LIGAND PHARMACEUTICALS INC
For the period ended Sep 30, 2026. Filed Oct 30, 2026.
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, 2026 · Filed Oct 30, 2026
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 2026-06-30; filed 2026-08-07.
0000886163-26-000044
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-09-30; filed 2026-10-30.
0000886163-26-000060
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 67 previous paragraphs and 59 current paragraphs.
21 unchanged; 22 reworded; 16 added; 24 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 10 previous and 9 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 (16)
Current report
Third Quarter Corporate Highlights
Current report
On September 22, 2026, Ligand announced the acquisition of a milestone and royalty interest in Santen Pharmaceutical’s Ryjunea from Sydnexis for a $23 million upfront payment. Under the terms of the agreement, Ligand acquired a 100% interest in certain payments and related rights under Sydnexis’s existing license agreement with Santen. The acquired payment rights include a tiered low-double-digit to high-teens royalty on Ryjunea net sales in Europe, the Middle East and Africa, as well as certain milestone payments.
Current report
On September 24, 2026, Ligand announced it entered into a financing agreement with AvenCell Therapeutics, Inc., a clinical-stage cell therapy company developing controllable, allogeneic CAR-T therapies for patients with cancer, for up to $47 million. The investment is expected to help advance AvenCell’s pipeline, including AVC-201 for the treatment of relapsed/refractory acute myeloid leukemia (AML) and AVC-203 for the treatment of B-cell malignancies. Under the terms of the agreement, Ligand has committed up to $41 million in exchange for a mid single-digit to low double-digit royalty on worldwide annual net sales of all current and future AvenCell pipeline assets, with the applicable rate determined based on the total amount ultimately funded. The capital will be funded in four tranches, with the first tranche payable at closing, and the remaining three tranches payable upon achievement of certain predetermined clinical milestones and other specified financing conditions. Ligand has also committed up to $6 million in AvenCell’s concomitant Series C financing.
Current report
Key Portfolio Developments
Current report
Total revenue and income decreased by $14.3 million, or 7%, to $194.2 million in YTD 2026 compared to $208.4 million in YTD 2025. Royalties increased by $50.8 million, or 46%, to $161.3 million in YTD 2026 compared to $110.5 million in YTD 2025, primarily attributable to royalties earned on the newly acquired XOMA assets, Filspari and Ohtuvayre.
Current report
Captisol sales decreased by $7.8 million, or 24%, to $24.6 million in YTD 2026 compared to $32.4 million in YTD 2025, primarily attributable to the timing of customer orders. Contract revenue and income decreased by $57.2 million, or 87%, to $8.3 million in YTD 2026 compared to $65.5 million in YTD 2025. The decrease was primarily attributable to the absence of the $53.1 million of income recognized in connection with the divestiture of our Pelthos subsidiary during the prior-year period.
Current report
Cost of Captisol decreased by $1.2 million, or 30%, to $2.7 million in Q3 2026 compared to $3.8 million in Q3 2025, primarily attributable to the lower Captisol sales. Amortization of intangibles increased by $2.1 million, or 26%, to $10.2 million in Q3 2026 compared to $8.1 million in Q3 2025, primarily attributable to the addition of intangible assets from the XOMA Acquisition. See Note 2, XOMA Acquisition, for additional information.
Current report
Research and development expenses decreased by $18.3 million, or 87%, to $2.8 million in Q3 2026 compared to $21.0 million in Q3 2025. The decrease was primarily attributable to the absence of the $17.8 million charge recognized in the prior-year period related to the research and development funding arrangement associated with the AVIM Therapy royalty rights acquired in the Orchestra transaction.
Current report
We recognized a $6.3 million loss from fair value adjustments to contingent liabilities in Q3 2026, compared with a $0.5 million gain in Q3 2025. The change was primarily driven by fair value adjustments related to contingent liabilities assumed in the XOMA acquisition. Fair value adjustments to partner program derivatives were zero in Q3 2026, compared with a $0.8 million gain in Q3 2025, which reflected the reversal of fair value adjustments recorded in the first half of 2025 on derivatives that were reclassified to financial royalty assets upon our early adoption of ASU 2025-07 effective January 1, 2025. We recognized no fair value adjustments to partner program derivatives in the nine months ended September 30, 2026 or 2025.
Current report
Total operating costs and expenses increased by $0.7 million to $183.5 million in YTD 2026 compared to $182.7 million in YTD 2025.
Current report
We recognized a $5.8 million loss from fair value adjustments to contingent liabilities in YTD 2026, compared with a $1.5 million loss in YTD 2025. The change was primarily driven by fair value adjustments related to contingent liabilities assumed in the XOMA acquisition.
