This might not be the biggest of biotech mergers out there, but deals are continuing in the bio-space.  Ligand Pharmaceuticals Incorporated (NASDAQ: LGND) has entered into a definitive merger agreement to acquire Pharmacopeia (NASDAQ: PCOP) in a deal valued up to $70 million.

The transaction is structured as a stock-for-stock exchange for thefirst part of the deal and in the second part there is an addedkicker.  Pharmacopeia stockholders will be entitled to a ContingentValue Right which will entitle shareholders under certain circumstancesto receive an aggregate cash payment of $15 million for allPharmacopeia stockholders.

Ligand will issue approximately 17.5 million shares, subject toadjustment for Pharmacopeia options at closing, or 0.58 shares for eachoutstanding Pharmacopeia share.  This will give Ligand 84% of thecombined company. 

This exchange ratio is based on closing prices of Ligand shares between$3.00 and $3.75 for a period prior to the closing date and based onLigand’s closing price on September 24, 2008 of $3.12 implies apurchase price of $1.81 per common share of Pharmacopeia.  This excludes a potential for approximately $0.50 per share or anaggregate of $15 million related to the Contingent value right.  Hereare the other price contingencies:

• At prices between $3.75 and $4.50, value is fixed at $66 million.
• At prices above $4.50, the exchange ratio is fixed at 0.49.
• At prices below $3.00, value is fixed at $52.8 million, including some cash contribution at prices below $2.93 and above $2.38.
• Below $2.38 the consideration is fixed at 0.60 shares and $10 million in cash in the aggregate.
• At prices equal or less than $1.65 Pharmacopeia has the right to terminate the agreement.

Shareholders could also receive an aggregate $15 million cash paymentas the terms of the Contingent Value Right if Ligand enters into alicense, sale, development, marketing or option agreement with respectto its DARA program by December 31, 2011. Please note, the CVRs willnot be transferable.

Jon C. Ogg
September 24, 2008

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