LIGAND PHARMACEUTICALS INC

Previous wording

We are a biopharmaceutical company enabling scientific advancement through supporting the clinical development of high-value medicines. We do this by providing financing, licensing our technologies or both. Our business model seeks to generate value for stockholders by creating a diversified portfolio of biopharmaceutical product revenue streams that are supported by an efficient and low corporate cost structure. Our goal is to offer investors an opportunity to participate in the promise of the biotech industry in a profitable and diversified manner. Our business model focuses on funding programs in mid- to late-stage drug development in return for economic rights, purchasing royalty rights in development stage or commercial biopharmaceutical productsand licensing our technology to help partners discover and develop medicines. We partner with other pharmaceutical companies to leverage what they do best (late-stage development, regulatory management and commercialization) in order to generate our revenue. Our Captisol platform technology is a chemically modified cyclodextrin with a structure designed to optimize the solubility and stability of drugs. We have established multiple alliances, licenses and other business relationships with the world’s leading biopharmaceutical companies including Amgen, Merck, Pfizer, Jazz, Takeda, Gilead Sciences and Baxter International.

Current wording

We are a biopharmaceutical company enabling scientific advancement through supporting the clinical development of high-value medicines. We do this by providing financing, licensing our technologies or both. Our business model seeks to generate value for stockholders by creating a diversified portfolio of biopharmaceutical product revenue streams that are supported by an efficient and low corporate cost structure. Our goal is to offer investors an opportunity to participate in the promise of the biotech industry in a profitable and diversified manner. Our business model focuses on funding programs in mid- to late-stage drug development in return for economic rights, purchasing royalty rights in development stage or commercial biopharmaceutical productsand licensing our technology to help partners discover and develop medicines. We partner with other pharmaceutical companies to leverage what they do best (late-stage development, regulatory management and commercialization) in order to generate our revenue. Our Captisol platform technology is a chemically modified cyclodextrin with a structure designed to optimize the solubility and stability of drugs. We have established multiple alliances, licenses and other business relationships with the world’s leading biopharmaceutical companies including Amgen, Merck, Pfizer, Jazz, Takeda, Gilead Sciences, Baxter International and Agenus.

Previous wording

Total revenue and other income decreased by $13.0 million, or 30%, to $31.0 million in Q1 2024 compared to $44.0 million in Q1 2023. Revenue from intangible royalty assets increased by $1.2 million, or 7%, to $18.4 million in Q1 2024 compared to $17.2 million in Q1 2023. Income from financial royalty assets increased by $0.2 million, or 50%, to $0.7 million in Q1 2024 compared to $0.5 million in Q1 2023. Captisol sales decreased by $1.4 million, or 13%, to $9.2 million in Q1 2024 primarily due to the timing of customer orders. Contract revenue and other income decreased by $13.0 million, or 83%, to $2.7 million in Q1 2024 compared to $15.7 million in Q1 2023 primarily due to the milestone tied to FDA approval of Travere’s FILSPARI in Q1 2023.

Current wording

Total revenue and other income increased by $2.2 million, or 3%, to $72.5 million in YTD 2024 compared to $70.3 million in YTD 2023. Revenue from intangible royalty assets increased by $3.4 million, or 9%, to $41.0 million in YTD 2024 compared to $37.6 million in YTD 2023 primarily due to increases of FILSPARI sales. Income from financial royalty assets increased by $0.3 million, or 30%, to $1.3 million in YTD 2024 compared to $1.0 million in YTD 2023. Captisol sales increased by $0.9 million, or 5%, to $16.7 million in YTD 2024 compared to $15.8 million in YTD 2023, primarily due to the timing of customer orders. Contract revenue and other income decreased by $2.4 million, or 15%, to $13.5 million in YTD 2024 compared to $15.9 million in YTD 2023, primarily due to the milestone tied to FDA approval of Travere’s FILSPARI during the first quarter of 2023.

Previous wording

Cost of Captisol decreased by $0.8 million, or 22%, to $2.9 million in Q1 2024 compared to $3.7 million in Q1 2023, with the decrease primarily due to the lower Captisol sales this quarter.

Current wording

Cost of Captisol increased by $1.2 million, or 74%, to $2.9 million in Q2 2024 compared to $1.7 million in Q2 2023, with the increase primarily due to the higher Captisol sales this quarter.

Previous wording

Amortization of intangibles decreased by $0.4 million, or 4%, to $8.2 million in Q1 2024 compared to $8.5 million in Q1 2023 with the decrease primarily due to the cessation of amortization of certain Pelican intangibles resulting from the sale of the Pelican business.

