Ligand Pharmaceuticals (LGND) closed the last trading session at $79.92, gaining 10.7% over the past four weeks, but there could be plenty of upside left in the stock if short-term price targets set by Wall Street analysts are any guide. The mean price target of $116.33 indicates a 45.6% upside potential.The mean estimate comprises three short-term price targets with a standard deviation of $25.11. While the lowest estimate of $95 indicates an 18.9% increase from the current price level, the most optimistic ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _____________________________________________________________________________________________ FORM 10-K _____________________________________________________________________________________________ ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transitio ...

Ligand Pharmaceuticals Inc. (NASDAQ:LGND) Q4 2023 Earnings Conference Call February 27, 2024 8:30 AM ET Company Participants Tavo Espinoza - CFO Todd Davis - CEO Mattew Korenberg - COO Conference Call Participants Matt Hewitt - Craig-Hallum Capital Group Lawrence Solow - CJS Securities Operator Ladies and gentlemen, thank you for standing by. Welcome everyone to the Ligand Fourth Quarter 2023 Earnings Webcast. At this time, all lines have been placed on mute to prevent any background noise. After the speake ...

"2023 was a transformative year for Ligand, both operationally and financially. We refocused the company to be a lean- infrastructure, high-margin business," said Todd Davis, CEO of Ligand. "We enhanced our deal making capabilities with the strengthening of our senior team and opening of a Boston office. These initiatives will help us execute on a larger scale and continue to expand our portfolio through a focus on life science royalty opportunities. We are now well positioned and resourced to close on mult ...

PART I. FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements](index=5&type=section&id=ITEM%201.%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) Ligand's unaudited condensed consolidated financial statements detail financial position, operations, and cash flows post-OmniAb spin-off, with notes on key accounting and transactions [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets slightly increased to **$769.2 million** by September 30, 2023, driven by equity investments and inventory, while total liabilities significantly decreased to **$101.3 million** due to convertible note repayment Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $19,275 | $45,006 | | Short-term investments | $171,227 | $166,864 | | Total current assets | $253,994 | $263,601 | | Total assets | $769,226 | $762,668 | | **Liabilities & Equity** | | | | Total current liabilities | $15,727 | $98,810 | | 2023 convertible senior notes, net | $0 | $76,695 | | Total liabilities | $101,330 | $165,183 | | Total stockholders' equity | $667,896 | $597,485 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q3 2023 total revenues decreased to **$32.9 million** due to absent COVID-related Captisol sales, resulting in a **$10.3 million** net loss from continuing operations, impacted by investment losses Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | Metric | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | **Total revenues** | **$32,868** | **$59,221** | **$103,213** | **$145,863** | | Royalties | $23,863 | $19,255 | $61,447 | $50,507 | | Captisol | $8,608 | $35,949 | $24,450 | $77,616 | | Operating income from continuing operations | $3,078 | $12,341 | $15,300 | $23,136 | | **Net income (loss) from continuing operations** | **($10,273)** | **$9,645** | **$35,631** | **$9,315** | | Net loss from discontinued operations | $0 | ($9,241) | ($1,665) | ($25,191) | | **Net income (loss)** | **($10,273)** | **$404** | **$33,966** | **($15,876)** | | Diluted net income (loss) per share | ($0.59) | $0.02 | $1.91 | ($0.93) | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations decreased to **$41.5 million** for the nine months ended September 30, 2023, with significant cash usage in financing for convertible note repayment, leading to a **$25.1 million** net decrease in cash Cash Flow Summary (in thousands) | Activity | Nine months ended Sep 30, 2023 | Nine months ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $41,512 | $84,378 | | Net cash (used in) provided by investing activities | ($1,398) | $170,908 | | Net cash used in financing activities | ($65,262) | ($270,692) | | **Net decrease in cash, cash equivalents and restricted cash** | **($25,148)** | **($15,406)** | - The repayment of the **2023 Convertible Notes** for **$76.9 million** was the primary use of cash in financing activities during the first nine months of 2023[23](index=23&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail significant corporate actions, including the OmniAb spin-off, Pelican sale, Novan acquisition, revenue recognition, convertible note repayment, and subsequent events like a new credit facility and further acquisitions - The spin-off of the **OmniAb Business** was completed in November 2022 and is now classified as a discontinued operation, with its financial results reported separately[31](index=31&type=chunk)[82](index=82&type=chunk) Disaggregation of Revenue (in thousands) | Revenue Stream | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | **Royalties** | **$23,863** | **$19,255** | **$61,447** | **$50,507** | | Kyprolis | $10,537 | $9,123 | $24,862 | $20,872 | | Rylaze | $3,678 | $2,099 | $9,315 | $6,065 | | **Captisol** | **$8,608** | **$35,949** | **$24,450** | **$77,616** | | Captisol - Core | $8,608 | $3,582 | $24,450 | $13,133 | | Captisol - COVID | $0 | $32,367 | $0 | $64,483 | | **Contract revenue** | **$397** | **$4,017** | **$17,316** | **$17,740** | | **Total** | **$32,868** | **$59,221** | **$103,213** | **$145,863** | - On September 18, 2023, the company sold its **Pelican subsidiary** to Primrose Bio, receiving common, preferred, and restricted shares in Primrose Bio and retaining commercial royalty rights to key products like **RYLAZE** and **VAXNEUVANCE**, recognizing a gain of **$2.1 million** on the sale[66](index=66&type=chunk)[67](index=67&type=chunk) - On September 27, 2023, Ligand acquired certain assets of **Novan, Inc.** for **$12.2 million**, including the lead product candidate **berdazimer gel, 10.3%**, and the **NITRICIL technology platform**[75](index=75&type=chunk) - The **2023 Convertible Senior Notes** matured on May 15, 2023, and the company paid the remaining **$76.9 million** principal amount in cash[92](index=92&type=chunk) - Subsequent to the quarter end, Ligand entered into a **$75.0 million revolving credit facility**, acquired royalty interests in **soticlestat** from Ovid Therapeutics for **$30.0 million**, and acquired **Tolerance Therapeutics** for **$20.0 million** to gain royalty rights to **TZIELD**[109](index=109&type=chunk)[112](index=112&type=chunk)[113](index=113&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Ligand's strategy to diversify revenue through licensing and acquisitions, highlighting a **44%** Q3 2023 revenue decrease due to absent COVID-related Captisol sales, offset by royalty growth, while maintaining strong liquidity [Overview and Business Updates](index=28&type=section&id=Overview%20and%20Business%20Updates) Ligand's business model focuses on funding drug development and licensing Captisol® technology, with recent strategic moves including the Pelican spin-out, Novan acquisition, and royalty interest purchases to diversify future revenue streams - The company's business model focuses on creating a diversified portfolio of biotech and pharmaceutical product revenue streams supported by an efficient, low-cost corporate structure[118](index=118&type=chunk) - Acquired **Novan Inc.** assets for **$12.2 million**, including the **NDA-stage berdazimer gel 10.3% program** with a PDUFA goal date of January 5, 2024[124](index=124&type=chunk) - Invested **$30 million** to acquire **13%** of Ovid Therapeutics' interest in royalties and milestones for **soticlestat**, a program in Phase 3 trials for rare epilepsy syndromes[125](index=125&type=chunk) - Acquired **Tolerance Therapeutics** for **$20 million**, securing a royalty of less than **1%** on worldwide net sales of **TZIELD**, a therapy for type 1 diabetes[126](index=126&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) Q3 2023 total revenue decreased **44%** to **$32.9 million** due to absent COVID-related Captisol sales, despite a **24%** increase in royalty revenue, resulting in a **$10.3 million** net loss from continuing operations Revenue Comparison (in thousands) | Revenue Stream | Q3 2023 | Q3 2022 | % Change | | :--- | :--- | :--- | :--- | | Royalties | $23,863 | $19,255 | 24% | | Captisol - Core | $8,608 | $3,582 | 140% | | Captisol - COVID | $0 | $32,367 | (100)% | | Contract revenue | $397 | $4,017 | (90)% | | **Total revenue** | **$32,868** | **$59,221** | **(44)%** | - Total operating costs and expenses decreased by **32%** in Q3 2023 compared to Q3 2022, primarily driven by a **$10.7 million (75%)** decrease in the Cost of Captisol, corresponding to lower sales[139](index=139&type=chunk)[140](index=140&type=chunk) - Other expense in Q3 2023 was **$15.2 million**, compared to other income of **$13 thousand** in Q3 2022, mainly due to a **$13.2 million** unrealized loss from short-term investments in Q3 2023[149](index=149&type=chunk)[150](index=150&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) Ligand maintained **$190.5 million** in cash and investments as of September 30, 2023, with operating cash flow of **$41.5 million**, and secured a new **$75.0 million** revolving credit facility to support future operations and strategic initiatives - The company held **$190.5 million** in cash, cash equivalents, and short-term investments as of September 30, 2023[159](index=159&type=chunk) - In October 2023, Ligand entered into a new **$75.0 million revolving credit facility**, which matures in October 2026, with no amounts borrowed to date[164](index=164&type=chunk)[166](index=166&type=chunk) - A stock repurchase program authorizing up to **$50.0 million** remains in place through April 2026, with the full amount available for repurchase as of September 30, 2023[162](index=162&type=chunk)[163](index=163&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=35&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) No material changes to market risks were reported for the nine months ended September 30, 2023, compared to the 2022 Annual Report disclosures - No material changes to market risks were reported for the nine months ended September 30, 2023[172](index=172&type=chunk) [Item 4. Controls and Procedures](index=35&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the quarter[173](index=173&type=chunk) - No material changes to internal control over financial reporting were identified during the third quarter of 2023[174](index=174&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=35&type=section&id=ITEM%201.