Current report
The loss from short-term investments was $3.8 million in Q3 2026, compared with a gain of $7.8 million in Q3 2025, primarily due to changes in mark-to-market adjustments on our common stock investments. Q3 2026 included unrealized losses of $5.1 million on Viking and $3.4 million on Palvella, partially offset by unrealized gains of $3.5 million on Orchestra and $2.1 million on Agenus. Q3 2025 included an unrealized gain of $9.8 million on Palvella, partially offset by an unrealized loss of $1.5 million on Elutia.
Current report
As of September 30, 2026, we had approximately $447.4 million in cash, cash equivalents, and short-term investments, compared to $733.5 million as of December 31, 2025. The decrease was primarily attributable to cash used for the XOMA Acquisition and other acquisition and investment activities, partially offset by proceeds from the issuance of the 2031 Notes and cash generated from operations. A summary of our cash flow activity is provided below.
Current report
In connection with the XOMA Acquisition, we amended and restated our revolving credit facility in July 2026. The amended facility provides aggregate revolving commitments of $125.0 million and matures in September 2028. As of September 30, 2026, we had no outstanding borrowings under the facility, $0.6 million of letters of credit outstanding, and $124.4 million of available borrowing capacity. See Note 7, Debt, for additional information regarding the amended revolving credit facility.
Current report
In June 2026, we issued $700.0 million aggregate principal amount of the 2031 Notes and received net proceeds of approximately $679.0 million. We also maintain an at-the-market equity offering program that permits the sale of up to $100.0 million of common stock. No shares had been sold under the program as of September 30, 2026.
Current report
As of September 30, 2026, the conditions for holders to convert the 2030 Notes were met, and the 2030 Notes are convertible at the option of holders through December 31, 2026. As a result, the $460.0 million aggregate principal amount of the 2030 Notes, net of unamortized debt discount and issuance costs, is classified as a current liability in our condensed consolidated balance sheet. Upon conversion, we are required to settle the principal amount in cash, and we may settle any conversion value in excess of principal in cash, shares of our common stock, or a combination. No 2030 Notes had been submitted for conversion as of September 30, 2026. Whether the 2030 Notes remain convertible and classified as current in future periods will depend on whether the conversion condition is met at each quarter-end. See Note 7, Debt, for additional information. We believe that our cash, cash equivalents and short-term investments, together with availability under our revolving credit facility, are sufficient to settle the principal amount of the 2030 Notes in cash if all holders were to convert.
Removed paragraphs (24)
Previous report
2031 Convertible Debt Financing
Previous report
On June 25, 2026, we completed the offering of $700.0 million aggregate principal amount of 0.00% convertible senior notes due 2031 (the “2031 Notes”). The aggregate principal amount of the 2031 Notes includes the full exercise of the option to purchase an additional $75.0 million aggregate principal amount of 2031 Notes by the initial purchasers.
Previous report
Net proceeds from the offering were $679.0 million, after deducting fees and expenses. Of that amount, we used $81.7 million of the proceeds to enter into a call spread overlay consisting of convertible note hedge and warrant transactions, and approximately $60 million to repurchase 228,859 shares of our common stock at a price of $262.17 per share. The convertible note hedge transactions intended to reduce the potential for dilution from the 2031 Notes upon conversion. As a result of the warrants transactions, there will be no dilution to our stock until the share price exceeds $524.34 per share. We expect to use the remaining net proceeds from the offering of the 2031 Notes for general corporate purposes, including investing in complementary businesses, companies, products and technologies, although we have no present commitments or agreements to do so beyond the XOMA Acquisition. See Note 6, Debt, for additional information regarding the 2031 Notes.
Previous report
XOMA Acquisition
Previous report
On July 14, 2026, we announced completion of the acquisition of XOMA Royalty, a biotechnology royalty aggregator. Details of the transaction are as follows:
Previous report
•Each outstanding share of XOMA Royalty common stock was converted into the right to receive (i) $39.00 in cash and (ii) one contingent value right (CVR) representing the holder’s right to receive potential future payments derived from the CVR trust’s interest in XOMA Royalty LLC in connection with the Holding Company Reorganization (as defined in the merger agreement);
Previous report
•The closing of the transaction met our original timeline expectations. Management believes that the transaction is expected to be immediately accretive; and
Previous report
•We funded the transaction through cash on hand and expects to retain sufficient capital capacity to continue executing our capital deployment strategy of investing approximately $150 million to $250 million annually in high-value royalty assets.
