LIGAND PHARMACEUTICALS INC
For the period ended Sep 30, 2024. Filed Nov 8, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 8, 2024
LGND$306.20+2.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-07.
0000886163-24-000071
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-08.
0000886163-24-000078
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 74 previous paragraphs and 75 current paragraphs.
29 unchanged; 23 reworded; 22 added; 19 removed; 3 previous and 1 current paragraphs rearranged.
Tables are not compared: 7 previous and 7 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (22)
Current report
We will host an investor and analyst day in Boston on December 10, 2024. CEO Todd Davis and other members of Ligand’s senior management team will provide an overview of our business model and investment selection process, review the progress of the portfolio including near-term partner milestones, and introduce 2025 guidance.
Current report
During Q3 2024, we sold 334,325 shares of our common stock pursuant to an At-The-Market (ATM) Equity Offering, generating net proceeds of $34.3 million. We have the ability to issue an additional $65 million under the current ATM plan.
Current report
FILSPARI
Current report
On September 5, 2024, Travere Therapeutics announced it received full FDA approval for FILSPARI for the treatment of IgA Nephropathy (IgAN) in adults. The FDA decision expands patient access to the first and only non-immunosuppressive therapy approved for the treatment of this rare progressive kidney disease.
Current report
On October 17, 2024, Travere Therapeutics and CSL Vifor announced that Swissmedic granted temporary marketing authorization for FILSPARI for the treatment of adults with primary IgAN with a urine protein excretion ≥1.0 g/day (or urine protein-to-creatinine ratio ≥0.75 g/g). The Swissmedic approval was supported by results from the pivotal Phase 3 PROTECT Study of FILSPARI in IgA nephropathy (IgAN) and follows full marketing approval by the U.S. FDA in September 2024 and conditional marketing authorization by the European Medicines Agency in April 2024.
Current report
On October 26, 2024, Travere Therapeutics presented new data further demonstrating the clinical benefit of FILSPARI in IgAN and reinforcing its potential in focal segmental glomerulosclerosis (FSGS) at the American Society of Nephrology Kidney Week 2024. Presentations included new data from the SPARTAN Study which showed that nearly 60% of patients with IgAN achieved complete remission when using FILSPARI as a first-line treatment. In addition, presentations took place on the SPARTACUS Study, PROTECT open-label extension, and real-world evidence highlighting the initial safety and efficacy data of FILSPARI in IgAN in combination treatment with a SGLT2 inhibitor. A late-breaking presentation demonstrated sparsentan delivered rapid and sustained proteinuria reduction and long-term kidney health benefits in a subset of patients with genetic, often treatment resistant, FSGS.
Current report
Ohtuvayre
Current report
On November 4, 2024, Verona Pharma provided an update on the commercial launch of Ohtuvayre in the U.S. reporting net sales of $5.6 million and October net sales that exceeded total third quarter sales. Additionally, through October Verona Pharma reported more than 2,200 unique prescribers and more than 5,000 prescriptions were filled across a broad COPD population.
Current report
In September, 2024, Verona's Pharma development partner in Greater China, Nuance Pharma (private), completed enrollment in its pivotal Phase 3 clinical trial evaluating Ohtuvayre for the maintenance treatment of COPD in China. Results from the trial are expected in 2025.
Current report
Other Portfolio Updates
Current report
On October 23, 2024, Merck (NYSE: MRK) announced that the U.S. Centers for Disease Control and Prevention’s Advisory Committee on Immunization Practices (ACIP) voted to update the adult age-based pneumococcal vaccination guidelines and has recommended CAPVAXIVE (Pneumococcal 21-valent Conjugate Vaccine) for pneumococcal vaccination in adults 50 years of age and older. Additionally, ACIP shared clinical decision-making has also recommended a supplemental dose of CAPVAXIVE for adults 65 years of age and older who have completed their vaccine series with both PCV13 (pneumococcal 13-valent conjugate vaccine) and PPSV23 (pneumococcal 23-valent polysaccharide vaccine).
