Ligand Makes Offer to Acquire Vernalis

Ligand Pharmaceuticals and Vernalis announced that Ligand has declared its firm intention to acquire the entire issued and to be issued shares of Vernalis. Vernalis is a structure-based drug discovery biotechnology company with a broad pipeline of partnered programs and ongoing collaborations.

Under the terms of the proposed UK scheme of arrangement, Ligand would pay Vernalis shareholders £0.062 per share in cash, valuing Vernalis at approximately £32.8 million, equivalent to approximately $43 million. This proposal, which requires approval by a majority of the shareholders representing at least 75% or more in value of the company’s outstanding shares voting on the transaction, has received the support and irrevocable undertakings from the Board of Directors of Vernalis and its two largest shareholders, who own in aggregate approximately 67% of the outstanding shares of the company.

On March 15, 2018 Vernalis announced that as part of its then-ongoing strategic review, it had decided to commence a formal sales process with Evercore serving as financial advisor. As part of its strategic review Vernalis has substantially completed the closure of its US commercial operations and remains on track to have completed this by 30 September 2018. If Ligand’s offer is approved by Vernalis shareholders, the transaction is expected to close in October 2018.

The acquisition of Vernalis would provide Ligand with:

A portfolio of more than eight fully-funded partnered programs, or shots on goal, including programs in the respiratory, oncology and CNS sectors. Partners include Corvus, Verona, Celgene, Servier, Menarini, Tris and CTI.

A 70-person R&D team based in Cambridge, England focused on fragment- and structure-based drug discovery and partnering, with an active portfolio of collaboration agreements generating over $8 million per year of service revenue matched by a comparable level of costs, and partnerships that have the potential to generate additional near-term shots on goal. Ongoing collaboration partners include Servier, Daiichi Sankyo, Lundbeck, Asahi Kasei and an undisclosed Japanese partner.

An established compound library and additional early-stage, unpartnered programs in oncology, CNS and other areas that will provide business development out-licensing and corporate formation opportunities.

Expected cash on hand as of June 30, 2018 of £27.3 million or approximately $36 million. Ligand estimates incurring additional deal costs of approximately $4 million, resulting in $32 million of net cash to Ligand from the transaction.

United Kingdom-based operations that would provide a platform to more efficiently pursue investment and acquisition opportunities in Europe and the United Kingdom.

Currently the transaction is anticipated to close in the fourth quarter of 2018. With a fourth quarter close, revenue and operating expense impact from Vernalis is currently expected to be small and mostly offset each other. Beyond 2018, research business revenue is expected to approximate expenses with longer-term milestones and royalties being accretive to future Ligand earnings.

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