Previous report
Concurrently with the closing of the XOMA Acquisition, we entered into the Amended Credit Agreement, which amends and restates in its entirety the Credit Agreement. The Amended Credit Agreement provides for a $125.0 million revolving credit facility maturing on September 12, 2028. The Amended Revolving Credit Facility is secured by certain collateral of Ligand and the guarantors and is guaranteed by all of our material domestic subsidiaries, each of whom will derive substantial benefit from the Amended Revolving Credit Facility.
Previous report
Key Portfolio Development
Previous report
Total revenue and income increased by $22.5 million, or 24%, to $115.4 million in YTD 2026 compared to $93.0 million in YTD 2025. Royalties increased by $27.1 million, or 42%, to $91.0 million in YTD 2026 compared to $63.9 million in YTD 2025, primarily attributable to royalties earned on Filspari, Zelsuvmi, Ohtuvayre, Capvaxive and Kyprolis. Captisol sales decreased by $5.1 million, or 24%, to $16.6 million in YTD 2026 compared to $21.7 million in YTD 2025, primarily attributable to the timing of customer orders. Contract revenue and income remained steady at $7.8 million in YTD 2026 compared to $7.3 million in YTD 2025.
Previous report
Cost of Captisol increased by $0.3 million, or 11%, to $3.2 million in Q2 2026 compared to $2.9 million in Q2 2025, primarily due to lower gross margins resulting from changes in the mix of customers served during the period. Amortization of intangibles decreased by $0.2 million, or 2%, to $8.1 million in Q2 2026 compared to $8.3 million in Q2 2025, primarily attributable to the deconsolidation of LNHC, Inc. on July 1, 2025 in connection with the Pelthos Transaction. See Note 2, Pelthos Transaction, for additional information.
Previous report
Research and development expenses increased by $8.1 million, or 123%, to $14.7 million in Q2 2026 compared to $6.6 million in Q2 2025. The increase was primarily driven by the $12.3 million research and development funding arrangement with Orchestra BioMed, partially offset by the absence of research and development expenses associated with our former Pelthos business following the deconsolidation of LNHC, Inc. on July 1, 2025. See Note 3, Investment Transactions, and Note 2, Pelthos Transaction, for additional information.
Previous report
Total operating costs and expenses decreased by $31.3 million, or 26%, to $89.5 million in YTD 2026 compared to $120.7 million in YTD 2025.
Previous report
Operating income was $26.0 million in YTD 2026, compared to an operating loss of $27.8 million in YTD 2025, an improvement of $53.7 million. The improvement was primarily driven by (1) the non-recurrence in the current period of the $44.3 million research and development funding charge recognized in connection with the Castle Creek Investment in YTD 2025, and (2) continued growth of royalty revenues. These increases were partially offset by the $12.3 million research and development funding arrangement expense recognized in the second quarter of 2026 related to Orchestra BioMed.
Previous report
The gain from short-term investments was $11.8 million in Q2 2026 compared to a gain of $0.9 million in Q2 2025. The increase was primarily driven by favorable mark-to-market adjustments on Palvella and Viking common stock. Palvella common stock resulted in an unrealized gain of $7.3 million in Q2 2026 compared to an unrealized loss of $1.3 million in Q2 2025, and Viking common stock resulted in an unrealized gain of $5.2 million in Q2 2026 compared to an unrealized gain of $2.4 million in Q2 2025.
Previous report
As of June 30, 2026, we had approximately $1,357.8 million in cash, cash equivalents, and short-term investments, an increase of $624.2 million from $733.5 million as of December 31, 2025. The increase was primarily attributable to the cash flow activity described in the “Cash Flow Summary” below. In addition, as of June 30, 2026, we had $124.4 million of available borrowing capacity under our Revolving Credit Facility and $0.6 million of letters of credit outstanding. Our principal sources of liquidity are our existing cash, cash equivalents, and short-term investments; cash flows generated from operations; and available borrowing capacity under our Revolving Credit Facility. We believe these sources provide us with the financial flexibility necessary to meet our operating, investing, and financing needs.
Previous report
In addition to cash flows generated from operations, we have historically supplemented our liquidity by liquidating short-term investments and by issuing debt and equity securities. Our short-term investments consist of U.S. government debt securities, equity securities of publicly traded companies, investment-grade corporate debt securities, commercial paper, and certificates of deposit. We maintain investment guidelines governing the diversification and maturities of our portfolio to provide both safety of principal and liquidity. These guidelines are reviewed periodically and updated as appropriate to reflect prevailing yields and interest rate conditions.
Previous report
On June 25, 2026, we issued the 2031 Notes. The $700.0 million aggregate principal amount of the 2031 Notes includes the purchase of an additional $75.0 million aggregate principal amount by the initial purchasers pursuant to the full exercise of their overallotment option. The net proceeds from the 2031 Notes offering were approximately $679.0 million, after deducting fees and expenses.
