LIGAND PHARMACEUTICALS INC

Ligand Pharmaceuticals Incorporated operates as a biopharmaceutical royalty company focused on deploying capital and licensing technologies to acquire and create diversified royalty streams from high-value medicines. The company's primary business is investing in and structuring royalty interests in mid- to late-stage development and commercial biopharmaceutical products, allowing it to generate long-duration, non-dilutive cash flows supported by a lean corporate cost structure. Capital deployment and technology licensing are the primary drivers of long-term growth. The company partners capital through a range of transaction structures including royalty purchases, development-stage financing arrangements, and acquisitions of companies or assets with embedded royalty rights designed to create cash flowing royalties and produce attractive risk-adjusted returns. The goal is to provide investors with exposure to biopharmaceutical innovation through a diversified portfolio of royalty interests while mitigating the binary risk and capital intensity traditionally associated with drug development. In addition to royalty investment activities, the company operates two infrastructure-light, royalty-generating platform technologies, Captisol and NITRICIL.

The company has 12 major commercial stage royalty assets comprising the majority of its royalty revenue and maintains a portfolio of more than 90 additional commercial and development-stage programs. The business model is highly differentiated from a traditional biotechnology company in several ways: limited infrastructure requirements enabling relatively high operating margins; the ability to enable development over a broad range of therapeutic areas and be strategic about the size of investments to achieve a highly diversified portfolio; significant mitigation of the high volatility and risk associated with building a business around a single or small number of assets; and the ability to target the size of investments to achieve appropriate diversification across the portfolio. Since refocusing the business in 2022, the company has built a highly experienced business and investment team to execute its strategy. There is high demand for capital and low availability of structured capital in the segment of the biopharmaceutical market in which the company operates, creating significant investment opportunities. Unlike open-market equity investing, many investments take place under Confidential Disclosure Agreements, facilitating access to in-depth proprietary information and data.

Revenue is generated primarily from royalties on sales of products commercialized by partners, supplemented by Captisol material sales and contract revenue from license fees and milestone payments. The company partners with leading biopharmaceutical companies to leverage their capabilities in late-stage development, regulatory execution, and commercialization, while focusing on disciplined capital deployment, portfolio construction, and risk management. This allows the company to leverage its partners' asset infrastructure in sales and marketing, manufacturing and R&D to avoid high cost infrastructure itself. The business model is executed using four key strategies: royalty purchase and other royalty monetization transactions; acquisitions of companies or assets with embedded royalty rights and other special situations; project finance and other development-stage financing arrangements; and IP technology platform investments.

The company's largest and most established royalty-generating technology platform is Captisol, a patent-protected, chemically modified cyclodextrin designed to optimize the solubility and stability of drugs. This technology has enabled 17 FDA-approved products, including Gilead's Veklury, Amgen's Kyprolis, Baxter's Nexterone, and Acrotech Biopharma's Evomela. The company maintains a broad global patent portfolio for Captisol with the latest expiration date in 2033, and other patent applications covering methods of making Captisol, if issued, extend the expiration date to 2041. The NITRICIL technology platform, acquired through the Novan acquisition in 2023, leverages nitric oxide's naturally occurring antimicrobial and immunomodulatory properties and is currently leveraged in one FDA-approved product, Zelsuvmi, the first at-home FDA approved treatment for molluscum contagiosum. The HepDirect and LTP technology platforms are proprietary liver-targeting prodrug technologies that can deliver many different chemical classes of drugs to the liver. The Pelican Expression Technology platform is owned and operated by Primrose Bio, in which Ligand held a 31.5% equity interest as of December 31, 2025 ¹.

