Metabasis Announces Ligand to Acquire Metabasis for Cash and Contingent Value Rights

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Metabasis Announces Ligand to Acquire Metabasis for Cash and Contingent Value Rights

SAN DIEGO -- Ligand Pharmaceuticals Incorporated (NASDAQ: LGND) and Metabasis Therapeutics, Inc. (NASDAQ: MBRX) announced today they have entered into a definitive merger agreement under which Ligand will acquire all of the outstanding shares of Metabasis.

Under the transaction, Metabasis stockholders will receive a cash payment at the closing of the transaction of approximately $3.2 million, less Metabasis' estimated net liabilities at closing and an amount to be deposited in the stockholders' representative's fund (Metabasis currently estimates the closing payment to be approximately $1.8 million in cash). In addition, Metabasis stockholders will receive for each Metabasis share four tradable Contingent Value Rights ("CVRs") that will be registered on a Form S-4 registration statement to be filed by Ligand with the Securities and Exchange Commission. The CVRs will entitle Metabasis stockholders to cash payments as frequently as every six months as cash is received by Ligand from proceeds from the sale or partnering of any of the Metabasis drug development programs, among other triggering events. Ligand has committed to spend at least $8 million in new research and development funding on the Metabasis programs within 42 months following the closing of the transaction.

The Ligand and Metabasis Boards of Directors have unanimously voted in favor of the transaction. Stockholders of Metabasis representing approximately 29% of the outstanding shares of Metabasis have signed voting agreements in support of the transaction. Merriman Curhan Ford acted as financial advisor to Metabasis with respect to this transaction.

"This transaction utilizes a creative structure that we believe is potentially highly beneficial to the stockholders of both companies," said John L. Higgins, President and Chief Executive Officer of Ligand Pharmaceuticals. "Ligand obtains numerous high-quality partnered and development-stage programs that will increase  our revenue potential and expand  our pipeline of proprietary assets. In exchange, the non-partnered Metabasis programs will be advanced by a company with strong and proven research credentials, with the goal of generating cash proceeds payable directly to Metabasis stockholders. If any or all of the Metabasis programs are financially successful, stockholders at both companies will benefit meaningfully from their shared participation in the programs."

Mark D. Erion, Ph.D., President, Chief Executive Officer and Chief Scientific Officer of Metabasis, stated, "Metabasis has built a pipeline of product candidates and drug development programs that have the potential to one day yield new therapies for metabolic and chronic liver diseases, but due to our limited financial and operational resources, we are unable to independently realize their full potential value. Ligand's strong research and business development capabilities, coupled with its solid financial position and its commitment to additional research and development funding as part of this transaction, gives Metabasis' portfolio of programs the potential to deliver significant future value to Metabasis' stockholders."

Highlights of the Proposed Transaction

With the acquisition of Metabasis, Ligand does not anticipate any change to its year-end 2009 financial outlook. For 2010, the required cash payment of $3.2 million is projected to be largely offset by the potential receipt of a cash milestone from Roche for the advancement of its program for hepatitis, net of the portion of that payment to be allocated to CVR holders. The obligation for funding Metabasis' programs is not expected to materially change Ligand's overall spending over the next several years, as spending for R&D projects can be directed as needed to the highest priority programs.

Metabasis Contributes the Following to Ligand

About Metabasis

Metabasis is a biopharmaceutical company that has discovered novel drugs for metabolic diseases using its proprietary technology and its knowledge of processes and pathways within the liver that are useful for liver-selective drug targeting and treatment of metabolic diseases. Metabasis has established a broad pipeline of product candidates and advanced discovery programs targeting large markets with significant unmet needs. Metabasis' product pipeline includes clinical-stage product candidates and advanced discovery programs for the treatment of metabolic diseases such as diabetes and hyperlipidemia, as well as product candidates and advanced discovery programs for the treatment of liver diseases such as hepatitis and primary liver cancer. All of Metabasis' product candidates were developed internally.

