumstances, for 10 years.
RESEARCH AND DEVELOPMENT AGREEMENT
The Company entered into a research and development agreement (the Development
Agreement) under which Allergan and Ligand perform research and development for
the Company on retinoid compounds and products in accordance with annual
budgets and development plans jointly proposed by Allergan and Ligand and
approved by the Company's Board of Directors. Under the Development Agreement,
the Company has agreed to reimburse Allergan and Ligand for their internal
costs plus 10% and the cost of services performed by third parties. Total
amounts charged to the Company during 1996 and 1995 by Allergan and Ligand
under the Development Agreement were (in millions):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Allergan $10.6 $ 6.6
Ligand 21.8 12.7
</TABLE>
If the Company discontinues development of compounds meeting certain criteria,
Allergan and Ligand are entitled to develop and commercialize such compounds
using their own funds. The Company is entitled to receive a royalty equal to
6% of net sales of any such independently developed products. The Company also
has the right to reacquire any such product prior to the earlier of the
commencement of Phase III clinical trials for such product or the exercise or
expiration of the Stock Purchase Option, for an amount equal to costs incurred
by Allergan and/or Ligand plus interest at 25% per year. Additionally, with
respect to any reacquired product, the Company will pay a royalty equal to 4%
of net sales to the developing party.
<PAGE> 9
FINANCIAL INFORMATION EXTRACTED FROM ALRT'S
ANNUAL REPORT FILED ON FORM 10-K, AS AMENDED,
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
Allergan Ligand Retinoid Therapeutics, Inc.
Notes to Financial Statements (continued)
3. RELATIONSHIP WITH ALLERGAN AND LIGAND (CONTINUED)
COMMERCIALIZATION AGREEMENT
The Company also entered into a commercialization agreement (the
Commercialization Agreement) which provides for the marketing, manufacture and
sale by Allergan and/or Ligand of the Products developed under the Development
Agreement which have received regulatory approval for commercial sale.
SERVICES AGREEMENT
The Company also entered into a services agreement (the Services Agreement)
under which Allergan and Ligand provide management and administrative services
to the Company at 110% of direct and indirect costs for services performed
internally by Allergan and Ligand and on a cost reimbursement basis for
services performed by third parties. Total amounts charged to the Company
during 1996 and 1995 by Allergan and Ligand for these services under the
Services Agreement were (in millions):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Allergan $0.1 $0.1
Ligand 0.1 0.1
</TABLE>
PANRETIN (ALRT1057) PURCHASE OPTION
The Company has granted Allergan and Ligand an option (the Panretin (ALRT1057)
Purchase Option) to acquire the Company's Panretin (ALRT1057) Products. Unless
the Panretin (ALRT1057) Purchase Option has been terminated as to either
Allergan or Ligand as a result of default under the agreement (in which case
the Panretin (ALRT1057) Purchase Option will only be exercisable by the party
for which such option has not been terminated), Allergan and Ligand, jointly,
may exercise the Panretin (ALRT1057) Purchase Option beginning on the earlier
of (i) June 3, 1997 or (ii) the receipt of regulatory approval for commercial
sale of any Panretin (ALRT1057) Product in the United States or in certain
other major countries and ending on the earlier of (a) 90 days after receipt of
such regulatory approval or (b) June 3, 2000. Additionally, the Panretin
(ALRT1057) Purchase Option will terminate on the date the Stock Purchase Option
is exercised or expires.
The Panretin (ALRT1057) Purchase Option exercise price is $21.4 million prior
to June 3, 1998 and increases in equal amounts on a quarterly basis to $27.8
million on March 3, 1999 and to $36.2 million on March 3, 2000. The exercise
price may be paid in cash, shares of Allergan or Ligand, or any combination
thereof.
<PAGE> 10
FINANCIAL INFORMATION EXTRACTED FROM ALRT'S
ANNUAL REPORT FILED ON FORM 10-K, AS AMENDED,
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
Allergan Ligand Retinoid Therapeutics, Inc.
