LIGAND PHARMACEUTICALS INC

Previous wording

On April 17, 2025, we announced the signing of a definitive merger agreement to combine our wholly owned subsidiaries, Pelthos Therapeutics Inc. and LNHC, Inc. (collectively “Pelthos”) with CHRO Merger Sub Inc., a wholly owned subsidiary of Channel Therapeutics. The merger will be supported by $50 million in capital raised from a group of strategic investors led by Murchinson (“Investor Group”). Upon completion of the transaction, the combined company will operate under the name Pelthos Therapeutics Inc. and trade on the NYSE American exchange under the ticker PTHS. The transaction is expected to close in the summer of 2025, subject to the fulfillment of customary closing conditions.

Current wording

On July 2, 2025, we announced the completion of its previously announced merger between the Company's wholly owned subsidiary, LNHC, Inc., and CHRO Merger Sub Inc., a wholly owned subsidiary of Channel Therapeutics Corporation (“Channel”). The combined company operates under the name Pelthos Therapeutics Inc. (“Pelthos”) and trades on the NYSE American exchange under the ticker symbol “PTHS”.

Previous 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.

Current wording

Total revenue and other income increased by $6.1 million, or 15%, to $47.6 million in Q2 2025 compared to $41.5 million in Q2 2024. Royalties increased by $13.2 million, or 57%, to $36.4 million in Q2 2025 compared to $23.2 million in Q2 2024, primarily due to income from Qarziba financial royalty asset acquired in Q3 2024 and an increase in Filspari sales. Captisol sales increased by $0.8 million, or 10%, to $8.3 million in Q2 2025 compared to $7.5 million in Q2 2024, primarily due to the timing of customer orders. Contract revenue and other income decreased by $7.9 million, or 73%, to $2.9 million in Q2 2025 compared to $10.9 million in Q2 2024, with the difference due to the timing of partner milestone events.

Previous wording

Amortization of intangibles remained steady at $8.3 million in Q1 2025 compared to $8.2 million in Q1 2024.

Current wording

Amortization of intangibles remained steady at $8.3 million in Q2 2025 compared to $8.3 million in Q2 2024.

Previous wording

Fair value adjustment to partner program derivatives was $(0.4) million for Q1 2025, compared with zero for Q1 2024.

Current wording

Fair value adjustment to partner program derivatives was $1.3 million for Q2 2025 compared to zero for Q2 2024.

Previous wording

Total operating costs and expenses increased by $53.6 million, or 191%, to $81.5 million in Q1 2025 compared to $28.0 million in Q1 2024.

Current wording

Total operating costs and expenses increased by $32.1 million, or 36%, to $120.7 million in YTD 2025 compared to $88.6 million in YTD 2024.

Previous wording

Cost of Captisol increased by $2.0 million, or 68%, to $4.8 million in Q1 2025 compared to $2.9 million in Q1 2024, with the increase primarily due to the higher Captisol sales in Q1 2025 compared to Q1 2024.

Current wording

Cost of Captisol increased by $2.0 million, or 34%, to $7.8 million in YTD 2025 compared to $5.8 million in YTD 2024, with the increase primarily due to the higher Captisol sales in YTD 2025 compared to 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 $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.

Current wording

Research and development expense was $56.7 million for YTD 2025, compared with $11.3 million for YTD 2024, with the increase primarily due to a $44.3 million 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

General and administrative expense was $18.8 million for Q1 2025, compared to $11.0 million for Q1 2024, with the increase primarily due to employee related costs and operating costs associated with incubating the Pelthos business.

Current wording

General and administrative expense was $39.0 million for YTD 2025, compared to $28.6 million for YTD 2024, with the increase primarily due to employee related costs and operating costs associated with incubating the Pelthos business.

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. 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.

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 gain from short-term investments was $0.9 million in Q2 2025 as compared to the net loss from short-term investments of $14.3 million in Q2 2024. In Q2 2025, we recorded an unrealized gain on Viking shares of $2.4 million as compared to an unrealized loss of $29.0 million in Q2 2024. In addition, we recorded a gain of $15.2 million on the fair value adjustment to the Viking Share Collar in Q2 2024.

Previous 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.

Current wording

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

Previous 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.

Current wording

Other non-operating expense, net, primarily consists of mark-to-market adjustments on derivatives (other than the Viking Share Collar and the partner program derivatives) and CVRs. Other non-operating expense, net, in Q2 2025 decreased by $34.9 million as compared to Q2 2024, primarily due to the fair market changes to derivative assets and the revaluation of investments in Primrose Bio and the equity method loss related to Primrose Bio in Q2 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, 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.

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, 2025 and 2024 was 56.8% and 20.6%, respectively. The effective tax rate for the six months ended June 30, 2025 and 2024 was 3.5% and 28.8%, respectively. The variance from the U.S. federal statutory tax rate of 21% for the three and six months ended June 30, 2025 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 statutory tax rate of 21% for the three and six months ended June 30, 2024 was primarily due to tax benefits from the foreign-derived intangible income deduction, as well as the research and development tax credits, which were partially offset by the Section 162(m) limitation during the period.

Previous 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.

Current wording

As of June 30, 2025, our cash, cash equivalents, and short-term investments totaled $245.0 million, which decreased by $11.1 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

Historically, we have liquidated our short-term investments and/or issued debt and equity securities to finance our business needs as a supplement to cash provided by operating activities. Our short-term investments include U.S. government debt securities, investment-grade corporate debt securities, bond funds and certificates of deposit. We have established guidelines relative to diversification and maturities of our investments in order to provide both safety and liquidity. These guidelines are periodically reviewed and modified to take advantage of trends in yields and interest rates. Additionally, we own certain securities which are classified as short-term investments that we received as a result of a milestone and an upfront license payment as well as 1.0 million shares of common stock in Viking.

Current wording

Historically, we have liquidated our short-term investments and/or issued debt and equity securities to finance our business needs as a supplement to cash provided by operating activities. Our short-term investments include U.S. government debt securities, investment-grade corporate debt securities, and certificates of deposit. We have established guidelines relative to diversification and maturities of our investments in order to provide both safety and liquidity. These guidelines are periodically reviewed and modified to take advantage of trends in yields and interest rates. Additionally, we own certain securities which are classified as short-term investments that we received as a result of a milestone and an upfront license payment as well as 1.0 million shares of common stock in Viking.

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 (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.

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 and six months ended June 30, 2025 and 2024, we did not issue any shares of common stock in the ATM Offering.

Previous 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.

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. During the three and six months ended June 30, 2025 and 2024, we did not repurchase any shares of common stock, respectively, under the stock repurchase program.

Previous 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.

Current wording

As of June 30, 2025, we had $5.6 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, 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.

Current wording

During the six months ended June 30, 2025, we used cash in operations primarily for the Castle Creek transaction, partially offset by cash from revenue and other operating income. We used cash in investing activities primarily for purchases of short-term investments, partially offset by cash proceeds from sale and maturity of short-term investments. We generated cash from financing activities primarily due to net proceeds from stock options exercises and ESPP, as well as proceeds from Pelthos investors.

Previous 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.

Current wording

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