Current report
On October 9, 2024, Viking Therapeutics announced positive data from the company's Phase 1b clinical trial of VK0214, a novel small molecule agonist of the thyroid hormone receptor beta (TRβ), in patients with X-linked adrenoleukodystrophy. Results from this study showed VK0214 to be safe and well-tolerated following once-daily dosing over the 28-day study period. In addition, significant reductions were observed in plasma levels of very long-chain fatty acids (VLCFAs) and other lipids, as compared to placebo. Ligand is entitled to a 3.5-7.5% royalty on future net sales of VK0214, as well as clinical, regulatory, and commercial milestones.
Current report
On July 1, 2024, Palvella Therapeutics (private) initiated SELVA, a 24-week, pivotal Phase 3, single-arm, baseline-controlled clinical trial of QTORIN™ rapamycin for the treatment of microcystic lymphatic malformations (MLM). The study’s primary and key secondary endpoints are clinician-reported outcomes and the study will enroll 40 subjects at leading vascular anomaly centers across the U.S.
Current report
Total revenue and other income increased by $21.1 million, or 20%, to $124.3 million in YTD 2024 compared to $103.2 million in YTD 2023. Royalties increased by $11.5 million, or 18%, to $74.0 million in YTD 2024 compared to $62.5 million in YTD 2023, primarily due to income from QARZIBA financial royalty asset acquired in Q324 and an increase in FILSPARI sales. Captisol sales decreased by $1.5 million, or 6%, to $23.0 million in YTD 2024 compared to $24.5 million in YTD 2023, primarily due to the timing of customer orders. Contract revenue and other income increased by $11.1 million, or 68%, to $27.4 million in YTD 2024 compared to $16.3 million in YTD 2023, primarily due to a commercial milestone tied to Verona's Ohtuvayre in Q3 2024.
Current report
Amortization of intangibles remained steady at $8.3 million in Q3 2024 compared to $8.2 million in Q3 2023.
Current report
General and administrative expense was $24.5 million for Q3 2024, compared to $14.7 million for Q3 2023, with the increase primarily due to a one-time stock compensation expense associated with the anticipated departure of our former President and COO and an increase in G&A expenses related to the acquisition of Novan (Pelthos) in September 2023.
Current report
Fair value adjustment to partner program derivatives was $7.8 million for Q3 2024 primarily due to certain Agenus partners discontinuing development of their partnered programs. These programs may be relicensed at a later date, and Ligand would retain its economic interest upon any relicense activity.
Current report
Amortization of intangibles decreased slightly by $0.6 million, or 2%, to $24.7 million in YTD 2024 compared to $25.3 million in YTD 2023.
Current report
General and administrative expense was $53.0 million for YTD 2024, compared to $36.8 million for YTD 2023, with the increase primarily due to a one-time stock compensation expense associated with the anticipated departure of our former President and COO and an increase in G&A expenses related to the acquisition of Novan (Pelthos) in September 2023.
Current report
Fair value adjustment to partner program derivatives was $7.8 million for YTD 2024 primarily due to certain Agenus partners discontinuing development of their partnered programs. These programs may be relicensed at a later date, and Ligand would retain its economic interest upon any relicense activity.
Current report
Gain on Sale of Pelican
Current report
The gain on sale of Pelican in amount of $2.1 million for the three and nine months ended September 30, 2023 represents the excess of the fair value of 1) our investments in Primrose Bio and other economic rights; and 2) the carrying amount of Pelican business assets and liabilities together with allocated goodwill as of September 18, 2023, the date of sale; and 3) $15 million cash consideration paid.
Removed paragraphs (19)
Previous report
On July 8, 2024, we announced the $100 million acquisition of APEIRON Biologics, a private biotech company based in Vienna, Austria. Apeiron holds the royalty rights to QARZIBA (dinutuximab beta) for the treatment of high-risk neuroblastoma. QARZIBA was approved by the European Medicines Agency in 2017 and is commercially available today in more than 35 countries. QARZIBA is marketed outside of mainland China by the global pharmaceutical company Recordati S.p.A., which acquired EUSA Pharma (UK) Limited in 2022.
