King Pharmaceuticals, Inc.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): September 12, 2006
(September 6, 2006)
King Pharmaceuticals, Inc.
(Exact name of registrant as specified in charter)
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Tennessee
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001-15875
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54-1684963 |
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(State or other jurisdiction
of incorporation)
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(Commission
File Number)
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(I.R.S. Employer
Identification No.) |
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501 Fifth Street, Bristol, Tennessee
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37620 |
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(Address of principal executive offices)
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(Zip Code) |
Registrants telephone number, including area code: (423) 989-8000
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy
the filing obligation of the registrant under any of the following provisions (see General
Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c)) |
TABLE OF CONTENTS
Item 1.01. Entry Into a Material Definitive Agreement.
On
September 6, 2006, King Pharmaceuticals, Inc., a Tennessee
corporation (the Company),
King Pharmaceuticals Research and Development, Inc., a Delaware corporation and wholly-owned
subsidiary of the Company (King R&D, and together with the Company, King) and
Ligand Pharmaceuticals Incorporated, a Delaware corporation (Ligand) entered into a
Purchase Agreement (the Purchase Agreement), pursuant to which King has agreed to acquire
all of Ligands rights in and to Avinza® (morphine sulfate extended-release capsules) in the United
States, its territories and Canada, including, among other things, all Avinza® inventory,
equipment, records and related intellectual property, and assume certain liabilities as set forth
in the Purchase Agreement (collectively, the Transaction). In addition, King has,
subject to the terms and conditions of the Purchase Agreement, agreed to offer employment following
the closing of the Transaction (the Closing) to certain of Ligands existing sales
representatives that support the sale of Avinza® or otherwise reimburse Ligand for certain agreed
upon severance arrangements offered to any such non-hired representatives.
Pursuant to the Purchase Agreement, at Closing, Ligand will be paid a $265 million cash
payment (the Closing Payment), $15 million of which will be funded into an escrow account
to support any indemnification claims made by King following the Closing, and King will assume
certain liabilities, including a product-related liability owed by Ligand to Organon
Pharmaceuticals USA Inc. (Organon) of approximately
$48 million. The Closing Payment will be increased, and the
corresponding liability assumed by King at Closing reduced, by the
amount of any payments made by Ligand to Organon for this
liability prior to Closing. The Closing Payment is also subject to
adjustment based on Ligands ability to reduce wholesale and retail inventory levels of Avinza® to
certain targeted levels by Closing in accordance with the Purchase Agreement.
King has also agreed to pay Ligand, in addition to assuming existing royalty obligations owed
to Organon and other third parties, a 15% royalty on Kings annual net
sales of Avinza® or any reformulation or derivation thereof for the first 20 months following the
later of the Closing or January 1, 2007, and, thereafter through November 25, 2017, as follows:
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if annual net sales are $200 million or less, 5% of all such net sales; |
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if annual net sales exceed $200 million but do not exceed $250 million, 10% of
all such net sales; and |
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if annual net sales exceed $250 million, 10% on all net sales up to and
including $250 million, plus 15% of net sales in excess of $250 million. |
In connection with the Transaction, the Company has committed to loan Ligand, at Ligands
option, $37.75 million (the Loan). If the Loan is drawn by Ligand, amounts outstanding
thereunder would be subject to certain market terms, including a 9.75% interest rate and a security
interest in Ligands assets other than those related to Avinza®. Upon Closing, accrued interest on
the Loan would be forgiven and the outstanding principal amount due thereunder would be credited
against the Closing Payment. If the Loan is drawn by Ligand and the Closing does not occur,
accrued interest and the outstanding principal amount due thereunder would become due on January 1,
2007.
Also in connection with the Transaction, the Company entered into a Contract Sales Force
Agreement (the Sales Agreement) with Ligand, pursuant to which the Company has agreed to
conduct a detailing program to promote the sale of Avinza® for an agreed upon fee, subject to the
terms and conditions of the Sales Agreement. Pursuant to the Sales Agreement, the Company has
agreed to perform certain minimum monthly product details, which are to commence no later than
October 1, 2006
and continue for a period of six months following such date or until the Closing or earlier
termination of the Purchase Agreement. Following the initial term,
Ligand may, at its option, extend the term of the Sales Agreement for an
additional one-month period. The Company believes the amount payable to the Company
pursuant to the Sales Agreement will not be material to the Company.