%20Legal%20Proceedings) Ligand is involved in the National Prescription Opiate Litigation but rejects all claims, intending to vigorously defend itself, believing no material adverse effect is likely - The company is a defendant in the **Multi-District Litigation (MDL)** captioned In Re: National Prescription Opiate Litigation, but rejects all claims and intends to defend the matters vigorously[106](index=106&type=chunk) [Item 1A. Risk Factors](index=35&type=section&id=ITEM%201A.%20Risk%20Factors) A new risk factor highlights the **$75.0 million Revolving Credit Facility**, whose financial covenants and security over assets could limit operational flexibility and lead to material harm upon default - A new risk factor was disclosed concerning the terms of the **October 2023 Credit Agreement**, which could limit business flexibility and affect financial health[177](index=177&type=chunk) - The **Credit Agreement** contains financial covenants, including maintaining a leverage ratio no greater than **2.50 to 1.00** and minimum consolidated **EBITDA of $45 million** for any trailing four-quarter period[179](index=179&type=chunk) - Obligations under the **Credit Agreement** are secured by company collateral, and a default could result in lenders foreclosing on these assets, which would harm the business[177](index=177&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=36&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities were reported during the period - None reported[181](index=181&type=chunk) [Item 5. Other Information](index=36&type=section&id=ITEM%205.%20Other%20Information) No officers or directors adopted, modified, or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q3 2023 - No officers or directors adopted, modified, or terminated any **Rule 10b5-1** trading arrangements during the three months ended September 30, 2023[184](index=184&type=chunk) [Item 6. Exhibits](index=37&type=section&id=ITEM%206.%20Exhibits) Exhibits filed with the Form 10-Q include the Credit Agreement, CEO/CFO certifications, and iXBRL financial data - Exhibits filed with the report include the new **Credit Agreement**, CEO/CFO certifications, and **iXBRL** financial data[186](index=186&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ________________________________________________________________________________________ FORM 10-Q ________________________________________________________________________________________ ☒ Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 2023 or ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Transition Per ...

Royalty Revenue & Cash Operating Expenses $219M in cash at June 30 and no debt Leverage from royalty revenue growth and lean operating expenses Operating structure expected to support growing profitability and cash flow 7 FINANCIAL REVIEW AND 2023 GUIDANCE 8 Q2 2023 FINANCIAL PERFORMANCE Lıgand® 1Nasdaq: LGND The following presentation contains forward-looking statements by Ligand and its partners that involve risks and uncertainties and reflect Ligand's and it's partners' judgment as of the date of this pr ...

Financial Data and Key Metrics Changes - Revenues for Q2 2023 were $26 million, with over $20 million in royalty revenue, compared to $50.1 million in Q2 2022, which included COVID-19-related sales [22][45] - GAAP net income from continuing operations in Q2 2023 was $2.3 million or $0.13 per diluted share, down from $12.6 million or $0.74 per diluted share in the prior year [28] - Adjusted diluted EPS for Q2 2023 was $1.42, up from $0.43 in Q2 2022, driven by gains in sales of Viking Therapeutics stock [47] - The company ended the quarter with cash and short-term investments of $219 million and is now debt-free after paying off the remaining convertible notes [22][29] Business Line Data and Key Metrics Changes - G&A expenses in Q2 2023 were $11.3 million, down from $12.1 million in Q2 2022, primarily due to reduced headcount-related expenses [3] - R&D expenses in Q2 2023 were $6.9 million, down from $8.5 million in Q2 2022, also attributed to decreased headcount-related expenses [3] - Captisol sales were $5.2 million for Q2 2023, compared to core Captisol sales of $3.3 million in the same quarter last year [27] Market Data and Key Metrics Changes - Rylaze reached a record level with $86 million in sales in Q1 2023, indicating strong market performance [4] - Vaxneuvance, marketed by Merck, reported $168 million in sales in Q2 2023, tracking to exceed original 2023 consensus sales estimates of about $300 million [51] - Travere reported sales of $3.5 million for Q2 2023, marking their first full quarter of commercialization for FILSPARI [50] Company Strategy and Development Direction - The company aims to grow its royalty portfolio through project finance, royalty monetization, M&A, and platform technology acquisitions [2] - The acquisition of Novan's assets for $15 million is part of the strategy to enhance the portfolio, with a focus on high-value clinical products [23][35] - The company is focused on maintaining a lean operating structure while maximizing operating margins [46] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for a productive second half of the year, highlighting the potential of FILSPARI as a significant royalty asset [5][22] - The