Previous report
On July 24, 2024, Palvella Therapeutics, Inc. (private) announced a merger agreement with Pieris Pharmaceuticals, Inc. (Nasdaq: PIRS) in which Palvella anticipates becoming a publicly traded rare disease company upon the close of the merger. In connection with the proposed merger, Palvella secured commitments from a syndicate of leading specialist biotech investors in an oversubscribed $78.9 million concurrent private financing.
Previous report
The transaction will help advance several clinical milestones for Palvella:
Previous report
•A Phase 3 pivotal study of QTORIN 3.9% rapamycin anhydrous gel for the treatment of microcystic lymphatic malformations, a serious, rare genetic and lifelong disease for which there are no FDA-approved therapies. The disease impacts more than 30,000 diagnosed patients in the U.S. QTORIN rapamycin has been granted FDA’s Breakthrough Therapy, Fast Track, and Orphan Designations for the treatment of microcystic lymphatic malformations.
Previous report
•A Phase 2 study of QTORIN rapamycin for the treatment of cutaneous venous malformations. Cutaneous venous malformations are a serious, rare genetic disease which can cause functional impairment, significantly impact quality of life, and are associated with severe long-term complications. QTORIN rapamycin has been granted FDA’s Fast Track Designation for the treatment of venous malformations.
Previous report
Notably, if approved, QTORIN™ rapamycin has the potential to be the first approved therapy and standard of care in the U.S. for microcystic lymphatic malformations and cutaneous venous malformations.
Previous report
As background, Palvella was originally sourced through our proactive deal origination efforts. Since our first transaction with Palvella, the company has secured significant subsequent equity funding from leading biotech investors, including BVF Partners, Petrichor, Samsara BioCapital, and others. We are entitled to a royalty of 8-9.8% on worldwide commercial sales of QTORIN rapamycin. In addition to our royalty, we anticipate owning approximately 2% of the combined company following the close of the reverse merger and concurrent financing.
Previous report
On July 18, 2024, Agenus Inc. (Nasdaq: AGEN), announced the results of its end-of-Phase 2 meeting with the FDA, for the advancement of its immunotherapy combination, botensilimab (BOT) and balstilimab (BAL), for the treatment of adult patients with relapsed/refractory microsatellite stable colorectal cancer (r/r MSS CRC) with no active liver metastases (NLM). Agenus received clarity from the FDA on their Phase III dosing regimen, which is an important achievement. The company also announced topline interim data from its Phase 2 trial, which are showing trends consistent with the Phase 1 study, including an ORR of 19.4% and 6-month survival rate of 90% for the BOT 75mg/BAL combination. The safety profile was manageable and no new signals were observed. Agenus plans to continue future discussions with the FDA as the Phase 2 data mature and will present these data in totality at an upcoming medical conference.
Previous report
On June 26, 2024, Verona Pharma plc (Nasdaq: VRNA) announced FDA approval of Ohtuvayre (ensifentrine), the first inhaled product with a novel mechanism of action available for the maintenance treatment of chronic obstructive pulmonary disease in adult patients in more than 20 years. Ohtuvayre is a first-in-class selective dual inhibitor of the enzymes phosphodiesterase 3 phosphodiesterase 4 ("PDE3 and PDE4") that combines bronchodilator and non-steroidal anti-inflammatory effects in one molecule. Ligand earned a $5.8 million milestone payment upon FDA approval of Ohtuvayre and will earn an additional $13.8 million upon its commercial launch which is expected to occur during the third quarter of 2024. Ligand is entitled to a royalty of approximately 3% on future worldwide net sales of Ohtuvayre.