Major commercial-stage royalty receipt generating assets include Kyprolis, from which the company receives a 1.5% to 3.0% royalty on annual net sales and revenue from clinical and commercial Captisol material sales, with 2025 royalty receipts of $35.5 million ² on estimated 2025 product revenue of $1,529 million ³. Qarziba generated royalty receipts of $33.7 million ⁴ on estimated 2025 product revenue of €159 million ⁵, with the company receiving a tiered mid-teen royalty on worldwide sales. Filspari generated royalty receipts of $32.0 million ⁶ on estimated 2025 product revenue of $355 million ⁷, with the company entitled to a 9% royalty on worldwide sales. Ohtuvayre generated royalty receipts of $14.8 million ⁸ on estimated 2025 product revenue of $488 million ⁹, with the company's royalty rate at 3% of global net sales. Rylaze generated royalty receipts of $13.3 million ¹⁰ on estimated 2025 product revenue of $395 million ¹¹, with the company eligible to receive tiered low-single digit royalties based on worldwide net sales. Capvaxive generated royalty receipts of $10.1 million ¹² on estimated 2025 product revenue of $752 million ¹³, with the company entitled to a low single-digit royalty on worldwide net sales. Teriparatide generated royalty receipts of $8.1 million ¹⁴ on estimated 2025 product revenue of $34 million ¹⁵, with the company receiving tiered profit sharing of 25% on quarterly profits less than $3.75 million, 35% on quarterly profits greater than $3.75 million but less than $7.5 million and 40% on quarterly profits greater than $7.5 million. Vaxneuvance generated royalty receipts of $7.4 million ¹⁶ on estimated 2025 product revenue of $801 million ¹⁷, with the company entitled to low single-digit royalties. Evomela generated royalty receipts of $5.9 million ¹⁸ on estimated 2025 product revenue of $30 million ¹⁹, with the company receiving a 20% royalty on global net sales. Nexterone generated royalty receipts of $3.1 million ²⁰ on estimated 2025 product revenue of $81 million ²¹, with the company earning a low single digit royalty. Pneumosil generated royalty receipts of $3.0 million ²² on estimated 2025 product revenue of $129 million ²³, with the company entitled to a low-single digit royalty. 16 Other Products generated $10.0 million ²⁴ in total royalty receipts. Total royalty receipts were $176.9 million ²⁵, and after less amortization of financial royalty assets of $15.9 million ²⁶, GAAP income from royalty assets was $161.0 million ²⁷.

In February 2025, the company entered into a royalty financing agreement with Castle Creek Biosciences, Inc., investing $50 million ²⁸ in exchange for a mid-single digit royalty on worldwide sales of D-Fi and a portion of a future milestone payment upon D-Fi achieving FDA approval. Throughout 2024 and into January of 2025, the company acquired additional royalties from several Ohtuvayre inventors, bringing the total Ohtuvayre royalty to 3% ²⁹. On July 31, 2025, the company invested $25 million ³⁰ in strategic capital to fund Orchestra BioMed Holdings, Inc.'s late-stage partnered cardiology programs, consisting of a $20 million ³¹ cash payment paid at closing and an additional $5 million ³² to purchase shares of Orchestra's common stock in an equity private placement at the price of $2.75 per share ³³. Ligand also agreed to fund an additional $15 million ³⁴, subject to certain conditions precedent, at the nine-month anniversary of the transaction closing date. On September 24, 2025, the company invested $7 million ³⁵ in strategic capital to purchase economic rights from Arecor Limited, with an additional $1 million ³⁶ in deferred consideration payable in two equal parts at the six- and twelve-month anniversaries of the transaction closing date. In connection with the Arecor transaction, Ligand received warrants to purchase 1,002,739 ³⁷ ordinary shares of Arecor Therapeutics Plc, exercisable over a ten-year period, and is obligated to pay up to $3 million ³⁸ in contingent consideration tied to commercial milestones. In July 2025, the Pelthos Transaction was completed, supported by $50 million ³⁹ in capital raised from a group of strategic investors led by Murchinson. In connection with the transaction, Ligand invested $18 million ⁴⁰ in the combined company and the Investor Group invested $32 million ⁴¹ for a total of $50 million ⁴². As of December 31, 2025, Ligand owns approximately 48% ⁴³ of Pelthos' outstanding shares of common stock, and approximately 60% ⁴⁴ of Pelthos outstanding shares of Series A convertible preferred stock. Ligand earned a $5 million ⁴⁵ milestone payment from Pelthos following the commercial launch of Zelsuvmi, and is entitled to a 13% ⁴⁶ royalty on worldwide sales of Zelsuvmi, and up to an additional $5 million ⁴⁷ in commercial sales milestones. In November 2025, Ligand invested in Pelthos' private convertible notes financing to support the acquisition and re-launch of Xepi by Pelthos, and is entitled to a low single-digit royalty on U.S. net sales of Xepi.