company raised its adjusted EPS guidance to $4.85 to $5.00, reflecting strong operating income and gains from Viking stock sales [21][48] - Management noted that the industry is shifting towards later-stage opportunities, but this has not negatively impacted the company's portfolio [62] Other Important Information - The company has a robust existing portfolio and pipeline that offers significant financial growth potential [44] - The company is actively expanding its business development capabilities and has established a presence in Boston to enhance deal-making activities [42][43] Q&A Session Summary Question: What is the current mix between commercial and clinical Captisol? - The company indicated that commercial products have taken more than half the share of the Captisol business, with both commercial and clinical uses increasing [57] Question: What are the plans for the share repurchase program? - The company plans to monitor the markets and consult with management and the Board to determine the timing for utilizing the repurchase plan [60] Question: How does the shift in pharma and biotech priorities affect the portfolio? - Management noted that the shift towards later-stage opportunities has not impacted their portfolio, which consists of over 100 programs across various stages [62] Question: What is the royalty structure for Sparsentan's European revenue? - The company clarified that they receive a 9% royalty on Sparsentan sales worldwide, including Europe [100] Question: Any updates on Teriparatide and its competition? - The company mentioned that Teriparatide is facing competition from generics, but they are awaiting further developments regarding its approval and market dynamics [104]

PART I. FINANCIAL INFORMATION [ITEM 1. Condensed Consolidated Financial Statements (unaudited)](index=5&type=section&id=ITEM%201.%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) This section provides the unaudited condensed consolidated financial statements and related notes, covering financial position, performance, cash flows, and key accounting policies [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement presents the company's financial position, detailing assets, liabilities, and equity at specific points in time | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :----- | :---------------------------- | :------------------------------- | | Total Assets | $811,076 | $762,668 | | Cash and Cash Equivalents | $88,728 | $45,006 | | Short-term Investments | $193,937 | $166,864 | | Total Liabilities | $164,759 | $165,183 | | Total Stockholders' Equity | $646,317 | $597,485 | - Total assets increased by **$48.4 million**, driven by a significant increase in cash and cash equivalents and short-term investments[12](index=12&type=chunk) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This statement outlines the company's financial performance over a period, showing revenues, expenses, and net income or loss | Metric | Three months ended March 31, 2023 (in thousands) | Three months ended March 31, 2022 (in thousands) | Change (in thousands) | % Change | | :----- | :----------------------------------------------- | :----------------------------------------------- | :-------------------- | :------- | | Total Revenues | $43,979 | $36,516 | $7,463 | 20% | | Total Operating Costs and Expenses | $29,774 | $34,383 | $(4,609) | (13)% | | Operating Income from Continuing Operations | $14,205 | $2,133 | $12,072 | 566% | | Total Other Income (Expense), net | $41,331 | $(11,277) | $52,608 | N/A | | Net Income (Loss) | $41,949 | $(15,385) | $57,334 | N/A | | Basic Net Income (Loss) Per Share | $2.46 | $(0.91) | $3.37 | N/A | | Diluted Net Income (Loss) Per Share | $2.33 | $(0.91) | $3.24 | N/A | - The company reported a net income of **$41.95 million** in Q1 2023, a significant improvement from a net loss of **$15.39 million** in Q1 2022, driven by increased revenues and a substantial gain from short-term investments[14](index=14&type=chunk) [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) This statement presents net income and other comprehensive income items, reflecting the total change in equity from non-owner sources | Metric | Three months ended March 31, 2023 (in thousands) | Three months ended March 31, 2022 (in thousands) | | :----- | :----------------------------------------------- | :----------------------------------------------- | | Net income (loss) | $41,949 | $(15,385) | | Unrealized net gain (loss) on available-for-sale securities, net of tax | $49 | $(114) | | Comprehensive income (loss) | $41,998 | $(15,499) | - Comprehensive income for Q1 2023 was **$41.998 million**, a substantial increase from a comprehensive loss of **$15.499 million** in Q1 2022[16](index=16&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This statement details changes in the equity section of the balance sheet, including retained earnings and additional paid-in capital | Metric | December 31, 2022 (in thousands) | March 31, 2023 (in thousands) | | :----- | :------------------------------- | :---------------------------- | | Total Stockholders' Equity | $597,485 | $646,317 | | Retained Earnings | $450,862 | $492,811 | | Additional Paid-in Capital | $147,590 | $154,424 | - Total stockholders' equity increased by **$48.83 million** to **$646.32 million** as of March 31, 2023, primarily due to net income and share-based compensation[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes the cash inflows and outflows from operating, investing, and financing activities over a period | Metric | Three months ended March 31, 2023 (in thousands) | Three months ended March 31, 2022 (in thousands) | | :----- | :----------------------------------------------- | :----------------------------------------------- | | Net cash provided by operating activities | $33,948 | $52,011 | | Net cash provided by investing activities | $10,549 | $113,881 | | Net cash used in financing activities | $(775) | $(170,421) | | Cash, cash equivalents and restricted cash at end of period | $88,728 | $14,993 | - Net cash provided by operating activities decreased, while net cash used in financing activities significantly decreased due to no repurchase of 2023 Notes in Q1 2023, leading to a substantial increase in cash and cash equivalents at period end[22](index=22&type=chunk)[135](index=135&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and additional information essential for understanding the condensed consolidated financial statements [1. Basis of Presentation and Summary of Significant Accounting Policies](index=10&type=section&id=1.%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines the foundational principles and key accounting methods used in preparing the financial statements - Post-OmniAb spin-off, Ligand operates as a biopharmaceutical company focused on developing and licensing biopharmaceutical assets[27](index=27&type=chunk) - The OmniAb Business spin-off in November 2022 is classified as a discontinued operation, with financial statements adjusted to reflect continuing operations[29](index=29&type=chunk) - Revenue is primarily generated from royalties, Captisol material sales, and contract revenue (license fees, milestones, and R&D services)[32](index=32&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk)[38](index=38&type=chunk) Disaggregation of Revenue (Q1 2023 vs Q1 2022, in thousands) | Revenue Type | Q1 2023 | Q1 2022 | Change | % Change | | :----------- | :------ | :------ | :----- | :------- | | Royalties | $17,154 | $13,432 | $3,722 | 28% | | Captisol - Core | $10,622 | $6,226 | $4,396 | 71% | | Captisol - COVID | $0 | $5,896 | $(5,896) | (100)% | | Contract Revenue | $16,203 | $10,962 | $5,241 | 48% | | **Total** | **$43,979** | **$36,516** | **$7,463** | **20%** | - Total short-term investments increased to **$193.94 million** as of March 31, 2023, and the company recognized a **$20.5 million** realized gain from selling 3.2 million shares of Viking common stock[45](index=45&type=chunk) - Share-based compensation expense decreased to **$5.93 million** in Q1 2023 from **$7.11 million** in Q1 2022[58](index=58&type=chunk) [2. Spin-off of OmniAb](index=18&type=section&id=2.%20Spin-off%20of%20OmniAb) This note details the completion of the OmniAb business spin-off and its financial reporting as a discontinued operation - The spin-off of the OmniAb Business was completed on November 1, 2022, through a Reverse Morris Trust transaction, resulting in OmniAb becoming an independent, publicly traded company[64](index=64&type=chunk)[65](index=65&type=chunk) - OmniAb's historical financial results are now reflected as discontinued operations in Ligand's consolidated financial statements for all periods presented through the distribution date[65](index=65&type=chunk) Net Loss from Discontinued Operations (Q1 2022, in thousands) | Metric | Three months ended March 31, 2022 | | :----- | :--------------------------------| | Total Revenues | $9,177 | | Total Operating Costs and Expenses | $20,616 | | Net loss | $(2,456) | [3. Fair Value Measurements](index=19&type=section&id=3.%20Fair%20Value%20Measurements) This note provides information on assets and liabilities measured at fair value, categorized by valuation inputs Assets and Liabilities Measured at Fair Value (in thousands) | Category | March 31, 2023 | December 31, 2022 | | :------- | :------------- | :---------------- | | Total Assets | $193,937 | $166,864 | | Investment in Viking common stock | $59,359 | $63,122 | | Total Liabilities | $2,887 | $3,557 | - Total assets measured at fair value increased, while total liabilities measured at fair value decreased, primarily due to a reduction in Metabasis contingent liabilities[69](index=69&type=chunk) - No impairment of goodwill, indefinite-lived assets, or long-lived assets was recorded during Q1 2023 or Q1 2022[72](index=72&type=chunk) [4. Convertible Senior Notes](index=20&type=section&id=4.%20Convertible%20Senior%20Notes) This note details the outstanding convertible senior notes, their conversion terms, and the company's settlement intentions - As of March 31, 2023, **$76.85 million** in principal amount of the 0.75% convertible senior notes due 2023 remain outstanding[85](index=85&type=chunk) - Holders are entitled to convert the notes without conditions from November 15, 2022, until May 11, 2023, with a conversion rate adjusted to **4.8390 shares per $1,000 principal amount**[75](index=75&type=chunk)[76](index=76&type=chunk) - The company intends to settle conversions through a combination of cash for the principal portion and shares for the excess conversion value[78](index=78&type=chunk) - No 2023 Notes were repurchased during Q1 2023, in contrast to **$165.8 million** repurchased in Q1 2022[79](index=79&type=chunk) [5. Income Tax](index=21&type=section&id=5.