Previous report
On June 17, 2024, Merck announced approval from the FDA for CAPVAXIVE, previously known as V116, a 21 valent pneumococcal vaccine for the prevention of Streptococcus pneumoniae infection. Risk of infection is higher among patients that are immunocompromised, suffering chronic health conditions, and adults aged 50 years or older. As the first pneumococcal conjugate vaccine specifically designed for adults, it covers 21 serotypes that account for approximately 85% of cases of invasive pneumococcal disease among individuals 65 and over, including 8 serotypes not covered by any licensed vaccines. Specific serotypes pose potentially greater risk for invasive pneumococcal disease, including pneumococcal bacteremia and meningitis. Following the FDA approval, Merck announced on June 27, that the U.S. Centers for Disease Control and Prevention’s Advisory Committee on Immunization Practices unanimously voted to recommend CAPVAXIVE as an option for all adults age 65 and older, for adults 19 to 64 with certain risk factors, and for those over 65 previously vaccinated with other pneumococcal vaccines. The FDA approval of CAPVAXIVE triggered a $2 million milestone payment to Ligand, and Ligand is entitled to a royalty on future worldwide net sales.
Previous report
On June 17, 2024, Ovid Therapeutics (Nasdaq: OVID) announced Takeda's SKYLINE study of soticlestat in Dravet syndrome narrowly missed its primary endpoint of reduction in convulsive seizure frequency and showed clinically meaningful and nominal significant effects in multiple key secondary efficacy endpoints. Additionally, Takeda's SKYWAY study in Lennox-Gastaut syndrome missed its primary endpoint of reduction in major motor drop seizures. Soticlestat had a consistent and favorable safety and tolerability profile in both studies. Takeda indicated that it plans to discuss the totality of the data with regulatory authorities.
Previous report
On June 17, 2024, Marinus Pharmaceuticals (Nasdaq: MRNS) announced topline results from Phase 3 RAISE trial of IV ganaxolone in refractory status epilepticus (RSE). The study met its first co-primary endpoint demonstrating rapid cessation of status epilepticus in a highly refractory patient population but failed to achieve statistical significance on the second co-primary endpoint of the proportion of patients not progressing to IV anesthesia. Marinus said they will continue to analyze the full RAISE dataset and plans to engage with the FDA to discuss a potential path forward for IV ganaxolone in RSE.
Previous report
On June 4, 2024, Viking Therapeutics announced positive, 52-week histologic data from its Phase 2b VOYAGE study of VK2809 in patients with biopsy-confirmed, non-alcoholic steatohepatitis (NASH). The study had successfully achieved its primary endpoint with patients receiving VK2809 experiencing statistically significant declines in liver fat from baseline compared to placebo at 12 weeks. The study also showed an encouraging tolerability and safety profile for VK2809. If development of VK2809 is successful, the program will address a multi-billion dollar market opportunity where Ligand will receive a 3.5%-7.5% royalty on future net sales of VK2809, as well as significant clinical, regulatory, and commercial milestones. Viking plans to schedule an end of Phase 2 meeting with the FDA in the fourth quarter of 2024.
Previous report
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 report
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 report
General and administrative expense was $17.6 million for Q2 2024, compared to $11.3 million for Q2 2023, with the increase primarily due to the increase in stock compensation for new hires in 2024 and a Q2 2024 stock compensation award modification.
Previous report
Amortization of intangibles decreased by $0.6 million, or 4%, to $16.4 million in YTD 2024 compared to $17.1 million in YTD 2023 with the decrease primarily due to the cessation of amortization of certain Pelican intangibles resulting from the sale of the Pelican business.
Previous report
General and administrative expense was $28.6 million for YTD 2024, compared to $22.1 million for YTD 2023, with the increase primarily due to the increase in stock compensation for new hires in 2024 and a Q2 2024 stock compensation award modification.
Previous report
Gain on derivative instruments consists of change in fair value of Primrose mRnA derivative and Agenus derivatives. We did not have the comparable derivatives in YTD 2023.
