King Pharmaceuticals, Inc. has entered into a definitive asset purchase agreement and related agreements with Ligand Pharmaceuticals Incorporated to acquire rights to Avinza (morphine sulfate extended release).

Avinza is an extended release formulation of morphine and is indicated as a once-daily treatment for moderate-to-severe pain in patients who require continuous, around-the-clock opioid therapy for an extended period of time.

Over 50 million people are affected by severe chronic pain in the United States, including low back pain, osteoarthritis, cancer related pain, and neuropathic pain. Due largely to the aging population, better physician training in pain management, and patient demand for better control, opioid sales are rising and are expected to exceed $7 billion in 2009 according to Frost and Sullivan, a leading global source for market research reports. Retail sales of Avinza totalled approximately $179 million in 2005 according to IMS Health Incorporated data.

Under the terms of the asset purchase agreement King will make a $265 million payment to Ligand to acquire all the rights to Avinza in the United States, its territories and Canada. In addition, King will also assume a product related liability owed a third party totalling $48 million and all existing product royalty obligations.

In addition to existing royalty obligations, King will pay Ligand a 15 percent royalty during the first 20 months after the closing date. Subsequent royalty payments will be based upon calendar year net sales. If calendar year net sales are less than $200 million the royalty payment will be 5 percent of all net sales. If calendar year net sales are greater than $200 million then the royalty payment will be 10 percent of all net sales less than $250 million, plus 15 percent of net sales greater than $250 million.

The agreement is subject to customary regulatory approvals, including antitrust review under the Hart-Scott-Rodino Antitrust Improvements Act. The transaction is also conditioned upon the approval of Ligand's shareholders. King anticipates that the transaction will close by the end of this year.

Brian A. Markison, King's president and chief executive officer, commented, "This transaction is an important step in the execution of our strategic plan. Avinza is a perfect complement to our growing neuroscience portfolio. Furthermore, we believe that Avinza will provide significant and sustainable revenue."

Between today and closing, King will market Avinza under the terms of a separate contract sales force agreement together with the experienced Ligand sales force that currently promotes the product. Upon closing of the asset purchase agreement, King will integrate a large portion of Ligand's existing Avinza sales force, nearly doubling the capacity of King's current neuroscience specialty sales team. Additionally, one of King's two primary care sales forces will market Avinza.

Markison continued, "Avinza strengthens our pain franchise and better establishes King as a leader in pain management. Importantly, developing even greater relationships today with prescribing physicians will further enhance the market potential of Remoxy (long-acting oral oxycodone), our lead abuse-deterrent opioid product currently in late-stage development with Pain Therapeutics, Inc. Today's announcement underscores King's commitment to building a stronger, more stable company well-positioned to create value for its shareholders."

Following approval of Remoxy by the US Food and Drug Administration (FDA), King's portfolio of products will include a broader spectrum of pain management solutions to meet the needs of different patient populations.

Avinza: Typically prescribed by oncology and pain management specialists, it is ideally suited for low-risk patient populations with chronic moderate-to-severe pain. Remoxy: Like Avinza, Remoxy is intended for patients with moderate-to-severe pain. However, King expects that it will be prescribed by a broader range of physicians for a wide variety of pain management conditions due to its abuse-deterrent formulation of long-acting oxycodone, which is intended to minimize the risk of drug diversion, abuse or accidental misuse for patients. Skelaxin (metaxalone): A non-narcotic and non-addictive muscle relaxant that brings relief to muscle regions affected by pain and discomfort, especially lower back pain. Skelaxin is often prescribed concomitantly with analgesics such as Avinza.