Previous report
On February 27, 2026, we entered into an At-the-Market Equity Offering Sales Agreement (the “Sales Agreement”) with Leerink Partners LLC (the “Agent”), pursuant to which we may, from time to time, offer and sell shares of our common stock having an aggregate offering price of up to $100.0 million through the Agent (the “ATM Offering”). Sales of our common stock under the ATM Offering, if any, will be made pursuant to a prospectus supplement filed with the SEC under our existing effective shelf registration statement. As of June 30, 2026, no shares had been sold under the ATM Offering.
Previous report
In April 2023, our Board approved a stock repurchase program (the “Repurchase Program”) authorizing, but not requiring, the repurchase of up to $50.0 million of our common stock from time to time through April 2026. Repurchases under the Repurchase Program may be made, if at all, primarily through open-market transactions in accordance with the requirements of Rule 10b-18 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The timing and amount of any repurchases will be determined by management based on its evaluation of market conditions, our share price, applicable legal requirements, and other factors. We did not repurchase any shares of common stock under the Repurchase Program during either of the three and six months ended June 30, 2026 or 2025.
Previous report
On August 14, 2025, we issued the 2030 Notes. The $460.0 million aggregate principal amount of the 2030 Notes includes the purchase of an additional $60.0 million aggregate principal amount by the initial purchasers pursuant to the full exercise of their overallotment option. The net proceeds from the 2030 Notes offering were approximately $445.1 million, after deducting the initial purchasers’ discounts and commissions and the debt issuance costs incurred by Ligand.
Previous report
Concurrently with the closing of the XOMA Acquisition, we entered into the Amended Credit Agreement, which amends and restates in its entirety the Credit Agreement and provides for a $125.0 million revolving credit facility maturing on
Previous report
September 12, 2028. The Amended Revolving Credit Facility is secured by certain collateral of us and the guarantors and is guaranteed by all of our material domestic subsidiaries, each of whom will derive substantial benefit from the Amended Revolving Credit Facility.
Reworded paragraphs (22)
Previous wording
We believe that the XOMA Acquisition strengthens our royalty portfolio by adding seven commercial products, including Roche’s VABYSMO® (faricimab-svoa), Servier’s OJEMDA™ (tovorafenib), and Zevra Therapeutics’ MIPLYFFA® (arimoclomol). Additionally, the acquisition adds 14 late-stage development programs, featuring Takeda’s mezagitamab and certain assets from Takeda’s externalized asset portfolio, such as osavampator, volixibat, and OHB-607, along with more than 100 assets in various stages of development to Ligand’s portfolio. As a result, our portfolio has more than doubled in size, now comprising over 200 commercial, clinical, and preclinical stage royalty assets.
Current wording
On July 14, 2026, Ligand completed the acquisition of XOMA Royalty, a biotechnology royalty aggregator. The acquisition strengthens Ligand’s royalty portfolio by adding seven commercial products, including Roche’s VABYSMO® (faricimab-svoa), Servier and Ipsen’s OJEMDA™ (tovorafenib), and Zevra Therapeutics’ MIPLYFFA® (arimoclomol). Additionally, the acquisition adds 14 late-stage development programs, featuring Takeda’s mezagitamab and certain assets from Takeda’s externalized asset portfolio, including osavampator, volixibat, and OHB-607, along with more than 100 additional assets in various stages of development to Ligand’s portfolio. As a result, Ligand’s portfolio has more than doubled in size, now comprising over 200 commercial, clinical, and preclinical stage royalty assets.
Previous wording
Total revenue and income increased by $16.1 million, or 34%, to $63.7 million in Q2 2026 compared to $47.6 million in Q2 2025. Royalties increased by $11.6 million, or 32%, to $48.0 million in Q2 2026 compared to $36.4 million in Q2 2025, primarily attributable to royalties earned on Filspari, Zelsuvmi, and Ohtuvayre. Captisol sales decreased by $0.3 million, or 4%, to $8.0 million in Q2 2026 compared to $8.3 million in Q2 2025, primarily attributable to the timing of customer orders. Contract revenue and income increased by $4.7 million, or 161%, to $7.7 million in Q2 2026 compared to $2.9 million in Q2 2025, primarily attributable to the timing of milestone events under partner agreements.