Reworded paragraphs (23)
Previous wording
Total revenue and other income increased by $15.2 million, or 58%, to $41.5 million in Q2 2024 compared to $26.4 million in Q2 2023. Revenue from intangible royalty assets increased by $2.2 million, or 11%, to $22.6 million in Q2 2024 compared to $20.4 million in Q2 2023 primarily due to increases of FILSPARI sales. Income from financial royalty assets increased by $0.05 million, or 10%, to $0.6 million in Q2 2024 compared to $0.5 million in Q2 2023. Captisol sales increased by $2.3 million, or 44%, to $7.5 million in Q2 2024 compared to $5.2 million in Q2 2023, primarily due to the timing of customer orders. Contract revenue and other income increased by $10.7 million, or 5,125%, to $10.9 million in Q2 2024 compared to $0.2 million in Q2 2023, primarily due to the milestone tied to FDA approval of Verona's Ohtuvayre in Q2 2024, the milestone tied to EMA approval of Travere's FILSPARI in Q2 2024, and the milestone tied to FDA approval of Merck's V116 in Q2 2024.
Current wording
Total revenue and other income increased by $18.9 million, or 58%, to $51.8 million in Q3 2024 compared to $32.9 million in Q3 2023. Royalties increased by $7.8 million, or 33%, to $31.7 million in Q3 2024 compared to $23.9 million in Q3 2023, primarily due to income from QARZIBA financial royalty asset acquired in Q324 and an increase in FILSPARI sales. Captisol sales decreased by $2.4 million, or 27%, to $6.3 million in Q3 2024 compared to $8.6 million in Q3 2023, primarily due to the timing of customer orders. Contract revenue and other income increased by $13.5 million, or 3,623%, to $13.8 million in Q3 2024 compared to $0.4 million in Q3 2023, primarily due to a commercial milestone tied to Verona's Ohtuvayre in Q3 2024.
Previous wording
Total operating costs and expenses increased by $32.3 million, or 114%, to $60.6 million in Q2 2024 compared to $28.3 million in Q2 2023, primarily due to the $26.5 million financial royalty asset impairment.
Current wording
Total operating costs and expenses increased by $16.8 million, or 53%, to $48.7 million in Q3 2024 compared to $31.9 million in Q3 2023, primarily due to the fair value adjustment to partner program derivatives and a Q3 2024 stock compensation award modification.
Previous 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.
Current wording
Cost of Captisol decreased by $1.0 million, or 30%, to $2.4 million in Q3 2024 compared to $3.5 million in Q3 2023, with the decrease primarily due to the lower Captisol sales this quarter.
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 $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.
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 $5.7 million for Q3 2024, compared with $5.5 million for Q3 2023.
Previous wording
Total operating costs and expenses increased by $30.5 million, or 52%, to $88.6 million in YTD 2024 compared to $58.1 million in YTD 2023, primarily due to the $26.5 million financial royalty asset impairment.
Current wording
Total operating costs and expenses increased by $47.3 million, or 52%, to $137.3 million in YTD 2024 compared to $90.0 million in YTD 2023, primarily due to the increase in financial royalty asset impairment of $26.5 million, the stock compensation award modifications, and the fair value adjustment to partner program derivatives.
Previous wording
Cost of Captisol increased by $0.4 million, or 7%, to $5.8 million in YTD 2024 compared to $5.4 million in YTD 2023, with the increase primarily due to the higher Captisol sales in YTD 2024.
Current wording
Cost of Captisol decreased by $0.6 million, or 7%, to $8.2 million in YTD 2024 compared to $8.9 million in YTD 2023, with the decrease primarily due to the lower Captisol sales in YTD 2024.
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 $11.3 million for YTD 2024, compared with $13.5 million for YTD 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.
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 $17.0 million for YTD 2024, compared with $19.0 million for YTD 2023, with the decrease primarily due to the sale of the Pelican business in September 2023, partially offset by the increase in R&D expenses related to the acquisition of Novan (Pelthos) in September 2023.