%20Income%20Tax) This note explains the company's effective tax rate and the primary factors contributing to its variance from the statutory rate - The effective tax rate for Q1 2023 was **21.5%**, a significant change from **(41.4)%** in Q1 2022[87](index=87&type=chunk) - The Q1 2023 variance from the U.S. federal statutory tax rate was primarily due to Section 162(m) limitation on officer compensation and non-deductible ISO-related stock compensation, partially offset by foreign derived intangible income tax benefit[87](index=87&type=chunk) [6. Stockholders' Equity](index=22&type=section&id=6.%20Stockholders'%20Equity) This note details changes in stock options and restricted stock activity, along with information on the At-The-Market Equity Offering Sales Agreement Stock Options and Restricted Stock Activity (as of March 31, 2023) | Metric | Stock Options (Shares) | Restricted Stock Awards (Shares) | | :----- | :--------------------- | :------------------------------- | | Balance as of December 31, 2022 | 2,991,473 | 348,453 | | Granted | 409,591 | 194,615 | | Exercised/Vested | (93,598) | (153,431) | | Forfeited | (69,853) | (12,635) | | Balance as of March 31, 2023 | 3,237,613 | 377,002 | - The company has an At-The-Market (ATM) Equity Offering Sales Agreement to sell up to **$100.0 million** of common stock, but no shares have been issued under this program to date[91](index=91&type=chunk) [7. Commitment and Contingencies](index=22&type=section&id=7.%20Commitment%20and%20Contingencies) This note outlines the company's involvement in legal proceedings and significant lease agreement amendments - The company is involved in civil complaints related to the National Prescription Opiate Litigation but believes these claims are unlikely to have a material adverse effect on its business[93](index=93&type=chunk)[95](index=95&type=chunk) - An amendment to the headquarters lease agreement in Q1 2023 resulted in a **$1.1 million** increase in both operating lease assets and liabilities[96](index=96&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance, condition, and future outlook, highlighting key revenue drivers, expense changes, and liquidity - Ligand's business model focuses on acquiring or funding programs and out-licensing technology platforms (Captisol, Pelican) to generate diversified revenue streams from royalties, Captisol sales, and contract revenue[100](index=100&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk) - The OmniAb spin-off was completed on November 1, 2022, with OmniAb's historical results now reported as discontinued operations[103](index=103&type=chunk) - As of March 31, 2023, cash, cash equivalents, and short-term investments totaled **$282.7 million**, an increase of **$70.8 million** from year-end 2022[128](index=128&type=chunk) - The company plans to use existing cash to pay off the remaining **$76.9 million** principal amount of 2023 Notes on their May 15, 2023 maturity date[130](index=130&type=chunk) [Overview](index=24&type=section&id=Overview) This section describes Ligand's business model, focusing on its strategy of acquiring and licensing biopharmaceutical assets and technologies - Ligand's business model is focused on acquiring or funding programs and technologies for life science companies to discover and develop medicines, aiming for a diversified portfolio of biotech and pharmaceutical product revenue streams[100](index=100&type=chunk) - Key technology platforms include Captisol (optimizes drug solubility/stability) and Pelican Expression Technology (cost-effective, scalable recombinant protein production)[101](index=101&type=chunk) - Revenue consists of royalties from commercialized products, sales of Captisol material, and contract revenue from license, milestone, and other service payments[102](index=102&type=chunk) [OmniAb Separation and Spin-Off](index=24&type=section&id=OmniAb%20Separation%20and%20Spin-Off) This section details the completion of the OmniAb spin-off and its subsequent classification as discontinued operations - The spin-off of the OmniAb antibody discovery business was completed on November 1, 2022, through a Reverse Morris Trust transaction, making OmniAb an independent public company[103](index=103&type=chunk) - Following the distribution, OmniAb's historical financial results are reflected as discontinued operations in Ligand's consolidated financial statements[103](index=103&type=chunk) [Business Updates](index=25&type=section&id=Business%20Updates) This section highlights recent developments, including FDA approvals, clinical trial progress, and strategic asset sales - Travere Therapeutics received FDA accelerated approval for FILSPARI™ (sparsentan) for IgA nephropathy (IgAN) in February 2023, with EMA review expected in H2 2023[104](index=104&type=chunk) - Viking Therapeutics completed enrollment in its Phase 2b clinical trial of VK2809 for NASH, with topline data expected in H1 2023. Ligand sold 3.2 million Viking shares, generating **$43 million** in net proceeds[105](index=105&type=chunk) - Novan submitted an NDA for berdazimer gel, 10.3% (SB206) for molluscum contagiosum, with a PDUFA target date of January 5, 2024[106](index=106&type=chunk) - Novartis AG received FDA approval for a liquid form of TAFINLAR® (dabrafenib) + MEKINIST® (trametinib), the first approval of an oral Captisol-enabled product, for pediatric low-grade glioma[108](index=108&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, detailing revenue, operating