Current wording

Amortization of intangibles decreased by $0.3 million, or 3%, to $8.3 million in Q2 2024 compared to $8.5 million in Q2 2023 with the decrease primarily due to the cessation of amortization of certain Pelican intangibles resulting from the sale of the Pelican business.

Previous wording

At any one time, we are working on multiple R&D programs. As such, we generally do not track our R&D expenses on a specific program basis. Research and development expense was $6.0 million for Q1 2024, compared with $6.7 million for the same period of 2023, with the decrease primarily due to sale of the Pelican business in September 2023.

Current wording

At any one time, we are working on multiple R&D programs. As such, we generally do not track our R&D expenses on a specific program basis. Research and development expense was $5.4 million for Q2 2024, compared with $6.9 million for Q2 2023, with the decrease primarily due to sale of the Pelican business in September 2023, offset by the increase in R&D expenses related to the acquisition of Novan (Pelthos)in September 2023.

Previous wording

The fluctuation in the gain (loss) from short-term investments is primarily driven by the changes in the fair value of our ownership in Viking common stock and other equity security investments, which contributed an unrealized gain of $50.8 million in Q1 2024 as compared to an unrealized gain of $19.0 million in Q1 2023. In addition, we recognized a total realized gain of $60.0 million from the sales of 0.7 million shares of Viking common stock in Q1 2024. In Q1 2023, we sold 3.2 million shares of Viking common stock and recognized a realized gain of $20.5 million in total.

Current wording

The fluctuation in the (loss) gain from short-term investments is primarily driven by the changes in the fair value of our ownership in Viking common stock, a collar arrangement we have executed in Q2 2024 to hedge against the fluctuation in Viking's share price, and other equity security investments. The loss from short-term investments was $14.3 million in Q2 2024 as compared to the gain from short-term investments of $4.0 million in Q2 2023. In Q2 2024, we recorded an unrealized loss on Viking shares of $29.0 million compared to a $13.5 million unrealized loss in Q2 2023. In Q2 2024, the fair value adjustment to the collar agreement executed in Q2 2024 was a gain of $15.2 million. We did not have a comparable collar agreement in Q2 2023. In Q2 2023, we sold 1.3 million shares of Viking common stock and recognized a total realized gain of $16.6 million. We sold no shares of Viking common stock in Q2 2024.

Previous wording

Interest expense consists primarily of the 0.75% coupon cash interest expense and the non-cash accretion of discount (including the amortization of debt issuance cost) on our 2023 Notes. In May 2023, the 2023 Notes matured, and we paid the remaining $76.9 million principal amount and $0.3 million accrued interest in cash, which contributed to the decrease in interest expense in Q1 2024 as compared to Q1 2023.

Current wording

In Q2 2024, interest expense consists primarily of a royalty and milestone payments purchase agreement, entered by Novan (Pelthos) in 2019, and assumed as part of the acquisition in September 2023. In Q2 2023, interest expense consists primarily of the 0.75% coupon cash interest expense and the non-cash accretion of discount (including the amortization of debt issuance cost) on our 2023 Notes. In May 2023, the 2023 Notes matured, and we paid the remaining $76.9 million principal amount and $0.3 million accrued interest in cash. The increase in interest expense in Q2 2024 was primarily driven by a $1.1 million interest expense related to the Novan (Pelthos) royalty and milestone payments purchase agreement.

Previous wording

Other non-operating income (expense), net, in Q1 2024 decreased by $3.0 million as compared to Q1 2023, primarily due to the equity method loss related to Primrose Bio in Q1 2024 and mark-to-market gains on CVRs in Q1 2023.

Current wording

Other non-operating expense, net, primarily consists of change in fair value adjustments to Primrose Bio investments, equity method loss related to Primrose Bio, and mark-to-market adjustments on CVRs. Other non-operating expense, net, in YTD 2024 increased by $35.4 million as compared to YTD 2023, primarily due to the revaluation of Primrose investments and the equity method loss related to Primrose Bio in YTD 2024.

Previous wording

We compute our income tax provision by applying the estimated annual effective tax rate to income from operations and adding the effects of any discrete income tax items specific to the period. The effective tax rate for the three months ended March 31, 2024 and 2023 was 24.1% and 21.5%, respectively. The variance from the U.S. federal statutory tax rate of 21% for the three months ended March 31, 2024 was primarily due to the Internal Revenue Code Section 162(m) limitation on deduction for officer compensation, non-deductible incentive stock option (ISO) related stock compensation expense, which were partially offset by foreign derived intangible income tax benefit during the period. The variance from the U.S. federal tax rate of 21% for the three months ended March 31, 2023 was primarily due to Internal Revenue Code Section 162(m) limitation on deduction for officer compensation, non-deductible ISO related stock compensation expense, which were partially offset by foreign derived intangible income tax benefit during the period. during the period.

