LIGAND PHARMACEUTICALS INC

Previous wording

Total revenue and other income increased by $35.8 million, or 27%, to $167.1 million in 2024 compared to $131.3 million in 2023 primarily due to the $23.8 million increase in royalties. The increase in royalties in 2024 was primarily due to income from Qarziba financial royalty asset acquired in the third quarter of 2024 and an increase in sales of Travere Therapeutics’ Filspari. Captisol sales increased by $2.5 million to $30.9 million in 2024 compared to $28.4 million in 2023. The higher Captisol sales were due to the timing of customer orders. Contract revenue and other revenue increased by $9.5 million primarily due to milestone payments earned from Verona Pharma upon the approval and commercial launch of Ohtuvayre.

Current wording

Total revenue and income increased by $101.0 million, or 60%, to $268.1 million in 2025 compared to $167.1 million in 2024 primarily due to the $52.2 million increase in royalties and $39.4 million increase in contract revenue and income. The increase in royalties in 2025 was primarily due to income from Qarziba financial royalty asset acquired in the third quarter of 2024 and an increase in sales of Filspari, Ohtuvayre and Capvaxive. Captisol sales increased by $9.3 million to $40.2 million in 2025 compared to $30.9 million in 2024. The increase in Captisol sales were due to the timing of customer orders. Contract revenue and income increased by $39.4 million, with the change primarily due to income from the Pelthos Transaction. During the third quarter of 2025, we recognized $53.1 million in total income related to the divestiture of LNHC in connection with the Pelthos Transaction.

Previous wording

Revenue from intangible royalty assets is a function of our partners' product sales and the applicable royalty rate. Kyprolis royalty rate is under a tiered royalty rate structure with the highest being 3%. Evomela has a contractually fixed royalty rate of 20%. Teriparatide injection has a tiered gross profit share between 25% and 40% on sales that have been adjusted for certain deductible items as defined in the respective license agreement. The Rylaze and Vaxnuevance royalty rates are in the low single digits. Filspari has a fixed royalty rate of 9%.

Current wording

Revenue from intangible royalty assets is a function of our partners’ product sales and the applicable royalty rate. The following table represents revenue from intangible royalty assets by program (in millions):

Previous wording

Total operating costs and expenses for 2024 increased by $68.2 million or 56% compared with 2023.

Current wording

Total operating costs and expenses for 2025 increased by $37.3 million or 20% compared with 2024. Cost of Captisol increased year over year in 2025 primarily due to an increase in sales of Captisol during 2025 compared to 2024. Amortization of intangibles remained relatively steady in 2025 at $32.7 million compared to $33.0 million in 2024, with the change due to the deconsolidation of LNHC, Inc. on July 1, 2025 in connection with the closing of the Pelthos Transaction.

Previous wording

At any one time, we are working on multiple programs. As such, we generally do not track our R&D expenses on a specific program basis. Our R&D expenses decreased by $3.1 million in 2024 compared to 2023, with the decrease primarily attributable to lower employee related expenses and lab supplies resulting from the Pelican spin-off in September 2023. The decrease was partially offset by additional costs associated with incubating the Pelthos business.

Current wording

At any one time, we are working on multiple programs. As such, we generally do not track our R&D expenses on a specific program basis. Our R&D expenses increased by $59.8 million in 2025 compared to 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 and a $17.8 million research and development funding arrangement related to the Orchestra transaction. Both transactions are discussed in Note 3, Investment Transactions.

Previous wording

General and administrative expenses increased by $25.9 million in 2024 compared to 2023, with the increase primarily driven by higher stock-based compensation expenses for investments made in building out our business development and investment team. Additionally, a one-time, non-cash stock award modification expense related to the departure of Ligand's former Chief Operating Officer and costs associated with incubating the Pelthos Therapeutics business contributed to the increase.

Current wording

General and administrative expenses increased by $13.8 million in 2025 compared to 2024, with the increase primarily due to transaction costs.

Previous wording

Financial royalty asset impairment was $30.6 million for 2024 primarily due to Takeda's decision to discontinue the soticlestat program.

Current wording

Financial royalty asset impairment decreased by $24.4 million in 2025 compared to 2024. The 2025 impairment of $6.2 million is primarily due to UGN-301 and other Agenus partner programs. The 2024 impairment of $30.6 million was primarily due to Takeda’s decision to discontinue the soticlestat program.