Notes to Financial Statements (continued)
3. RELATIONSHIP WITH ALLERGAN AND LIGAND (CONTINUED)
The Company may not distribute or otherwise expend any proceeds received upon
the exercise of the Panretin (ALRT1057) Purchase Option until the earlier of
the exercise or expiration of the Stock Purchase Option.
4. STOCKHOLDERS' EQUITY
STOCK PURCHASE OPTION
The Company's Callable Common Stock is subject to a Stock Purchase Option
agreement pursuant to which Ligand and, in the event not exercised by Ligand,
Allergan may purchase all, but not less than all, of the Callable Common Stock
outstanding at specified prices, subject to adjustment. The option becomes
exercisable on the earlier of (i) June 3, 1997 or (ii) the quarter in which the
Company's available funds, as defined, decline below $10 million and expires on
the earlier of (a) June 3, 2000 or (b) 90 days subsequent to such a decline in
cash. The option is not exercisable prior to June 3, 1998 unless the available
funds are less than $60 million at the date of exercise.
The Stock Purchase Option exercise price is $21.97 per share prior to June 3,
1998 and increases in equal amounts on a quarterly basis to $28.56 per share on
March 3, 1999 and to $37.13 per share on March 3, 2000. The exercise price may
be paid in cash, shares of Allergan or Ligand, or any combination thereof.
The Company may not, until the expiration of the Stock Purchase Option, pay any
dividends, issue additional shares of capital stock, borrow money in excess of
$1 million, merge, liquidate or sell all or substantially all of its assets.
WARRANTS
Each unit sold by the Company in its initial public offering includes two
warrants, each warrant giving the holder the right to purchase one share of
Ligand common stock at a price of $7.12 per share. The warrants are
exercisable at any time from June 3, 1997 through June 2, 2000, subject to
certain acceleration provisions including the exercise or expiration of the
Stock Purchase Option. The warrants will trade with the Company's Callable
Common Stock as units until they become exerciseable on June 3, 1997. After
such date, the warrants will separate from the Company's common stock and
become independently tradable.
<PAGE> 11
FINANCIAL INFORMATION EXTRACTED FROM ALRT'S
ANNUAL REPORT FILED ON FORM 10-K, AS AMENDED,
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
Allergan Ligand Retinoid Therapeutics, Inc.
Notes to Financial Statements (continued)
4. STOCKHOLDERS' EQUITY (CONTINUED)
SPECIAL STOCK
The Company has issued 200 shares of Special Stock to Allergan and Ligand. The
holders of shares of Special Stock are not entitled to vote, except: (i) as
required by law and (ii) to elect two directors of ALRT, voting as a separate
class. ALRT's Board of Directors consists of a total of five directors. When
entitled to vote, each holder of Special Stock has one vote for each share
standing in his or her name.
The holders of shares of Special Stock do not have the right to any profits of
ALRT as a result of the ownership of such shares. In the event of the
liquidation, dissolution or winding up of ALRT, holders of the Callable Common
Stock shall have a priority over the holders of the Special Stock with respect
to return of capital, and the holders of the shares of Special Stock shall not
otherwise be entitled to participate in any way in the profits or assets of
ALRT.
In addition, until the Stock Purchase Option is exercised or terminates
unexercised, ALRT cannot, without the affirmative vote of the holders of a
majority of the issued and outstanding shares of Special Stock, voting
separately and as a class: (i) issue any additional shares of capital stock
through a stock split, sale, reorganization or otherwise, (ii) alter, change or
amend the rights, powers, preferences and restrictions of the Special Stock,
(iii) alter or change the provisions of ALRT's Certificate of Incorporation
relating to ALRT's capital stock and the Stock Purchase Option, (iv) merge,
consolidate or reorganize ALRT with or into any other corporation, (v) sell,
liquidate or otherwise dispose of all or substantially all of the assets of
ALRT, (vi) borrow an aggregate of in excess of $1 million outstanding at any
one time, (vii) declare or pay dividends or make any other distributions to
stockholders or (viii) adopt, amend or repeal the Bylaws of ALRT.