Total revenues for the fiscal year ended December 31, 2025 were $176.9 million ⁴⁸ in royalty receipts, with GAAP income from royalty assets of $161.0 million ⁴⁹. The company has 47 full-time employees ⁵⁰ as of December 31, 2025, of whom seven ⁵¹ are involved directly in scientific research and development activities. The company completed a $2.6 million ⁵² solar investment at Kansas University Innovation Park in early 2025. As of December 31, 2025, the company had U.S. federal and state net operating loss carryforwards of approximately $4.3 million ⁵³ and $162.1 million ⁵⁴, respectively, and federal and California research and development tax credit carryforwards of approximately $0 million ⁵⁵ and $24.3 million ⁵⁶, respectively.

A significant growth vector is the continued expansion of the royalty portfolio through disciplined capital allocation. The company has a specific set of criteria used to assess potential investments, including time to cash flow, as it typically seeks products that are within a few years of regulatory approval and commercialization. The company prioritizes investments where the path to royalty monetization is clear and capital requirements beyond its investment are accessible, typically meaning investment in Phase 3 assets, although it also evaluates opportunities to invest from Phase 2 to approved assets. The company believes its business model is highly scalable and has significant growth potential, with investment opportunities sourced through a combination of proprietary origination, deep industry relationships, and active engagement with biopharmaceutical partners. The company's business development team works closely with potential counterparties under CDAs to access non-public clinical, regulatory and commercial diligence materials, allowing evaluation of opportunities earlier, structuring transactions with greater precision, and selectively pursuing investments with attractive, asymmetric risk-reward profiles.

Another major growth vector is the development and commercialization of partnered programs in the pipeline. Several key programs are in Phase 3 or regulatory submission stages, including Agenus' BOT/BAL for microsatellite-stable colorectal cancer, for which Ligand is entitled to a 2.625% ⁵⁷ royalty on future global net sales. Castle Creek's D-Fi for dystrophic epidermolysis bullosa, for which Ligand is entitled to a mid-single-digit royalty, is in Phase 3. LeonaBio's lasofoxifene for metastatic breast cancer, for which Ligand is entitled to a tiered royalty of 6% to 10% ⁵⁸ on potential future net sales, is in Phase 3 with data expected in mid-2027. Palvella's Qtorin rapamycin for microcystic lymphatic malformations, for which Ligand is entitled to a tiered royalty of 8.0% to 9.8% ⁵⁹, is in Phase 3 with an NDA submission planned for the second half of 2026. Orchestra BioMed's AVIM Therapy and Virtue SAB programs, for which Ligand received a low double-digit royalty on the first $100 million ⁶⁰ of Orchestra's annual revenues and a mid-single-digit royalty on annual revenues exceeding $100 million ⁶¹, are in pivotal stages. Viking's VK2809 for MASH, for which Ligand may be entitled to up to $225 million ⁶² of development, regulatory and commercial milestones and a tiered royalty of 3.5% to 7.5% ⁶³ on potential future net sales, has completed a Phase 2b trial. Viking's VK0214 for X-ALD, for which Ligand may be entitled to up to $150 million ⁶⁴ of development, regulatory and commercial milestones and a tiered royalty of 3.5% to 7.5% ⁶⁵ on potential future net sales, has been evaluated in a Phase 1b trial.The company contracts with a third-party manufacturer, Hovione, for Captisol production. Hovione operates FDA-inspected sites in the United States, Macau, Ireland and Portugal, with manufacturing operations performed primarily at Hovione's Portugal and Ireland facilities. The company believes it maintains adequate inventory of Captisol to meet its current partner needs and that its Captisol capacity will be sufficient to meet future partner needs. The original term of the agreement with Hovione was through December 2024 and has been automatically renewed through December 2026, with the agreement automatically renewing for successive two-year renewal terms. The company has ongoing minimum purchase commitments under its agreement with Hovione. As of December 31, 2025, the company has 47 full-time employees ⁶⁶, of whom seven ⁶⁷ are involved directly in scientific research and development activities.