Previous wording

The increase in the gain (loss) from short-term investments of $28.7 million is primarily driven by the realized gain of $60.0 million from the sale of 0.7 million shares of Viking common stock in 2024, compared to the $44.4 million realized gain from the sales of 5.0 million shares of Viking common shares in 2023. In addition, the increase was driven by changes in the fair value of our ownership in Viking common stock (an unrealized gain of $9.0 million in 2024 compared to an unrealized gain of $2.6 million in 2023) and a $7.1 million net gain on the arrangements we executed and exercised in 2024 to hedge against the fluctuation in Viking's share price.

Current wording

The gain from short-term investments was $18.4 million in 2025 as compared to the gain from short-term investments of $75.0 million in 2024. The change is primarily driven by 1) sale of 0.7 million shares of Viking common stock in 2024 upon which we recognized a realized gain of $60.0 million in 2024, while we did not sell any shares of Viking common stock in 2025, and 2) $22.5 million unrealized gain on 2025 change in fair value of Palvella common stock that we received in December 2024. Also, in 2025, we recorded an unrealized loss on Viking common stock of $5.1 million as compared to an unrealized gain of $9.0 million in 2024. In addition, in 2024, we recorded a $7.1 million net gain on the arrangements we executed and exercised in 2024 to hedge against the fluctuation in Viking’s share price.

Previous wording

Interest income consists primarily of interest earned on our short-term investments and remained relatively steady in 2024 compared to 2023.

Current wording

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

Previous wording

Interest expense in 2024 consists primarily of a royalty and milestone payments purchase agreement, entered by Novan in 2019, and assumed as part of the Novan acquisition in September 2023. Interest expense in 2023 consists primarily of the 0.75% coupon cash interest expense in addition to the non-cash accretion of discount (including the amortization of debt issuance costs) 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. See additional information in “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (10), Debt.”

Current wording

Interest expense consists primarily of 1) the 0.75% coupon cash interest expense in addition to the non-cash accretion of discount (including the amortization of debt issuance costs) on our 2030 Notes issued in August 2025, and 2) interest accrued related to a royalty and milestone payments purchase agreement entered into by Novan, Inc. in 2019, assumed by Ligand as part of the Novan acquisition in September 2023, and deconsolidated on July 1, 2025.

Previous wording

Other non-operating expense, net, primarily consists of mark-to-market adjustments on derivatives (other than Viking Share Collar and Put and the partner program derivatives) and CVRs and losses on equity method investments. Other non-operating expense, net, increased by $53.2 million in 2024 compared to 2023, primarily due to the $25.8 million loss from revaluation of Primrose investments, the $12.8 million equity method loss from Primrose Bio, the $12.1 million loss from change in fair value of derivative assets, and the $3.0 million impairment loss related to Neuritek warrants in 2024.

Current wording

Other non-operating expense, net, primarily consists of mark-to-market adjustments on derivatives (other than Viking Share Collar and Put and the partner program derivatives), mark-to-market adjustments on CVRs and absorbed losses for equity method investment in Primrose Bio. Other non-operating expense, net, decreased by $20.2 million in 2025 compared to 2024, primarily due to an insignificant change in Agenus Warrant fair value in 2025 ($0.5 million increase) compared to $7.1 million decrease in 2024, no change in Agenus Upsize Option fair value in 2025 compared to $4.9 million decrease in 2024, and no losses absorbed losses from equity method investment in Primrose Bio in 2025 compared to $7.0 million losses absorbed in 2024.

Previous wording

Our effective tax rate for 2024 and 2023 was 260% and 15%, respectively. Our tax rate is affected by recurring items, such as the U.S. federal and state statutory tax rates and the relative amounts of income we earn in those jurisdictions, which we expect to be fairly consistent in the near term. It is also affected by discrete items that may occur in any given year, but are not consistent from year to year. In 2024, the variance from the U.S. federal statutory rate of 21% was primarily attributable to increase in foreign includable income and non-deductible stock based compensation. In 2023, the variance from the U.S. federal statutory rate of 21% was primarily due the decrease in unrecognized tax benefits. The items below also had an impact on the difference between our statutory U.S. rate.