Current wording

We compute our income tax provision by applying the estimated annual effective tax rate to income from operations and adding the effects of any discrete income tax items specific to the period. The effective tax rate for the three months ended June 30, 2024 and 2023 was 20.6% and 27.8%, respectively. The effective tax rate for the six months ended June 30, 2024 and 2023 was 28.8% and 21.8%, respectively. The variance from the U.S. federal statutory tax rate of 21% for the three and six months ended June 30, 2024 was primarily due to Internal Revenue Code Section 162(m) limitation on deduction for officer compensation, other non-deductible items, and change in reserve, which were partially offset by the foreign derived intangible income tax benefit. The variance from the U.S. federal tax rate of 21% for the three and six months ended June 30, 2023 was primarily due to the tax deductions related to foreign derived intangible income tax benefit as well as the research and development tax credits, which were partially offset by the Section 162(m) limitation during the period.

Previous wording

Net loss from discontinued operations for Q1 2024 and Q1 2023 was zero and $1.7 million, respectively. See additional information in “Item 1. Condensed Consolidated Financial Statements —Notes to Condensed Consolidated Financial Statements—Note (4), Spin-off of OmniAb.”

Current wording

Net loss from discontinued operations for Q2 2024 and Q2 2023 was zero. Net loss from discontinued operations for YTD 2024 and YTD 2023 was zero and $1.7 million, respectively .See additional information in “Item 1. Condensed Consolidated Financial Statements —Notes to Condensed Consolidated Financial Statements—Note 5, Spin-off of OmniAb.”

Previous wording

As of March 31, 2024, our cash, cash equivalents, and short-term investments totaled $310.6 million, which increased by $140.3 million from the end of last year due to factors described in the Cash Flow Summary below. Our primary source of liquidity, other than our holdings of cash, cash equivalents, and short-term investments, has been cash flows from operations.

Current wording

As of June 30, 2024, our cash, cash equivalents, and short-term investments totaled $226.9 million, which increased by $56.6 million from the end of last year due to factors described in the Cash Flow Summary below. Our primary source of liquidity, other than our holdings of cash, cash equivalents, and short-term investments, has been cash flows from operations. Our ability to generate cash from operations provides us with the financial flexibility we need to meet operating, investing, and financing needs.

Previous wording

On September 30, 2022, we entered into an At-The-Market Equity Offering Sales Agreement (the “Sales Agreement”) with Stifel, Nicolaus & Company, Incorporated (the “Agent), under which we may, from time to time, sell shares of our common stock having an aggregate offering price of up to $100.0 million in “at the market” offerings through the Agent. Sales of the shares of common stock, if any, will be made at prevailing market prices at the time of sale, or as otherwise agreed with the Agent. The Agent will receive a commission from the Company of up to 3.0% of the gross proceeds of any shares of common stock sold under the Sales Agreement. Shares of our common stock may be issued and sold pursuant to the Sales Agreement under the registration statement on Form S-3 we filed on September 30, 2022. As of March 31, 2024, we have not sold any shares of common stock under the Sales Agreement.

Current wording

On September 30, 2022, we entered into an At-The-Market Equity Offering Sales Agreement (the “Sales Agreement”) with Stifel, Nicolaus & Company, Incorporated (the “Agent”), under which we may, from time to time, sell shares of our common stock having an aggregate offering price of up to $100 million in “at the market” offerings through the Agent. Sales of the shares of common stock, if any, will be made at prevailing market prices at the time of sale, or as otherwise agreed with the Agent. The Agent will receive a commission from the Company of up to 3% of the gross proceeds of any shares of common stock sold under the Sales Agreement. Shares of our common stock may be issued and sold pursuant to the Sales Agreement under the registration statement on Form S-3 we filed on September 30, 2022. As of June 30, 2024, we have not sold any shares of common stock under the Sales Agreement.

Previous wording

Our Board of Directors has approved a stock repurchase program authorizing, but not requiring, the repurchase of up to $50.0 million of our common stock from time to time through April 2026. We expect to acquire shares, if at all, primarily through open-market transactions in accordance with all applicable requirements of Rule 10b-18 of the Exchange Act. The timing and amount of repurchase transactions will be determined by management based on our evaluation of market conditions, share price, legal requirements and other factors. Authorization to repurchase $50.0 million of our common stock remained available as of March 31, 2024.