Current wording
Total revenue and income decreased by $36.7 million, or 32%, to $78.7 million in Q3 2026 compared to $115.5 million in Q3 2025. Royalties increased by $23.7 million, or 51%, to $70.3 million in Q3 2026 compared to $46.6 million in Q3 2025, primarily attributable to royalties earned on the newly acquired XOMA assets, Filspari and Ohtuvayre. Captisol sales decreased by $2.7 million, or 26%, to $7.9 million in Q3 2026 compared to $10.7 million in Q3 2025, primarily attributable to the timing of customer orders. Contract revenue and income decreased by $57.7 million, or 99%, to $0.5 million in Q3 2026 compared to $58.2 million in Q3 2025. The decrease was primarily attributable to the absence of the $53.1 million of income recognized in connection with the divestiture of our Pelthos subsidiary during the prior-year period, which included $24.5 million associated with the out-license of Zelsuvmi and a $28.6 million gain on the sale of the business.
Previous wording
(1) N/M = Not meaningful. Percentage change is not meaningful as no corresponding amount was recognized in the prior year period.
Current wording
(1) N/M = Not meaningful. Percentage change is not meaningful as no amount was recognized in either nine-month period.
Previous wording
Total operating costs and expenses increased by $15.9 million, or 41%, to $55.1 million in Q2 2026 compared to $39.2 million in Q2 2025.
Current wording
Total operating costs and expenses increased by $34.4 million, or 57%, to $94.5 million in Q3 2026 compared to $60.1 million in Q3 2025.
Previous wording
General and administrative expenses increased by $8.9 million, or 44%, to $29.1 million in Q2 2026 compared to $20.2 million in Q2 2025. The increase was primarily attributable to transaction costs associated with the XOMA Acquisition, as well as higher employee-related costs, including increased headcount and share-based compensation, reflecting the Company’s continued investment in its origination and portfolio management functions. Fair value adjustments to partner program derivatives were zero for Q2 2026 compared to $1.3 million for Q2 2025.
Current wording
General and administrative expenses increased by $44.2 million, or 155%, to $72.6 million in Q3 2026 compared to $28.4 million in Q3 2025. The increase was primarily attributable to $14.2 million transaction costs associated with the XOMA Acquisition, $10.8 million of post-combination compensation expense related to the cash settlement of XOMA employee restricted stock units, $7.6 million of severance expenses, and a $6.6 million increase in the allowance for credit losses on financial royalty assets, as well as higher employee-related costs, including increased headcount and share-based compensation, reflecting the Company’s continued investment in its origination and portfolio management functions.
Previous wording
Cost of Captisol decreased by $1.3 million, or 16%, to $6.5 million in YTD 2026 compared to $7.8 million in YTD 2025, primarily attributable to the lower Captisol sales. Amortization of intangibles decreased by $0.3 million, or 2%, to $16.2 million in YTD 2026 compared to $16.5 million in YTD 2025, primarily attributable to the deconsolidation of LNHC, Inc. on July 1, 2025 in connection with the Pelthos Transaction.
Current wording
Cost of Captisol decreased by $2.4 million, or 21%, to $9.1 million in YTD 2026 compared to $11.6 million in YTD 2025, primarily attributable to the lower Captisol sales. Amortization of intangibles increased by $1.8 million, or 7%, to $26.4 million in YTD 2026 compared to $24.6 million in YTD 2025, primarily attributable to the addition of intangible assets from the XOMA Acquisition. See Note 2, XOMA Acquisition, for additional information.
Previous wording
Research and development expenses decreased by $39.8 million, or 70%, to $16.8 million in YTD 2026 compared to $56.7 million in YTD 2025. The decrease was primarily driven by the absence of the $44.3 million research and development funding charge recognized in the first quarter of 2025 in connection with the D-Fi royalty rights acquired in the Castle Creek Transaction and the absence of $6.4 million research and development expenses associated with our former Pelthos business following the deconsolidation of LNHC, Inc. on July 1, 2025 in connection with the Pelthos Transaction. These decreases were partially offset by the $12.3 million research and development funding arrangement expense recognized in the second quarter of 2026 related to Orchestra BioMed. See Note 3, Investment Transactions, and Note 2, Pelthos Transaction, for additional information.
Current wording
Research and development expenses decreased by $58.1 million, or 75%, to $19.6 million in YTD 2026 compared to $77.7 million in YTD 2025. The decrease was primarily attributable to the absence of the $44.3 million charge recognized in the prior-year period related to the research and development funding arrangement associated with the D-Fi royalty rights acquired in the Castle Creek transaction, the absence of the $17.8 million charge recognized in the prior-year period related to the research and development funding arrangement associated with the AVIM Therapy royalty rights acquired in the Orchestra transaction, and the absence of $6.4 million of research and development expenses associated with our former Pelthos business following its divestiture in the Pelthos transaction. These decreases were partially offset by a $12.3 million research and development funding arrangement expense recognized in the current-year period related to Orchestra BioMed.