Current wording

Our effective tax rate for 2025 and 2024 was 22% and 260%, respectively. Our tax rate is affected by recurring items, such as the U.S. federal and state statutory tax rates and the relative amounts of income we earn in those jurisdictions, which we expect to be fairly consistent in the near term. It is also affected by discrete items that may occur in any given year, but are not consistent from year to year. In 2025, the variance from the US federal statutory rate of 21% was primarily attributable to increase in foreign includable income, non-deductible stock-based compensation and change in valuation allowance. In 2024, the variance from the U.S. federal statutory rate of 21% was primarily attributable to increase in foreign includable income and non-deductible stock based compensation.

Previous wording

At December 31, 2024, we had approximately $256.2 million in cash, cash equivalents, and short-term investments. Cash and cash equivalents and short-term investments decreased by $85.9 million from 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 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

At December 31, 2025, we had approximately $733.5 million in cash, cash equivalents, and short-term investments. Cash and cash equivalents and short-term investments increased by $477.4 million from last year, due to mark-to-market adjustments and factors described in the “Cash Flow Summary” below. Our primary source of liquidity, other than our holdings of cash, cash equivalents, and 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, shares of publicly traded companies, investment-grade corporate debt securities, commercial paper 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.

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 2024, we issued 360,325 shares of common stock in the ATM Offering, generating net proceeds of $37.4 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 were able to sell, from time to time, 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. As of the date hereof, the Shelf Registration statement is no longer effective and the ATM Offering has expired. During 2024, we issued 360,325 shares of common stock in the ATM Offering, generating net proceeds of $37.4 million, net of commissions and other transaction costs. During 2025, we did not issue any shares of common stock in the ATM Offering.

Previous wording

We also have commitments under our supply agreement with Hovione for Captisol purchases. The total purchase obligation as of December 31, 2024 was $21.6 million, of which $9.0 million is expected to be paid within a year and the remaining amount is expected to be paid between 1 to 3 years.

Current wording

We also have commitments under our supply agreement with Hovione for Captisol purchases. The total purchase obligation as of December 31, 2025 was $25.4 million, of which $12.6 million is expected to be paid within a year and the remaining amount is expected to be paid between 1 to 3 years.

Previous wording

As of December 31, 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, as amended, is October 12, 2026. As of December 31, 2024, there were no events of default or violation of any covenants under our financing obligations.

Current wording

As of December 31, 2025, 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, as amended, is September 12, 2028. As of December 31, 2025, there were no events of default or violation of any covenants under the Revolving Credit Facility.

Previous wording

We believe that existing funds, cash generated from operations and existing sources of and access to financing are adequate to satisfy our needs for working capital; capital expenditure and 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 satisfy our needs for working capital; capital expenditure and 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 December 31, 2024, we had $3.7 million in fair value of contingent consideration liabilities associated with the acquisitions to be settled in future periods.

Current wording

As of December 31, 2025, we had $3.2 million in fair value of contingent consideration liabilities related to our business combinations to be settled in future periods.

Previous wording

In 2024, we generated cash from operations primarily from revenue and other operating income. We used cash for investing activities primarily for the Apeiron Acquisition and Agenus Transaction. During the year, we generated cash from financing activities, primarily including 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

In 2024, we generated cash from operations primarily from revenue and operating income. We used cash for investing activities primarily for the Apeiron Acquisition and Agenus Transaction. We generated cash from financing activities, primarily including 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

In 2023, we generated cash from operations primarily from revenue and other operating income. We used cash for investing activities primarily for the purchases of financial royalty assets, the Novan acquisition and our investment in Primrose Bio, partially offset by cash from the sale and maturity of short-term investments including Viking shares. During the year, we used cash for financing activities, including the repayment of the remaining $76.9 million principal amount upon maturity of the 2023 Notes and $0.3 million accrued interest in cash.

Current wording

In 2023, we generated cash from operations primarily from revenue and operating income. We used cash for investing activities primarily for the purchases of financial royalty assets, the Novan acquisition and our investment in Primrose Bio, partially offset by cash from the sale and maturity of short-term investments including Viking shares. We used cash in financing activities primarily for the repayment of the remaining $76.9 million principal amount of the 2023 Notes upon maturity, partially offset by net proceeds from stock options exercises and ESPP.