Ligand Pharmaceuticals Sued for $3.8 Billion Over Bond Terms

By Reed Yurchak July 31, 2018

Some Ligand Pharmaceuticals Inc. investors accused the biotech company of unfairly changing the terms of a bond agreement to deny them more than $3.8 billion in payouts.

Eight bond funds that invested in Ligand’s $245 million issuance of 0.75 convertible senior notes in 2014 sued the San Diego-based biotech company claiming it changed the trigger for converting the bonds without telling investors.

“The purported amendment would materially and adversely impair the conversion rights of the holders and was not consented to by the holders,’’ the funds, including Citadel Equity Fund and Polygon Convertible Opportunity Master Fund, said in the Delaware Chancery Court suit filed July 27.

Ligand officials said in a securities filing July 30 that the company amended the pact to correct a “scrivener’s error in the conversion calculation’’ and it had the right to do so without investors’ consent, according to the agreement’s terms.

Ligand shares have gained 82 percent during the past 12 months compared with the S&P SmallCap Health Index, which is up as much as 52 percent for the same period. The shares fell 1.8 percent to $220.83 in Nasdaq trading in New York at 11:05 a.m., July 30.

According to the suit, the bond-indenture agreement said conversion rights are triggered if Ligand’s stock trades at 130 percent of its price when the bonds were issued and sustains that activity during a specific time period. Investors claim the shares hit those triggers in February.

Instead of paying out, Ligand officials unfairly modified the agreement’s section governing conversion triggers and never filed the amendment with the U.S. Securities and Exchange Commission, according to the suit.

The case is AG Oncon LLC v. Ligand Pharmaceuticals Inc., Del. Ch., No. 2018-0556, complaint 7/27/18.

©2018 Bloomberg L.P. All rights reserved. Used with permission

With assistance from Cristin Flanagan

To contact the reporters on this story: Jef Feeley in Wilmington, Del., at [email protected]; Joshua Fineman in New York at [email protected]

To contact the editor responsible for this story: David Glovin at [email protected]

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