Previous wording
General and administrative expenses increased by $11.0 million, or 28%, to $50.0 million in YTD 2026 compared to $39.0 million in YTD 2025. The increase was primarily attributable to transaction costs associated with the XOMA Acquisition, as well as higher employee-related costs, including increased headcount and share-based compensation, reflecting the Company’s continued investment in its origination and portfolio management functions. Fair value adjustments to partner program derivatives were zero for YTD 2026 compared to $0.8 million for YTD 2025.
Current wording
General and administrative expenses increased by $55.2 million, or 82%, to $122.6 million in YTD 2026 compared to $67.4 million in YTD 2025. The increase was primarily attributable to $19.1 million transaction costs associated with the XOMA Acquisition, $10.8 million of post-combination compensation expense related to the cash settlement of XOMA employee restricted stock units, $7.6 million of severance expenses, and a $7.2 million increase in the allowance for credit losses on financial royalty assets, as well as higher employee-related costs, including increased headcount and share-based compensation, reflecting the Company’s continued investment in its origination and portfolio management functions.
Previous wording
The gain from change in fair value of equity-method investments and other investments was $35.7 million in Q2 2026. This gain reflects the change in fair value of the Pelthos common stock and Pelthos Series A convertible preferred stock that we acquired in connection with the Pelthos Transaction in July 2025. For additional information, see Note 2, Pelthos Transaction.
Current wording
The loss from change in fair value of equity-method investments and other investments was $35.7 million in Q3 2026, compared with a gain of $75.9 million in Q3 2025. The change primarily reflected mark-to-market adjustments on our Pelthos common stock and Series A convertible preferred stock acquired in connection with the Pelthos Transaction in July 2025. For additional information, see Note 3, Pelthos Transaction.
Previous wording
Interest income consists primarily of interest earned on our short-term investments and on the Pelthos Convertible Notes acquired in November 2025. Interest income increased by $5.7 million to $7.3 million in Q2 2026 compared to $1.6 million in Q2 2025, primarily due to higher average investment balances resulting from the issuance of our 2030 Notes as well as interest earned on the Pelthos Convertible Notes.
Current wording
Interest income consists primarily of interest earned on our short-term investments and the Pelthos Convertible Notes acquired in November 2025. Interest income increased by $1.6 million to $5.5 million in Q3 2026, compared with $3.9 million in Q3 2025, primarily due to higher average invested balances and interest earned on the Pelthos Convertible Notes.
Previous wording
Interest expense consists primarily of coupon interest and non-cash amortization of debt discount and issuance costs related to our 2030 Notes issued in August 2025, as well as interest accrued under a royalty and milestone payments purchase agreement entered into by Novan, Inc. in 2019, which Ligand assumed in connection with the Novan acquisition in September 2023. Interest expense increased by $0.6 million to $1.7 million in Q2 2026 compared to $1.2 million in Q2 2025. The increase was primarily attributable to interest expense on the 2030 Notes, which were not outstanding during the prior-year period, partially offset by the absence of interest expense related to the Novan-assumed obligation following the deconsolidation of LNHC, Inc. on July 1, 2025, in connection with the Pelthos Transaction.
Current wording
Interest expense consists primarily of coupon interest and non-cash amortization of debt discount and issuance costs associated with the 2030 Notes issued in August 2025 and non-cash amortization of debt discount and issuance costs associated with the 2031 Notes issued in June 2026. Interest expense increased by $2.0 million to $2.9 million in Q3 2026, compared with $0.9 million in Q3 2025. The increase was primarily due to a full quarter of interest expense on the 2030 Notes and non-cash interest expense related to the 2031 Notes.
Previous wording
Other non-operating expense, net primarily consists of fair value adjustments on derivatives (excluding the partner program derivatives) and CVRs. Other non-operating expense, net was income of $2.7 million in Q2 2026 compared to income of $1.4 million in Q2 2025, primarily attributable to favorable changes in the fair value of CVR liabilities, which resulted in a $1.1 million gain in Q2 2026 compared to a $0.1 million loss in Q2 2025, as well as higher gains on derivatives of $1.4 million in Q2 2026 compared to $1.2 million in Q2 2025.
Current wording
Other non-operating income (expense), net primarily consists of fair value adjustments on derivatives (excluding partner program derivatives). Other non-operating income (expense), net was income of $8.6 million in Q3 2026, compared with expense of $0.9 million in Q3 2025. The change was primarily driven by a $8.5 million net gain from changes in fair value of derivative assets in Q3 2026, compared with a $0.7 million net loss in Q3 2025.