Previous wording
Financial royalty asset impairment was $26.5 million for YTD 2024, compared to zero for YTD 2023, with the increase due to the Takeda's Soticlestat missing its phase 3 clinical trial primarily endpoint of reducing the frequency of convulsive seizures for patients with Dravet Syndrome.
Current wording
Financial royalty asset impairment was $26.5 million for YTD 2024 primarily due to the impairment loss related to Takeda's soticlestat missing its phase 3 clinical trial primary endpoint of reducing the frequency of convulsive seizures for patients with Dravet Syndrome.
Previous 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.
Current 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, the collar arrangement we executed in Q2 2024 to hedge against the fluctuation in Viking's share price, and other equity security investments. The gain from short-term investments was $2.4 million in Q3 2024 as compared to the loss from short-term investments of $13.2 million in Q3 2023. In Q3 2024, we recorded an unrealized gain on Viking shares of $10.3 million compared to an unrealized loss of $11.5 million in Q3 2023. In Q3 2024, the fair value adjustment to the collar agreement was a loss of $7.9 million. We did not have a comparable collar agreement in Q3 2023.
Previous wording
Interest income consists primarily of interest earned on our short-term investments. The increase over the prior year was due to the increase in average investment balances in Q2 2024 compared to Q2 2023.
Current wording
Interest income consists primarily of interest earned on our short-term investments. The decrease over the prior year was due to the decrease in average investment balances in Q3 2024 compared to Q3 2023.
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 along with a royalty and milestone payments purchase agreement, entered by Novan (Pelthos) in 2019, and assumed as part of the acquisition in September 2023. In May 2023, the 2023 Notes matured. The increase in interest expense in YTD 2024 was primarily driven by a $1.1 million interest expense related to the Novan (Pelthos) royalty and milestone payments purchase agreement.
Current wording
In Q3 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. The increase in interest expense in Q3 2024 was primarily driven by the $0.5 million interest expense related to the Novan (Pelthos) royalty and milestone payments purchase agreement.
Previous 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.
Current wording
Other non-operating expense, net, primarily consists of mark-to-market adjustments on derivatives (other than the collar arrangement and the partner program derivatives) and CVRs. Other non-operating expense, net, in Q3 2024 increased by $8.2 million as compared to Q3 2023, primarily due to the loss from change in fair value of derivative assets in Q3 2024.
Previous 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 executed in Q2 2024 to hedge against the fluctuation in Viking's share price, and other equity security investments. The gain from short-term investments was $96.5 million in YTD 2024 as compared to $43.5 million in YTD 2023. In YTD 2024, we recorded an unrealized gain on Viking shares of $21.8 million compared to a $5.1 million unrealized gain in YTD 2023. In YTD 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 YTD 2023.
Current 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, the collar arrangement we executed in Q2 2024 to hedge against the fluctuation in Viking's share price, and other equity security investments. The gain from short-term investments was $98.9 million in YTD 2024 as compared to $30.3 million in YTD 2023. In YTD 2024, we recorded a realized gain on the sales of Viking shares of $60.0 million compared to $37.2 million in YTD 2023. Additionally, we recorded an unrealized gain on Viking shares of $32.1 million in YTD 2024 compared to an unrealized loss of $6.3 million in YTD 2023. In YTD 2024, the fair value adjustment to the collar agreement was a net gain of $7.3 million. We did not have a comparable collar agreement in YTD 2023.
Previous 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.
Current 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 along with a royalty and milestone payments purchase agreement, entered by Novan (Pelthos) in 2019, and assumed as part of the acquisition in September 2023. In May 2023, the 2023 Notes matured and we repaid the remaining $76.9 million principal amount upon maturity of the 2023 Notes and $0.3 million accrued interest in cash. The increase in interest expense in YTD 2024 was primarily driven by the $1.6 million interest expense related to the Novan (Pelthos) royalty and milestone payments purchase agreement.