Current wording

Our Board of Directors has approved a stock repurchase program authorizing, but not requiring, the repurchase of up to $50 million of our common stock from time to time through April 2026. We expect to acquire shares, if at all, primarily through open-market transactions in accordance with all applicable requirements of Rule 10b-18 of the Exchange Act. The timing and amount of repurchase transactions will be determined by management based on our evaluation of market conditions, share price, legal requirements and other factors. Authorization to repurchase $50 million of our common stock remained available as of June 30, 2024.

Previous wording

On October 12, 2023, we entered into a $75.0 million revolving credit facility (the “Revolving Credit Facility”) with Citibank, N.A. as the Administrative Agent. We, our material domestic subsidiaries, as Guarantors (as defined in the Credit Agreement), and the Lenders (as defined in the Credit Agreement) entered into a credit agreement (the “Credit Agreement”) with the Administrative Agent, under which the Lenders, the Swingline Lender and the L/C Issuer (each as defined in the Credit Agreement) agreed to make loans and other financial accommodations to us in an aggregate amount of up to $75.0 million. Borrowings under the Revolving Credit Facility accrue interest at a rate equal to either Term SOFR Rate or a specified base rate plus an applicable margin linked to our leverage ratio, ranging from 1.75% to 2.50% per annum for Term SOFR Rate loans and 0.75% to 1.50% per annum for base rate loans. The Revolving Credit Facility is subject to a commitment fee payable on the unused Revolving Credit Facility commitments ranging from 0.30% to 0.45%, depending on our leverage ratio. During the term of the Revolving Credit Facility, we may borrow, repay and re-borrow amounts available under the Revolving Credit Facility, subject to voluntary reductions of the swing line, letter of credit and revolving credit commitments.

Current wording

On October 12, 2023, we entered into the $75 million Revolving Credit Facility, under which the Lenders, the Swingline Lender and the L/C Issuer (each as defined in the Credit Agreement) agreed to make loans and other financial accommodations to us in an aggregate amount of up to $75 million. Borrowings under the Revolving Credit Facility accrue interest at a rate equal to either Term SOFR Rate or a specified base rate plus an applicable margin linked to our leverage ratio, ranging from 1.75% to 2.50% per annum for Term SOFR Rate loans and 0.75% to 1.50% per annum for base rate loans. The Revolving Credit Facility is subject to a commitment fee payable on the unused Revolving Credit Facility commitments ranging from 0.30% to 0.45%, depending on our leverage ratio. During the term of the Revolving Credit Facility, we may borrow, repay and re-borrow amounts available under the Revolving Credit Facility, subject to voluntary reductions of the swing line, letter of credit and revolving credit commitments.

Previous wording

As of March 31, 2024, we had $3.0 million in fair value of contingent consideration liabilities associated with prior acquisitions to be settled in future periods.

Current wording

As of June 30, 2024, we had $4.2 million in fair value of contingent consideration liabilities associated with prior acquisitions to be settled in future periods.

Previous wording

During the three months ended March 31, 2024, we generated cash from operations primarily due to net income. During the three months ended March 31, 2024, we used cash in investing activities for purchases of short-term investments and financial royalty assets, partially offset by cash from sale and maturity of short-term investments, including Viking shares. During the three months ended March 31, 2024, we generated cash from financing activities primarily due to net proceeds from stock options exercises and ESPP.

Current wording

During the six months ended June 30, 2024, we generated cash from operations primarily due to net income. During the six months ended June 30, 2024, we used cash in investing activities primarily for purchases of short-term investments, Agenus derivative assets, financial royalty assets and Palvella notes receivable, partially offset by cash from sale and maturity of short-term investments, including Viking shares, and cash proceeds from financial royalty assets. During the six months ended June 30, 2024, we generated cash from financing activities primarily due to net proceeds from stock options exercises and ESPP.

Previous wording

During the three months ended March 31, 2023, we generated cash from operations primarily due to net income. We generated cash from investing activities primarily from sale and maturity of short-term investments including Viking shares.

Current wording

During the six months ended June 30, 2023, we generated cash from operations primarily due to net income. We generated cash from investing activities primarily from sale and maturity of short-term investments including Viking shares. During the six months ended June 30, 2023, we repaid the remaining $76.9 million principal amount upon maturity of the 2023 Notes and $0.3 million accrued interest in cash.