Previous wording
The gain from short-term investments was $15.6 million in YTD 2026 compared to a loss of $11.4 million in YTD 2025. The increase was primarily driven by favorable mark-to-market adjustments on Palvella and Viking common stock. Palvella common stock resulted in an unrealized gain of $12.0 million in YTD 2026 compared to an unrealized gain of $2.6 million in YTD 2025, and Viking common stock resulted in an unrealized gain of $2.5 million in YTD 2026 compared to an unrealized loss of $13.7 million in YTD 2025.
Current wording
The gain from short-term investments was $11.8 million in YTD 2026, compared with a loss of $3.6 million in YTD 2025, primarily due to changes in mark-to-market adjustments on our common stock investments. YTD 2026 included unrealized gains of $8.6 million on Palvella, $3.8 million on Orchestra and $2.1 million on Agenus, partially offset by an unrealized loss of $2.6 million on Viking. YTD 2025 included an unrealized loss of $14.0 million on Viking and $1.6 million on Elutia, partially offset by an unrealized gain of $12.3 million on Palvella.
Previous wording
The loss from change in fair value of equity-method investments and other investments was $13.5 million in YTD 2026. This loss reflects the change in fair value of the Pelthos common stock and Pelthos Series A convertible preferred stock that we acquired in connection with the Pelthos Transaction in July 2025. For additional information, see Note 2, Pelthos Transaction.
Current wording
The loss from change in fair value of equity-method investments and other investments was $49.2 million in YTD 2026, compared with a gain of $75.9 million in YTD 2025. The change primarily reflected mark-to-market adjustments on our Pelthos common stock and Series A convertible preferred stock acquired in connection with the Pelthos Transaction in July 2025. For additional information, see Note 3, Pelthos Transaction.
Previous wording
Interest income consists primarily of interest earned on our short-term investments and on the Pelthos Convertible Notes acquired in November 2025. Interest income increased by $10.6 million to $14.0 million in YTD 2026 compared to $3.4 million in YTD 2025, primarily due to higher average investment balances resulting from the issuance of our 2030 Notes as well as interest earned on the Pelthos Convertible Notes.
Current wording
Interest income consists primarily of interest earned on our short-term investments and the Pelthos Convertible Notes acquired in November 2025. Interest income increased by $12.2 million to $19.4 million in YTD 2026, compared with $7.3 million in YTD 2025, primarily due to higher average invested balances and interest earned on the Pelthos Convertible Notes.
Previous wording
Interest expense consists primarily of coupon interest and non-cash amortization of debt discount and issuance costs related to our 2030 Notes issued in August 2025, as well as interest accrued under a royalty and milestone payments purchase agreement entered into by Novan, Inc. in 2019, which Ligand assumed in connection with the acquisition of our Pelthos Therapeutics Business from Novan in September 2023. Interest expense increased by $1.5 million to $3.5 million in YTD 2026 compared to $2.0 million in YTD 2025. The increase was primarily attributable to interest expense on the 2030 Notes, which were not outstanding during the prior-year period, partially offset by the absence of interest expense related to the Novan-assumed obligation following the deconsolidation of LNHC, Inc. on July 1, 2025, in connection with the Pelthos Transaction.
Current wording
Interest expense consists primarily of coupon interest and non-cash amortization of debt discount and issuance costs associated with the 2030 Notes issued in August 2025, non-cash amortization of debt discount and issuance costs associated with the 2031 Notes issued in June 2026, as well as interest accrued under a royalty and milestone payments purchase agreement entered into by Novan, Inc. in 2019, which Ligand assumed in connection with the acquisition of our Pelthos Therapeutics business from Novan in September 2023. Interest expense increased by $3.5 million to $6.4 million in YTD 2026, compared with $2.9 million in YTD 2025. The increase was primarily due to a full nine months of interest expense on the 2030 Notes along with interest expense related to the 2031 Notes. The increase was partially offset by the absence of interest expense related to the Novan-assumed obligation following the deconsolidation of LNHC, Inc. on July 1, 2025 in connection with the Pelthos Transaction.
Previous wording
Other non-operating expense, net primarily consists of fair value adjustments on derivatives (excluding the partner program derivatives) and CVRs. Other non-operating expense, net was income of $1.5 million in YTD 2026 compared to expense of $1.1 million in YTD 2025, primarily attributable to favorable changes in the fair value of CVR liabilities, which resulted in a $0.5 million gain in YTD 2026 compared to a $1.9 million loss in YTD 2025.