The filing does not contain explicit R&D spending levels, capital expenditure plans, share repurchase authorization amounts, or dividend policy with exact figures for the upcoming period.

A structural headwind flagged by management is the potential for lower-than-expected future revenue based on Kyprolis, Qarziba, Filspari, Evomela, Teriparatide, Vaxneuvance, Ohtuvayre, Capvaxive and Rylaze, as well as royalties from other partnered products. A significant portion of royalty revenue is based on sales of these products by partners, and any setback that may occur with respect to any of these products could significantly impair operating results. These products are or may become subject to generic competition; for example, the company entered into a settlement agreement with Teva and Acrotech Biopharma which will allow Teva to market a generic version of Evomela in the United States starting on June 1, 2026 ⁶⁸, or earlier under certain circumstances. Also, Amgen previously settled patent litigation related to Kyprolis on confidential terms with several parties, but it was publicly reported that the U.S. launch date for at least Breckenridge Pharmaceuticals' applicable generic product will be on a date that is held as confidential in 2027 or sooner, depending on certain occurrences.

Another constraint is the reliance on collaboration relationships to generate milestone and royalty payments. Collaboration partners have significant discretion when deciding whether or not to pursue any development program, and existing collaborations may not continue or be successful. Collaboration partners may develop products that compete with the types of products they are developing with the company. If product candidates are approved for marketing under collaboration programs, revenues received will depend on the manufacturing, marketing and sales efforts of collaboration partners, who generally retain commercialization rights. Generally, current collaboration partners also have the right to terminate their collaborations at will or under specified circumstances. If any collaboration partners breach or terminate their agreements or otherwise fail to conduct their collaboration activities successfully, including due to insolvency events, ongoing product development under these agreements will be delayed or terminated.

A significant portion of royalty revenue is concentrated on sales of Kyprolis by Amgen, Qarziba by Recordati, Filspari by Travere, Evomela by Acrotech Biopharma, Teriparatide by Alvogen/Adalvo, Vaxneuvance and Capvaxive by Merck, Ohtuvayre by Verona Pharma (now a subsidiary of Merck), and Rylaze by Jazz, and any setback with these products could significantly impair operating results. Generic competition poses a material threat, as the company entered into a settlement agreement allowing Teva to market a generic version of Evomela in the United States starting on June 1, 2026 ⁶⁹, and it has been publicly reported that the U.S. launch date for at least one generic version of Kyprolis will be in 2027 or sooner. The company relies on a single third-party manufacturer, Hovione, for Captisol production, and a supply interruption could materially adversely impact operating results. The company's ability to use its net operating loss carryforwards to offset future taxable income may be subject to limitations; as of December 31, 2025, the company had U.S. federal and state NOLs of approximately $4.3 million ⁷⁰ and $162.1 million ⁷¹, respectively, which could be further limited if an ownership change occurs. The company continues to have exposure to risks related to Pelthos due to its ongoing equity ownership of approximately 48% ⁷² of Pelthos' outstanding common stock and approximately 60% ⁷³ of Pelthos' Series A convertible preferred stock, and the market value of this equity interest may fluctuate significantly due to factors beyond the company's control.

Management's message emphasizes that since launching a more focused strategic investment approach in 2022, the company has delivered meaningful and sustained revenue growth, reflecting improved execution, portfolio discipline, and an increased emphasis on high-value opportunities. This approach has strengthened the core business, enhanced operating leverage, and supported continued investment in growth initiatives. Management states that over this period, increased market recognition of the strategy and execution has also been reflected in appreciation of the stock price. Management believes the focused approach enhances the durability of the business and supports long-term growth objectives. The strategic priorities emphasized for the period ahead include continuing to expand the pipeline by aggregating royalty rights in mid- to late-stage development and commercial biopharma products, while maintaining a lean infrastructure and high-margin business. Management also highlights the disciplined investment process that guides evaluation of potential investment opportunities, beginning with proprietary origination and progressing through a gated diligence framework, culminating in a unanimous approval vote by the experienced three-member Investment Committee of the board of directors prior to entering into any binding term sheet and/or definitive documentation.