5. INCOME TAXES
Valuation allowances of $21 million at December 31, 1996 and $7.6 million at
December 31, 1995 have been recognized as offsets to the deferred tax assets as
realization of such assets is uncertain. Significant components of the
Company's deferred tax assets as of December 31, 1996 and 1995 are (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $16,076 $ 6,777
Research and development credits 2,440 327
Capitalized costs and other 2,470 482
------- -------
Total deferred tax assets 20,986 7,586
Valuation allowance for deferred tax assets (20,986) (7,586)
------- -------
Net deferred tax assets $ -- $ --
======= =======
</TABLE>
At December 31, 1996, the Company had federal and California net operating loss
carryforwards of approximately $45.5 million and $2.4 million, respectively.
The federal and California tax loss carryforwards will expire in 2010 and 2003,
respectively, unless previously utilized. The Company also has federal and
California research and development tax credit carryforwards totaling $1.5
million and $1.3 million, respectively, which will begin to expire in 2010
unless previously utilized.
<PAGE> 1
Exhibit 99.3
FINANCIAL INFORMATION EXTRACTED FROM
ALRT'S QUARTERLY REPORT FILED ON FORM 10Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
FINANCIAL INFORMATION
Allergan Ligand Retinoid Therapeutics, Inc.
Statements of Operations
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
----- -----
September 30, September 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Interest income $ 211 $ 926 $ 1,323 $ 3,014
Costs and expenses:
Research and development 10,331 9,379 29,426 22,089
General and administrative
expenses 341 404 1,111 1,192
-------- ------- -------- --------
Total costs and expenses 10,672 9,783 30,537 23,281
-------- ------- -------- --------
Net loss $(10,461) $(8,857) $(29,214) $(20,267)
======== ======= ======== ========
Net loss per callable
common share $(3.22) $(2.73) $(8.99) $(6.24)
======== ======= ======== ========
Weighted average callable
common shares outstanding 3,250 3,250 3,250 3,250
</TABLE>
See accompanying notes.
Allergan Ligand Retinoid Therapeutics, Inc.
Condensed Balance Sheets
(In thousands, except share data)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 21,969 $ 29,897
Marketable securities -- 20,394
Other assets 148 720
-------- --------
$ 22,117 $ 51,011
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Payable to Allergan, Inc. and Ligand
Pharmaceuticals Incorporated $ 3,911 $ 3,889
Accounts payable and accrued liabilities 389 261
-------- --------
Total current liabilities 4,300 4,150
Stockholders' equity:
Callable Common stock, $.001 par value;
3,250,000 shares authorized, issued
and outstanding 3 3
Additional paid-in capital 94,256 94,256
Accumulated deficit (76,442) (47,228)
Unrealized holding loss on
marketable securities -- (170)
-------- --------
Total stockholders' equity 17,817 46,861
-------- --------
$ 22,117 $ 51,011
======== ========
</TABLE>
See accompanying notes.
Allergan Ligand Retinoid Therapeutics, Inc.
Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Nine Months
Ended
-----
September 30, September 30,
1997 1996
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<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $(29,214) $(20,267)
Changes in operating assets and liabilities:
Other assets 572 (547)
Payable to Allergan, Inc. and
Ligand Pharmaceuticals Incorporated 22 1,101
Accounts payable and accrued liabilities 128 (563)
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Net cash used in operating activities (28,492) (20,276)
INVESTING ACTIVITIES:
Sale (purchase) of marketable securities 20,564 (20,564)
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Net decrease in cash and equivalents (7,928) (40,840)
Cash and equivalents at beginning of period 29,897 79,793
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Cash and equivalents at end of period $ 21,969 $ 38,953
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</TABLE>
See accompanying notes.
Allergan Ligand Retinoid Therapeutics, Inc.
Notes to Financial Statements
1. Allergan Ligand Retinoid Therapeutics, Inc. (the Company) was incorporated
in Delaware in 1994 and commenced operations on June 3, 1995 to continue the
efforts of the Allergan Ligand Joint Venture (Joint Venture), established by
Allergan, Inc. (Allergan) and Ligand Pharmaceuticals Incorporated (Ligand) in
June 1992, to discover, develop and commercialize drugs based on retinoids.