Previous wording
Other non-operating expense, net, primarily consists of fair value adjustments to Primrose Bio investments, equity method loss related to Primrose Bio, and mark-to-market adjustments on derivatives (other than Collar arrangement) and CVRs. Other non-operating expense, net, in Q2 2024 increased by $32.7 million as compared to Q2 2023, primarily due to the revaluation of Primrose investments and the equity method loss related to Primrose Bio in Q2 2024.
Current wording
Other non-operating expense, net, primarily consists of fair value adjustments to Primrose Bio investments, equity method loss related to Primrose Bio, and mark-to-market adjustments on derivatives (other than the collar arrangement and the partner program derivatives) and CVRs. Other non-operating expense, net, in YTD 2024 increased by $43.6 million as compared to YTD 2023, primarily due to the revaluation of Primrose investments, the equity method loss related to Primrose Bio, and the loss from change in fair value of derivative assets 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 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.
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 September 30, 2024 and 2023 was (13.1)% and 15.4%, respectively. The effective tax rate for the nine months ended September 30, 2024 and 2023 was 35.1% and 23.5%, respectively. The variance from the U.S. federal statutory tax rate of 21% for the three and nine months ended September 30, 2024 was primarily due to section162(m) limitation on deduction for officer compensation, other non-deductible items, and income from foreign operations, which were partially offset by the foreign derived intangible income deduction. The variance from the U.S. federal tax rate of 21% for the three and nine months ended September 30, 2023 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.
Previous 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.
Current wording
As of September 30, 2024, our cash, cash equivalents, and short-term investments totaled $219.6 million, which increased by $49.3 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. 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 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.
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. 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. During the three and nine months ended September 30, 2024, we issued 334,325 shares of common stock in the ATM Offering, generating proceeds of $34.3 million, net of commissions and other transaction costs.
Previous 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.
Current wording
Our Board 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 September 30, 2024.
Previous wording
As of June 30, 2024, we had $74.4 million in available borrowing under the Revolving Credit Facility, after utilizing $0.6 million for letter of credit. The maturity date of the Revolving Credit Facility is October 12, 2026.
Current wording
As of September 30, 2024, we had $124.4 million in available borrowing under the Revolving Credit Facility, after utilizing $0.6 million for letter of credit. The maturity date of the Revolving Credit Facility is October 12, 2026.
Previous 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.
Current wording
As of September 30, 2024, we had $4.0 million in fair value of contingent consideration liabilities associated with prior acquisitions to be settled in future periods.
Previous 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.
Current wording
During the nine months ended September 30, 2024, we generated cash from operations primarily due to net income. We used cash in investing activities primarily for Apeiron acquisition, Agenus acquisition, and purchases of short-term investments, financial royalty assets and Palvella notes receivable, partially offset by cash from sale and maturity of short-term investments including Viking shares. We generated cash from financing activities primarily due to net proceeds from the sales of shares of common stock in the ATM Offering, and net proceeds from stock options exercises and ESPP.
Previous 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.
Current wording
During the nine months ended September 30, 2023, we generated cash from operations primarily due to net income. We used cash in investing activities primarily for Novan acquisition and investment in Primrose Bio, partially offset by cash from sale and maturity of short-term investments including Viking shares. We used cash in financing activities primarily for repayment of the 2023 Notes upon maturity, partially offset by net proceeds from stock options exercises and ESPP.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Interest income consists primarily of interest earned on our short-term investments.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
On July 8, 2024, we also amended our revolving credit facility with Citibank. The Credit Agreement was amended to, among other things, increase the aggregate revolving credit facility amount from $75 million to $125 million.
Previous report — wording carried elsewhere
Financial royalty asset impairment was $26.5 million for Q2 2024, compared to zero for Q2 2023, with the increase due to the Takeda's Soticlestat missing its phase 3 clinical trial primarily endpoint of reducing the frequency of convulsive seizures for patients with Dravet Syndrome.
Previous report — wording carried elsewhere
Interest income consists primarily of interest earned on our short-term investments. The increase over the prior year was due to the increase in average investment balances in YTD 2024 compared to YTD 2023.