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, Baxter International and Agenus.

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. We operate two infrastructure-light royalty-generating IP platform technologies. Our Captisol platform technology is a chemically modified cyclodextrin with a structure designed to optimize the solubility and stability of drugs. Our NITRICIL platform technology facilitates “tunable” dosing, permitting an adjustable drug release profile to allow proprietary formulations that target a broad range of indications. We have established multiple alliances, licenses and other business relationships with the world’s leading biopharmaceutical companies including Amgen, Merck, Pfizer, Jazz, Gilead Sciences and Baxter.

Previous 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.

Current wording

Total revenue and other income increased by $14.4 million, or 46%, to $45.3 million in Q1 2025 compared to $31.0 million in Q1 2024. Royalties increased by $8.4 million, or 44%, to $27.5 million in Q1 2025 compared to $19.1 million in Q1 2024, primarily due to income from Qarziba financial royalty asset acquired in Q3 2024 and an increase in Filspari sales. Captisol sales increased by $4.2 million, or 46%, to $13.5 million in Q1 2025 compared to $9.2 million in Q1 2024, primarily due to the timing of customer orders. Contract revenue and other income increased by $1.7 million, or 64%, to $4.4 million in Q1 2025 compared to $2.7 million in Q1 2024, primarily due to a regulatory milestone tied to Xi'an Xintong's Xinshumu (pradefovir mesylate tablets) in Q1 2025.

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 $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.

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 $50.1 million for Q1 2025, compared with $6.0 million for Q1 2024, with the increase primarily due to a research and development funding arrangement related to the D-Fi royalty rights acquired with the Castle Creek Investment transaction as discussed in Note 3, Castle Creek and Agenus Transactions.

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, 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.

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 and other equity security investments. The net loss from short-term investments was $12.4 million in Q1 2025 as compared to the net gain from short-term investments of $110.8 million in Q1 2024. In Q1 2025, we recorded an unrealized loss on Viking shares of $16.1 million compared to an unrealized gain of $50.8 million in Q1 2024.

Previous 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.

Current wording

Interest income consists primarily of interest earned on our short-term investments. The decrease over the prior year period was due to the decrease in average investment balances in Q1 2025 compared to Q1 2024.

Previous 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.

Current wording

Interest expense consists primarily of interest accrued related to a royalty and milestone payments purchase agreement, entered by Novan (Pelthos) in 2019, and assumed as part of the acquisition in September 2023.

Previous 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.

Current wording

Other non-operating expense, net, primarily consists of mark-to-market adjustments on derivatives (other than the partner program derivatives) and CVRs. Other non-operating expense, net, in Q1 2025 increased by $0.3 million as compared to Q1 2024, primarily due to the loss from change in fair value of CVR liabilities in Q1 2025.

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 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.

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 March 31, 2025 and 2024 was 15.4% and 24.1%, respectively. The variance from the U.S. federal statutory tax rate of 21% for the three months ended March 31, 2025 was primarily due to Internal Revenue Code 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 months ended March 31, 2024 was primarily due to tax benefits from the foreign-derived intangible income deduction and research and development tax credits, which were partially offset by Internal Revenue Code Section 162(m) limitation during the period.

Previous 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.

Current wording

As of March 31, 2025, our cash, cash equivalents, and short-term investments totaled $208.9 million, which decreased by $47.3 million from the end of last year mainly due to the cash paid for the Castle Creek transaction. 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. 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.

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 (the “ATM Offering”). The shelf registration statement relating to such shares included a prospectus covering the offering, issuance and sale of up to $100 million of our common stock from time to time through the ATM Offering. The shares to be sold under the Sales Agreement may be issued and sold pursuant to the shelf registration statement. During the three months ended March 31, 2025 and 2024, we did not issue any shares of common stock in the ATM Offering.

Previous 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.

Current wording

In April 2023, 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 March 31, 2025.

Previous 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.

Current wording

On October 12, 2023, we entered into a $75 million revolving credit facility (the “Revolving Credit Facility”) with Citibank, N.A. as the Administrative Agent (as defined in the Credit Agreement). 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 revolving loans, swingline loans and other financial accommodations to us (including the issuance of letters of credit) in an aggregate amount of up to $75 million. Borrowings under the Revolving Credit Facility accrue interest at a rate equal to either Term Secured Overnight Financing Rate (“Term SOFR”) 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 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

We believe that our existing funds, cash generated from operations and existing sources of and access to financing are adequate to fund our need for working capital, capital expenditures, debt service requirements, continued advancement of research and development efforts, potential stock repurchases and other business initiatives we plan to strategically pursue, including acquisitions and strategic investments.

Current wording

We believe that our existing funds, cash generated from operations and existing sources of and access to financing are adequate to fund our need for working capital, capital expenditures, Pelthos Therapeutics transaction, debt service requirements, continued advancement of research and development efforts, potential stock repurchases and other business initiatives we plan to strategically pursue, including acquisitions and strategic investments.

Previous 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.

Current wording

As of March 31, 2025, we had $5.5 million in fair value of contingent consideration liabilities associated with prior acquisitions to be settled in future periods.

Previous 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.

Current wording

During the three months ended March 31, 2025, we used cash in operations primarily for the Castle Creek transaction, partially offset by cash from revenue and other operating income. We generated cash from cash in investing activities primarily from sale and maturity of short-term investments partially offset by purchases of short-term investments. We used cash in financing activities primarily due to cash paid for taxes related to net share settlement of equity awards, partially offset by net proceeds from stock options exercises and ESPP.

Previous 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.

Current wording

During the three months ended March 31, 2024, we generated cash from operations primarily from revenue and other operating income. 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. We generated cash from financing activities primarily due to net proceeds from stock options exercises and ESPP.