On June 3, 1995, the Company and Ligand completed a public offering (the
Offering) of 3.25 million units (the Units), each Unit consisting of one share
of the Company's callable common stock (Callable Common Stock) and two warrants
(the Warrants), each to purchase one share of Ligand common stock. The Offering
raised net proceeds for the Company of $26.8 million. At the completion of the
Offering, Ligand contributed $17.5 million in cash, as well as warrants in
exchange for (i) a right to acquire all of the Callable Common Stock at
specified future dates and amounts (Stock Purchase Option) and (ii) a right to
acquire all rights to the Panretin (ALRT1057) product, jointly with Allergan,
currently under development by the Company. At the same time, Allergan
contributed $50.0 million in cash to the Company in exchange for (i) the right
to acquire one-half of technologies and other assets in the event Ligand
exercises its right to acquire all of the Callable Common Stock (Asset Purchase
Option), (ii) a similar right to acquire all of the Callable Common Stock if
Ligand does not exercise its right and (iii) a right to acquire all rights to
the Panretin (ALRT1057) product, jointly with Ligand.
On June 3, 1997, the Units separated and the Callable Common Stock and Warrants
currently trade separately.
ALRT's Board of Directors approved a research and development plan for the year
ending December 31, 1997 which represents an acceleration in spending on ALRT's
retinoid programs. The accelerated spending is the result of more rapid
discovery and development of a significantly larger library of viable retinoid
compounds than anticipated at the time of formation of ALRT. ALRT anticipates
the acceleration in spending could result in the use of substantially all of
the funds available for research and development remaining in ALRT in late 1997
or early 1998.
On September 24, 1997, Ligand and Allergan announced that they had exercised
their respective options to purchase the Callable Common Stock and certain
assets of ALRT. Ligand's notice of exercise of the Stock Purchase Option
included a stock purchase option exercise price of $21.97 per share of
outstanding Callable Common Stock (in the aggregate, "Stock Purchase Option
Exercise Price"), the original exercise price designated for the exercise of
the Stock Purchase Option at any time prior to June 3, 1998. Ligand has filed a
registration statement with the Securities and Exchange Commission registering
the issuance of up to $46,410,000 in Ligand Common Stock as partial payment of
the Stock Purchase Option Exercise Price. Ligand has reserved the right, at any
time prior to the closing of the exercise of the Stock Purchase Option, to make
payment of a greater amount of the Stock Purchase Option Exercise Price in cash
than set forth in its notice of exercise.
Allergan's notice of exercise of its Asset Purchase Option included an aggregate
asset purchase price of $8.9 million (Asset Purchase Option Exercise Price), the
original exercise price designated for the exercise of the Asset Purchase Option
at any time prior to June 3, 1998 under the governing asset purchase agreement.
The Asset Purchase Option Exercise Price will be paid in cash to ALRT
concurrently with the payment to holders of Callable Common Stock of the Stock
Purchase Option Exercise Price and may be used to pay a portion of such Stock
Purchase Option Exercise Price.
The record date for the purchase of the Callable Common Stock is October 14,
1997, and the scheduled closing date was November 3, 1997, pending an effective
registration statement.
2. In the opinion of management, the accompanying unaudited financial
statements contain all adjustments (consisting only of normal recurring
accruals) necessary to present fairly the financial information contained
therein. These statements do not include all disclosures required by generally
accepted accounting principles. The results of operations for the quarter and
nine months ended September 30, 1997 are not necessarily indicative of the
results to be expected for the year ending December 31, 1997. Net loss per
callable common share is computed by dividing the net loss by the number of
callable common shares outstanding, which was 3,250,000 at all times during the
periods reported.
3. The Company invests its excess cash in money market funds and debt
instruments of financial institutions and corporations with strong credit
ratings. The Company has established guidelines with respect to the
diversification and maturities in order to maintain safety and liquidity. The
Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents. The Company's investments are
classified as available-for-sale and are carried at fair value, with unrealized
gains and losses reported as a separate component of stockholders' equity. The
investments are adjusted for amortization of premiums and discounts to maturity
and such amortization is included in interest income.