costs, other income, and tax impacts - Total revenue increased by **$7.5 million (20%)** to **$44.0 million** in Q1 2023, driven by contract revenue and royalties, despite a **100% decrease** in Captisol-COVID sales[111](index=111&type=chunk)[112](index=112&type=chunk) - Total operating costs and expenses decreased by **$4.6 million (13%)** to **$29.8 million** in Q1 2023, primarily due to lower R&D and G&A expenses[117](index=117&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk)[120](index=120&type=chunk) - Total other income (expense), net, swung to a gain of **$41.3 million** in Q1 2023 from a loss of **$11.3 million** in Q1 2022, mainly due to a **$39.5 million** gain from short-term investments (including **$20.5 million** realized gain from Viking stock sales and **$19.0 million** unrealized gain)[121](index=121&type=chunk)[122](index=122&type=chunk) - Net income from continuing operations was **$43.6 million** in Q1 2023, a significant improvement from a net loss of **$12.9 million** in Q1 2022[14](index=14&type=chunk) [Revenue](index=25&type=section&id=Revenue) This section analyzes the components of total revenue, including royalties, Captisol sales, and contract revenue, and their respective changes Revenue Breakdown (Q1 2023 vs Q1 2022, in thousands) | Revenue Type | Q1 2023 | Q1 2022 | Change | % Change | | :----------- | :------ | :------ | :----- | :------- | | Royalties | $17,154 | $13,432 | $3,722 | 28% | | Captisol - Core | $10,622 | $6,226 | $4,396 | 71% | | Captisol - COVID | $0 | $5,896 | $(5,896) | (100)% | | Contract revenue | $16,203 | $10,962 | $5,241 | 48% | | **Total revenue** | **$43,979** | **$36,516** | **$7,463** | **20%** | - Contract revenue increased significantly due to a milestone payment tied to FDA approval of Travere's FILSPARI[112](index=112&type=chunk) - Core Captisol sales increased by **71%** due to the timing of customer orders, while Captisol sales related to COVID-19 ceased[113](index=113&type=chunk) Royalty Revenue by Program (Q1 2023 vs Q1 2022, in millions) | Program | Q1 2023 Royalty Revenue | Q1 2022 Royalty Revenue | Change | | :------ | :---------------------- | :---------------------- | :----- | | Kyprolis | $6.2 | $4.6 | $1.6 | | Evomela | $2.6 | $2.7 | $(0.1) | | Teriparatide injection | $3.5 | $2.9 | $0.6 | | Rylaze | $2.6 | $1.6 | $1.0 | | Other | $2.3 | $1.6 | $0.7 | | **Total** | **$17.2** | **$13.4** | **$3.8** | [Operating Costs and Expenses](index=26&type=section&id=Operating%20Costs%20and%20Expenses) This section details the changes in cost of Captisol, amortization, research and development, and general and administrative expenses Operating Costs and Expenses (Q1 2023 vs Q1 2022, in thousands) | Expense Type | Q1 2023 | Q1 2022 | Change | % Change | | :----------- | :------ | :------ | :----- | :------- | | Cost of Captisol | $3,717 | $4,699 | $(982) | (21)% | | Amortization of intangibles | $8,539 | $8,580 | $(41) | (0.5)% | | Research and development | $6,663 | $9,179 | $(2,516) | (27)% | | General and administrative | $10,855 | $11,925 | $(1,070) | (9)% | | **Total** | **$29,774** | **$34,383** | **$(4,609)** | **(13)%** | - Research and development expense decreased primarily due to lower share-based compensation, employee-related expenses, and lab supply expenses[119](index=119&type=chunk) - General and administrative expense decreased mainly due to reduced legal expenses in connection with the OmniAb spin-off[120](index=120&type=chunk) [Other Income (Expense)](index=26&type=section&id=Other%20Income%20(Expense)) This section examines the components of other income and expense, including gains from short-term investments and interest income/expense Other Income (Expense), net (Q1 2023 vs Q1 2022, in thousands) | Metric | Q1 2023 | Q1 2022 | Change | | :----- | :------ | :------ | :----- | | Gain (loss) from short-term investments | $39,533 | $(12,877) | $52,410 | | Interest income | $1,435 | $134 | $1,301 | | Interest expense | $(240) | $(789) | $549 | | Other income (expense), net | $603 | $2,255 | $(1,652) | | **Total** | **$41,331** | **$(11,277)** | **$52,608** | - The significant gain from short-term investments in Q1 2023 was driven by **$19.0 million** in unrealized gains and **$20.5 million** in realized gains from Viking common stock sales[122](index=122&type=chunk) - Interest income increased due to higher interest rates, while interest expense decreased due to a lower average debt outstanding balance[123](index=123&type=chunk)[124](index=124&type=chunk) [Income Tax Benefit (Expense)](index=27&type=section&id=Income%20Tax%20Benefit%20(Expense)) This section analyzes the income tax benefit or expense and the effective tax rate for the period Income Tax (Q1 2023 vs Q1 2022, in thousands) | Metric | Q1 2023 | Q1 2022 | | :----- | :------ | :------ | | Income (loss) before income taxes | $55,536 | $(9,144) | | Income tax benefit (expense) | $(11,922) | $(3,785) | | Effective tax rate | 21.5% | (41.4)% | - The effective tax rate for Q1 2023 was **21.5%**, a significant change from **(41.4)%** in Q1 2022, primarily due to Section 162(m) limitation and non-deductible ISO-related stock compensation, partially offset by foreign derived intangible income tax benefit[127](index=127&type=chunk) [Net Loss from Discontinued Operations](index=27&type=section&id=Net%20Loss%20from%20Discontinued%20Operations) This section reports the net loss attributable to discontinued operations for the