In an effort to boost its cash position, Ligand Pharmaceuticals Inc. agreed to sell rights to its pain drug, Avinza, to King Pharmaceuticals Inc. in exchange for $265 million cash and a steady royalty stream for the next decade.

Bristol, Tenn.-based King gained all U.S. and Canadian rights to the drug, which was approved in March 2002 as a once-a-day treatment for chronic pain. In addition to an up-front payment, King also agreed to assume $48 million in product-related liability stemming from a co-promotion agreement terminated between Ligand and Roseland, N.J.-based Organon USA in January.

Beyond that is a tiered arrangement that starts with a 15 percent royalty rate for the first 20 months. After that, Ligand would receive a 5 percent royalty if yearly sales fall under $200 million. Above $200 million, the San Diego-based firm would receive 10 percent up to $250 million and 15 percent of net sales greater than $250 million.

Representatives of Ligand could not be reached for comment. The company's shares (NASDAQ:LGND) closed at $9.95 Thursday, up 8 cents.

Avinza (oral morphine sulfate extended-release capsules), which is intended for patients requiring continuous opioid therapy over an extended period of time, has been Ligand's top-selling drug since its approval. Retail sales of Avinza in 2005 totaled about $179 million, according to IMS Health figures. Ligand reported $33.7 million from net Avinza sales its second-quarter earnings, from U.S. and Canadian sales.

As part of the deal, King agreed to explore other formulations of Avinza, which could expand sales.

Avinza is designed to work by combining two components: the first is an immediate-release component aimed at rapidly leveling out plasma morphine concentrations, and the second has an extended-release mechanism to maintain those plasma concentrations for 24 hours.

Most of Ligand's Avinza sales staff will be integrated into King's neuroscience specialty sales team. That team already markets Skelaxin (metaxalone), a muscle relaxant, and anticipates marketing Remoxy, a pain drug in late-stage development. King licensed rights to Remoxy last fall in a potential $400 million deal with South San Francisco-based Pain Therapeutics Inc. (See BioWorld Today, Nov. 11, 2005.)

The sale of Avinza leaves Ligand with three marketed products: Ontak, for cutaneous T-cell lymphoma, Targretin gel and capsules, also for CTCL, and Panretin gel for Kaposi's sarcoma, an AIDS-related skin cancer.

Targretin is in clinical testing in several cancers, including renal-cell, breast, prostate/colon and other solid tumors, and Ontak is in development in B-cell non-Hodgkin's lymphoma, other T-cell lymphomas and non-small-cell lung cancer.

Ligand posted a net loss of $16 million, or 20 cents per share, for the second quarter. As of June 30, the company had cash, cash equivalents and short-term investments totaling $62.6 million.