Current wording
Other non-operating income (expense), net primarily consists of fair value adjustments on derivatives (excluding partner program derivatives). Other non-operating income (expense), net was income of $9.6 million in YTD 2026, compared with expense of $0.1 million in YTD 2025, primarily due to a $9.1 million net gain from fair value changes in derivative assets in YTD 2026, compared with a $0.1 million net loss in YTD 2025.
Previous wording
We compute our income tax provision by applying the estimated annual effective tax rate to income (loss) from operations and adjusting for the effects of any discrete income tax items recognized in the period. The effective tax rate for the three months ended June 30, 2026 and 2025 was 24.6% and 56.8%, respectively. The effective tax rate for the six months ended June 30, 2026 and 2025 was 12.2% and 3.5%, respectively. The variance from the U.S. federal statutory tax rate of 21% for the three and six months ended June 30, 2026 was primarily due to Section 162(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, 2025 was primarily due to Section 162(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.
Current wording
We compute our income tax provision by applying the estimated annual effective tax rate to income (loss) from operations and adjusting for the effects of any discrete income tax items recognized in the period. The effective tax rate for the three months ended September 30, 2026 and 2025 was 35.4% and 16.9%, respectively. The effective tax rate for the nine months ended September 30, 2026 and 2025 was 264.9% and 22.0%, respectively. The variance from the U.S. federal statutory tax rate of 21% for the three and nine months ended September 30, 2026 was primarily due to the Section 162(m) limitation on the deduction for officer compensation, non-deductible transaction costs and post-combination compensation expense related to the XOMA acquisition, other non-deductible items, and income from foreign operations, which were partially offset by the foreign-derived deduction eligible income deduction. The effective tax rate for the nine months ended September 30, 2026 was also significantly affected by discrete tax benefits related to excess tax deductions on stock-based compensation and energy tax credits, relative to a near break-even pre-tax loss for the period. The variance from the U.S. federal statutory tax rate of 21% for the three and nine months ended September 30, 2025 was primarily due to Section 162(m) limitation on deduction for officer compensation and income from foreign operations, which were partially offset by the foreign derived intangible income deduction.
Previous wording
We believe that our existing cash, cash equivalents, and short-term investments, together with cash generated from operations and available borrowing capacity under our Revolving Credit Facility, will be adequate to fund our working capital needs, capital expenditures, debt service requirements, and other business initiatives we plan to strategically pursue, including acquisitions and strategic investments, over the next twelve months and into 2027.
Current wording
Our principal sources of liquidity are our existing cash, cash equivalents, and short-term investments, cash generated from operations, and available borrowing capacity under our amended revolving credit facility. We believe these resources will be sufficient to fund our working capital requirements, capital expenditures, debt service obligations, acquisitions, strategic investments, and other business initiatives for at least the next twelve months.
Previous wording
As of June 30, 2026, we had $2.6 million in contingent consideration liabilities, measured at fair value, associated with prior acquisitions to be settled in future periods.
Current wording
As of September 30, 2026, we had $38.9 million in contingent consideration liabilities, measured at fair value, related to the XOMA Acquisition and prior acquisitions, which are expected to be settled in future periods.
Previous wording
During the six months ended June 30, 2026, we generated cash from operations primarily from revenue and other operating income. We generated cash from investing activities primarily from proceeds from the sale and maturity of short-term investments, partially offset by purchases of short-term investments. We generated cash from financing activities primarily from the issuance of our 2031 Notes.
Current wording
During the nine months ended September 30, 2026, we generated cash from operations primarily from revenue and other operating income. We used cash in investing activities primarily for the XOMA Acquisition and purchases of short-term investments, partially offset by proceeds from the sale and maturity of short-term investments. We generated cash from financing activities primarily from the issuance of our 2031 Notes.
Previous wording
During the six months ended June 30, 2025, we used cash in operating activities primarily for the Castle Creek Investment, partially offset by cash generated from revenue and other operating income. We used cash in investing activities primarily for purchases of short-term investments, partially offset by proceeds from the sale and maturity of short-term investments. We generated cash from financing activities primarily from net proceeds from stock option exercises and ESPP purchases, as well as proceeds from Pelthos investors.
Current wording
During the nine months ended September 30, 2025, we generated cash from operations primarily from revenue and other operating income, partially offset by investments in the Castle Creek and Orchestra R&D funding arrangements. We used cash in investing activities primarily for purchases of short-term investments, financial royalty assets, and derivative assets, as well as cash transferred in connection with the Pelthos Transaction, partially offset by proceeds from the sale and maturity of short-term investments and collections from financial royalty assets. We generated cash from financing activities primarily from the issuance of the 2030 Notes, net of related transactions, as well as proceeds from Pelthos investors, stock option exercises, and employee stock purchase plan purchases.