King and Ligand have made customary representations, warranties and covenants in the Purchase
Agreement. In addition, pursuant to the Purchase Agreement, Ligand is
subject to certain contractual restrictions on
its ability to (1) solicit, initiate or facilitate any Acquisition Proposal (as defined in the
Purchase Agreement), (2) provide non-public information or participate in discussions or
negotiations with third parties relating to any Acquisition Proposal, and (3) enter into any
agreement with respect to any Acquisition Proposal. Each of the
foregoing contractual restrictions is subject to
a fiduciary-out provision that allows Ligand, after it has provided notice to King, to (1)
provide certain information and participate in discussions with respect to an Acquisition Proposal
if Ligands board of directors determines that there is a reasonable
likelihood that such proposal could led to a Superior Proposal (as
defined in the Purchase Agreement), (2) change its recommendation to its stockholders and enter into
an agreement with respect to an Acquisition Proposal that its board
of directors determines
constitutes a Superior Proposal, (3) change its recommendation
to its stockholders if its board of
directors determines that doing so is consistent with its fiduciary duties to its stockholders
under applicable laws, and (4) take and disclose to its stockholders a position with respect to any
tender offer or exchange offer by a third party or amend or withdraw such position.
The Purchase Agreement may be terminated by either King or Ligand if the Closing has not
occurred by December 31, 2006, or upon the occurrence of certain customary matters. In addition,
if the Purchase Agreement is terminated under certain circumstances, including a determination by
Ligands board of directors to accept an Acquisition Proposal it determines to be a Superior
Proposal, Ligand has agreed to pay King a termination fee of $12 million. The Closing is subject
to certain closing conditions, including, but not limited to, Ligand stockholder approval of the
Transaction, the conversion or redemption prior to Closing of all of
Ligands outstanding 6% Convertible
Subordinated Notes due 2007, the expiration or termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and certain other customary
closing conditions.
The foregoing description of the Purchase Agreement does not purport to be complete and is
qualified in its entirety by reference to the Purchase Agreement, a copy of which is filed as
Exhibit 2.1 hereto and is incorporated herein by reference.
The Purchase Agreement has been included to provide investors and security holders with
information regarding its terms. It is not intended to provide any other factual information about
the Company. The Purchase Agreement contains representations and warranties the parties thereto
made to, and solely for the benefit of, each other. The assertions embodied in those
representations and warranties are qualified by information in confidential disclosure schedules
that the parties have exchanged in connection with signing the Purchase Agreement. Accordingly,
the investors and security holders should not rely on the representations and warranties as
characterizations of the present state of facts, since they were only made as of the date of the
Purchase Agreement and as of the Closing.
Moreover, information concerning the subject matter of the representations and warranties may
change after the date of the Purchase Agreement, which subsequent information may or may not be
fully reflected in the Companys public disclosures.
Item 8.01
Other Events
On September 7, 2006, the Company issued the press release furnished herewith as Exhibit 99.1
announcing that it had entered into the Purchase Agreement.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
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2.1 |
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Purchase Agreement, by and between Ligand Pharmaceuticals Incorporated,
King Pharmaceuticals, Inc. and King Pharmaceuticals Research and Development, Inc.,
dated as of September 6, 2006* |
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99.1 |
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Press release of King Pharmaceuticals, Inc. dated September 7, 2006. |
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* |
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Schedules 1.1(b) (Pre-Existing Assigned Contracts), 2.6 (Royalties) and 2.8(b)
(Inventory Value Adjustments) are attached to end of the Purchase Agreement. All other
schedules to the Purchase Agreement are not material and have been omitted in reliance on
Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally a copy of
any omitted schedule to the Securities and Exchange Commission upon request. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Date: September 12, 2006 |
KING PHARMACEUTICALS, INC.
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By: |
/s/ Joseph Squicciarino
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Joseph Squicciarino |
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Chief Financial Officer |
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EXHIBIT INDEX
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Exhibit |
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No. |
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Description |
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2.1
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Purchase Agreement, by and between Ligand Pharmaceuticals
Incorporated, King Pharmaceuticals, Inc. and King Pharmaceuticals
Research and Development, Inc., dated as of September 6, 2006* |
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99.1
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Press release of King Pharmaceuticals, Inc. dated September 7, 2006. |
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Schedules 1.1(b) (Pre-Existing Assigned Contracts), 2.6 (Royalties) and 2.8(b) (Inventory Value
Adjustments) are attached to end of the Purchase Agreement. All other schedules to the Purchase
Agreement are not material and have been omitted in reliance on Item 601(b)(2) of Regulation S-K.
The Company agrees to furnish supplementally a copy of any omitted schedule to the Securities and
Exchange Commission upon request. |