About Ligand Pharmaceuticals

Ligand discovers and develops new drugs that address critical unmet medical needs of patients with muscle wasting, frailty, hormone-related diseases, osteoporosis, inflammatory diseases, anemia, asthma, rheumatoid arthritis and psoriasis. Ligand's proprietary drug discovery and development programs are based on advanced cell-based assays, gene-expression tools, ultra-high throughput screening and one of the world's largest combinatorial chemical libraries. Ligand has strategic alliances with major pharmaceutical and biotechnology companies, including Bristol-Myers Squibb, Celgene, Cephalon, GlaxoSmithKline, Schering-Plough, Pfizer and Wyeth Pharmaceuticals. With more than 20 molecules in various stages of development, Ligand utilizes proprietary technologies for identifying drugs with novel receptor and enzyme drug targets.

Forward-Looking Statements

This release contains forward-looking statements that involve risks and uncertainties. Ligand and Metabasis caution readers that any forward-looking information is not a guarantee of future performance and actual results could differ materially from those contained in the forward-looking information. Words such as "expect," "estimate," "project," "potential," and similar expressions are intended to identify such forward-looking statements. Such forward-looking statements include, but are not limited to, the expected timing of closing the merger, statements about the benefits of the transaction between Ligand and Metabasis, including future financial and operating results and revenue potential, the expected effect of the merger on Ligand's operating cash burn rate, the possibility of payments being made under the CVR agreements, the combined entity's plans, objectives, expectations and intentions and other statements that are not historical facts. Among the important factors that could cause actual results to differ materially from those in any forward-looking statements are the risks that payment events which would produce proceeds for the CVR holders may not occur soon, or ever; the CVRs may have an illiquid market; the anticipated synergies and benefits from the transaction may not be fully realized or may take longer to realize than expected; Metabasis' stockholders may fail to approve the merger; Ligand or Metabasis may be unable to satisfy the conditions to closing of the merger, or the merger may be otherwise delayed or ultimately not consummated; Metabasis' product candidates may have unexpected adverse side effects or inadequate therapeutic efficacy; and positive results in clinical trials may not be sufficient to obtain FDA approval. There can be no assurance that any product in Ligand's, Metabasis' or the projected combined company's product pipeline will be successfully developed or manufactured, that final results of clinical studies will be supportive of regulatory approvals required to market licensed products, or that any of the forward-looking information provided herein will be proven accurate. Additional important factors that may affect future results are detailed in Ligand's and Metabasis' filings with the SEC, including each company's recent filings on Forms 10-K and 10-Q, or in information disclosed in public conference calls, the date and time of which are released beforehand. Each of Ligand and Metabasis disclaims any intent or obligation to update these forward-looking statements beyond the date of this release.

Additional Information and Where to Find It

Ligand intends to file with the SEC a Registration Statement on Form S-4, which will include a proxy statement of Metabasis and other relevant materials in connection with the proposed transaction. The proxy statement, which will also constitute a Ligand prospectus, will be mailed to the stockholders of Metabasis. The proxy statement and the other relevant materials will, when they become available, contain important information about Ligand, Metabasis and the proposed transaction. The proxy statement and other relevant materials (when they become available), and any other documents filed by Ligand or Metabasis with the SEC, may be obtained free of charge at the SEC's web site at www.sec.gov. In addition, investors and security holders may obtain free copies of the documents filed with the SEC by Ligand by going to the Investor Relations page on Ligand's corporate website at www.ligand.com. Investors and security holders may obtain free copies of the documents filed with the SEC by Metabasis by going to the Investors page on Metabasis' corporate website at www.mbasis.com. Investors and security holders of Metabasis are urged to read the proxy statement and the other relevant materials when they become available before making any voting or investment decision with respect to the proposed transaction.

Ligand and its respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of Metabasis in favor of the proposed transaction. Information concerning Ligand's directors and executive officers is set forth in Ligand's proxy statement for its 2009 annual meeting of stockholders, which was filed with the SEC on April 29, 2009, and annual report on Form 10-K filed with the SEC on March 16, 2009.

Metabasis and its respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of Metabasis in favor of the proposed transaction. Information about Metabasis executive officers and directors and their ownership of Metabasis common stock is set forth in Metabasis' annual report on Form 10-K filed with the SEC on March 31, 2009, as amended on April 30, 2009. Investors and security holders may obtain more detailed information regarding the direct and indirect interests of Metabasis and its executive officers and directors in the acquisition by reading the proxy statement regarding the merger, which will be filed with the SEC.