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 increaseour revenue potential and expandour 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

Under the terms of the agreement, Ligand will pay at the closing of the transaction approximately $3.2 million in cash, less Metabasis' estimated net liabilities at closing (currently estimated to then be over $1.3 million) and less an amount deposited in the stockholders' representative's fund.