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King gets US, Canadian rights to Avinza from Ligand
Deal Date:
09/2006
Deal Number:
200620568
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 Deal
Summary
Small-molecule developer Ligand has licensed King Pharmaceuticals (markets drugs for hospital/acute care markets and cardiovascular, metabolic, and neurological diseases) US and Canadian rights to the chronic pain drug Avinza (morphine sulfate). King signed a contract sales agreement to promote the product during the transition period until the deal closes.
King is responsible for a $265mm up-front payment to Ligand and will pay Organon--which had been co-promoting Avinza since 2003 but terminated the deal this year--$48mm for product-related liability and owed royalties. For the 20 months following the deal's closing, King will pay Ligand a 15% royalty. After that, the royalty rate depends on calendar year net sales: if they are less than $200mm, King pays a 5% royalty; if greater than $200mm, it pays 10% of net sales that are less than $250mm plus 15% of those greater than $250mm. This tiered royalty schedule ends in November 2017 when Avinza's patent expires. King will hire Ligand's existing Avinza sales reps and merge them into its own neuroscience field force, which, along with one of King's primary care sales forces, will promote the drug and make a minimum number of monthly product details to physicians through the end of 2009. Under the contract sales agreement, King is required to perform a certain number of details each month and will receive a fee for each detail from Ligand plus compensation for marketing and promotional expenses. King and Elan, which originally developed the drug, plan to investigate new Avinza formulations and Ligand will be eligible for similar tiered royalties. Avinza, which had 2005 sales of $179mm, is administered once-a-day by incorporating Elan's SODAS technology to deliver the active ingredient contained within a spherical bead coated with controlled-release polymers. The drug will be a good companion to King's muscle relaxant Skelaxin and Phase II Remoxy, an abuse-resistant oxycodone for pain that King is developing and will eventually sell under a 2005 alliance with Pain Therapeutics.
UPDATE 02/2007:
When the deal was completed, King announced it had paid $246mm up front (versus the previously stated $265mm) and would owe Organon $49mm, not $48mm, for product-related liabilities.
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Financial
Information
| Financial Information |
| Potential Deal
Value: |
$26,672.15
mm
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| Equity Purchased
as %: |
100.00
%
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| Financial Transaction 1 of 1 (1/1/2006)
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| Equity: |
$14,002.88mm
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| Buyer's Equity: |
$12,669.27mm
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| Total: |
$26,672.15mm
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| # Shares: |
333.40
mm
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| Price / Share: |
$
80.00
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| Post Market
Cap: |
$26,672.15mm
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| Price-to-Earnings: |
60.07
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| Price-to-Sales: |
7.51 |
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