period - Net loss from discontinued operations was **$1.7 million** in Q1 2023, a decrease from **$2.5 million** in Q1 2022[128](index=128&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash position, investment strategy, and ability to fund future operations and obligations - As of March 31, 2023, cash, cash equivalents, and short-term investments totaled **$282.7 million**, an increase of **$70.8 million** from the end of last year[128](index=128&type=chunk) - The company plans to use existing cash to pay off the remaining **$76.9 million** principal amount of 2023 Notes on their maturity date of May 15, 2023[130](index=130&type=chunk) - Management believes existing funds, cash generated from operations, and access to financing are adequate to fund business needs, including working capital, capital expenditures, debt service, R&D, and strategic initiatives[133](index=133&type=chunk) Cash Flow Summary (Q1 2023 vs Q1 2022, in thousands) | Activity Type | Q1 2023 | Q1 2022 | | :------------ | :------ | :------ | | Operating activities | $33,948 | $52,011 | | Investing activities | $10,549 | $113,881 | | Financing activities | $(775) | $(170,421) | [Critical Accounting Policies and Estimates](index=28&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section confirms that there have been no material changes to the company's critical accounting policies and estimates - There have been no material changes to the critical accounting policies and estimates compared to those described in the 2022 Annual Report[137](index=137&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures about Market Risk](index=28&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section states that there were no material changes to the company's market risks during the three months ended March 31, 2023, compared to the disclosures in its 2022 Annual Report - No material changes to market risks were identified in Q1 2023 compared to the disclosures in the 2022 Annual Report[139](index=139&type=chunk) [ITEM 4. Controls and Procedures](index=29&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2023, and there were no material changes in internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective as of March 31, 2023[140](index=140&type=chunk) - There were no material changes in internal control over financial reporting during the quarter ended March 31, 2023[141](index=141&type=chunk) PART II. OTHER INFORMATION [ITEM 1. Legal Proceedings](index=29&type=section&id=ITEM%201.%20Legal%20Proceedings) This section refers to Note 7 of the financial statements for updated disclosures on legal proceedings, which primarily involve civil complaints related to the National Prescription Opiate Litigation - Updates on legal proceedings are provided in Note 7, Commitment and Contingencies, to the Condensed Consolidated Financial Statements[142](index=142&type=chunk) [ITEM 1A. Risk Factors](index=29&type=section&id=ITEM%201A.%20Risk%20Factors) The company states that there have been no material changes to the risk factors disclosed in its 2022 Annual Report, but reminds readers that other unknown or immaterial factors could still adversely affect the business - No material changes to the risk factors disclosed in the 2022 Annual Report were identified[143](index=143&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=29&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds occurred during the period - No unregistered sales of equity securities or use of proceeds occurred[144](index=144&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=29&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities occurred during the period - No defaults upon senior securities occurred[145](index=145&type=chunk) [ITEM 4. Mine Safety Disclosures](index=29&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company[146](index=146&type=chunk) [ITEM 5. Other Information](index=29&type=section&id=ITEM%205.%20Other%20Information) No other information is reported in this section - No other information is reported in this section[147](index=147&type=chunk) [ITEM 6. Exhibits](index=30&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the At-the-Market Equity Offering Sales Agreement, Director Compensation Policy, Change in Control Severance Agreement, and various certifications and XBRL financial information - Key exhibits include the At-the-Market Equity Offering Sales Agreement, Director Compensation and Stock Ownership Policy, Form of Change in Control Severance Agreement, and various certifications by principal officers[148](index=148&type=chunk) - The report includes financial information formatted in iXBRL (Exhibit 101)[148](index=148&type=chunk) [SIGNATURE](index=31&type=section&id=SIGNATURE) The report is duly signed on May 8, 2023, by Octavio Espinoza, Chief Financial Officer - The report was signed by Octavio Espinoza, Chief Financial Officer, on May 8, 2023[153](index=153&type=chunk)

Ligand Pharmaceuticals Incorporated (NASDAQ:LGND) Q1 2023 Results Conference Call May 4, 2023 4:30 PM ET Company Participants Simon Latimer - Head of Investor Relations Todd Davis - Chief Executive Officer Tavo Espinoza - Chief Financial Office Matthew Korenberg - President and Chief Operating Officer Conference Call Participants Scott Henry - ROTH Capital Matt Hewitt - Craig-Hallum Capital Joseph Pantginis - HC Wayne Wright Operator Thank you for standing by. My name is Kyla Baker and I will be your confer ...