In April 2003, Ligand announced plans to co-promote its newly-approved pain medication Avinza with Organon, a business unit of Akzo Nobel, allegedly because of its inability to mount an aggressive sales campaign of its own. At that time, Ligand was also developing compounds to act on peroxisome proliferation activated receptors (PPAR) to target other medical problems. In May 2003, Ligand received a renewed commitment from Lilly for continuation of Phase I and Phase II studies for three novel compounds that act on PPAR, targeting diabetes and cardiovacscular disorders. In June 2003, Ligand received a $1 million milestone payment as a result of GlaxoSmithKline’s decision to continue Phase I development of a novel PPAR modulator for the treatment of dyslipidemias.

During the applicable period, the defendants allegedly represented that Avinza was selling well. As late as March 31, 2004, the defendants represented that the drug had performed well in 2003 in both prescription market-share growth and net sales as a result of rapid adoption by the medical community. The defendants even positioned Avinza as their key vehicle for the growth of the company by revising its five-year goal for market penetration and total market-share upward by 50%, from 10% to 15%. The picture painted by the lawsuits is much different: (1) distributors were actually returning large lots of unsold short-dated Avinza for replacement, as a way to mediate the defendants’ channel-stuffing of the drug in their attempts to meet sales targets; (2) wholesaler inventories had built up excessively, further diminishing the possibility of achieving Avinza sales and earnings for Ligand; (3) the company’s revenue, accounts receivable, and inventory valuation associated with Avinza was grossly overstated because the defendants had inappropriately sold and booked short-dated lots as revenue-- actually, these lots were rapidly approaching or had already exceeded their expiration date, and were worthless; and (4) remaining in-house Avinza inventories could not be used for direct sales since they were required to replace the short-dated lots already sold, so that the true value of the in-house Avinza inventory was nearly nothing.

The actions also allege that Ligand also concealed critical information regarding the safety, efficacy and viability of Ligand’s PPAR modulator programs with Lilly and GSK. Specifically, the defendants allegedly hid information regarding the cancer-causing effects of PPAR modulators-- news which would have a direct, adverse effect on the viability of the company’s PPAR compound programs.

On August 3, 2004, the company posted a second-quarter loss of $14.2 million, or $0.19 a share, far from the projected loss of $0.06 a share. At that time, Ligand revealed that it faced serious undisclosed issues impacting future profitability, and that its auditors had resigned. On this news, Ligand shares fell $5.38, or 39%, to $8.17, on volume of over 29 million shares.

If you purchased securities issued by Ligand during the applicable period, you may request appointment by the court as a lead plaintiff if you do so by October 8, 2004. A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the court must determine that your claim is typical of the claims of other class members, and that you will adequately represent the class. Under certain circumstances, one or more class members may together serve as lead plaintiffs. Your ability to share in any recovery is not affected by the decision whether or not to serve as a lead plaintiff. You may retain any counsel of your choice to serve you in this action, or you may choose to do nothing, and remain in the class as a silent member.