LIGAND PHARMACEUTICALS INC
For the period ended Dec 31, 2025. Filed Feb 27, 2026.
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FY2025 · Filed Feb 27, 2026
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Ligand Pharmaceuticals Incorporated
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Ligand Pharmaceuticals Incorporated (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 27, 2026 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
| Impairment assessment of finite-lived intangibles | |
| Description of the Matter | At December 31, 2025, the Company’s finite-lived intangible assets totaled $225.4 million. As discussed in Note 1 to the consolidated financial statements, the Company reviews finite-lived intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. The Company did not identify indicators of impairment for its finite-lived intangibles at December 31, 2025. Auditing management’s assessment of impairment is challenging due to the degree of subjective auditor judgment necessary in evaluating management’s process to identify potential indicators of impairment and the related assessment of the severity of such indicators in determining whether a triggering event has occurred. A high degree of auditor judgment was required to evaluate potential triggering events which included market conditions, industry and economic trends, changes in regulations, clinical success and historical and forecasted financial results. The evaluation of triggering events could have a significant effect on the Company’s impairment assessment and the determination of whether further quantitative analysis of finite-lived intangible assets was required. |
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| How We Addressed the Matter in Our Audit | We obtained an understanding of management’s process to identify indicators of impairment, including the qualitative analysis and related inputs and assumptions used in performing the analyses. We evaluated the design and tested the operating effectiveness of the controls that address the identification of indicators of impairment. For example, we tested controls over management’s assessment of indicators of impairment. To test the Company’s evaluation of indicators of impairment for finite-lived intangibles, our audit procedures included, among others, assessing the methodologies and testing the completeness and accuracy of the Company’s analysis of events or changes in circumstances. As part of our evaluation, we considered market conditions, industry and economic trends, changes in regulations, clinical success and historical and forecasted financial results, in assessing whether an indicator of impairments exists. |
| Financial royalty assets - recognition of income | |
| Description of the Matter | As disclosed in Note 6 to the consolidated financial statements, the Company’s total financial royalty assets, net, were $219.7 million as of December 31, 2025. For the year ended December 31, 2025, the Company recognized income from financial royalty assets of $28.5 million. As explained in Notes 1 and 6 to the consolidated financial statements, the Company’s financial royalty assets are measured at amortized cost and income is recognized using the prospective effective interest method. Auditing management’s recognition of income under the effective interest method involved complex auditor judgment, as the assumptions used to forecast the prospective interest rate include estimates of expected future cash flows from the underlying royalties and are therefore affected by uncertainties such as future demand for the underlying product. |
| How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls related to the recognition of income on financial royalty assets. This included testing controls over management’s review of the significant assumptions and other inputs used in estimating the forecasted cash flows. To test the income recognized, our audit procedures included, among others, evaluating the completeness and accuracy of the data used to develop the key assumptions identified above. For example, we tested the inputs to the model, principally comprising of historic product sales and estimates of nearer-term sales, by comparing to analyst reports or published sales information. We assessed the historical accuracy of management’s estimates by comparing expected cash flows to actual cash receipts. We also evaluated management’s expected future cash flows for the products underlying the royalties and performed a sensitivity analysis over the resulting forecasted product sales. |
/s/Ernst & Young LLP
We have served as the Company's auditor since 2016.
San Diego, California
February 27, 2026
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