Ligand Pharmaceuticals — Third Quarter 2026 Earnings Summary

Financial Performance:

• Third-quarter royalty revenue increased 51% year-over-year to $70.3 million, accounting for 89% of total revenues and income.
• Total revenues and income for the third quarter were $78.7 million, a 32% decrease from $115.5 million in the prior-year period; excluding $53.1 million of Pelthos divestiture-related income from the prior year, total revenues and income increased 26%.
• Year-to-date royalty revenue increased 46% to $161.3 million, representing 83% of total revenues and income.
• Year-to-date total revenues and income were $194.2 million, a 7% decrease from $208.4 million in the prior-year period; excluding Pelthos income, this represents a 25% increase.
• Captisol sales were $7.9 million in Q3 2026 (down from $10.7 million) and $24.6 million year-to-date (down from $32.4 million), reflecting timing of customer orders.
• Contract revenue and income were $0.5 million in Q3 2026 and $8.3 million year-to-date, primarily due to the absence of Pelthos divestiture-related income compared to the prior year.
• GAAP net loss for Q3 2026 was $28.5 million ($1.43 per diluted share), compared to GAAP net income of $117.3 million ($5.68 per diluted share) in the prior year.
• Adjusted net income for Q3 2026 was $57.5 million ($2.67 per diluted share), a 10% decrease in total and 14% decrease per share compared to the prior year.
• Year-to-date adjusted net income was $142.9 million ($6.67 per diluted share), a 17% increase in total and 10% increase per share compared to the prior year.
• Net non-operating expense was $28.3 million in Q3 2026 compared to net non-operating income of $85.8 million in the prior year, driven by mark-to-market losses on equity-method investments.
• General and administrative expense was $72.6 million in Q3 2026 and $122.6 million year-to-date, reflecting transaction and integration costs and share-based compensation associated with the XOMA acquisition.
• Research and development expense was $2.8 million in Q3 2026 and $19.6 million year-to-date, significantly lower than prior-year periods due to one-time R&D funding charges in the prior year.

Guidance and Future Outlook:

• Raised full-year 2026 adjusted diluted EPS guidance to $9.50 to $9.75, from the previous range of $9.00 to $9.50.
• Reaffirmed full-year 2026 revenue guidance: Royalty revenue of $225 million to $250 million, Captisol sales of $35 million to $40 million, and Contract revenue of $10 million to $20 million.
• Reaffirmed total revenue guidance of $270 million to $310 million for 2026.
• Management plans to share an updated five-year outlook at an investor day on December 8, 2026.

Business Segments and Product Lines:

• The XOMA acquisition added seven commercial products (including Roche's VABYSMO, Servier/Ipsen's OJEMDA, and Zevra's MIPLYFFA) and 14 late-stage development programs, doubling the portfolio to over 200 assets.
• Key commercial royalty assets driving growth include Travere Therapeutics' Filspari and Merck's Ohtuvayre.
• Acquired a milestone and royalty interest in Santen Pharmaceutical's Ryjunea for a $23 million upfront payment, securing a tiered low-double-digit to high-teens royalty on net sales in EMEA.
• Entered a structured financing agreement with AvenCell Therapeutics for up to $47 million, securing a mid single-digit to low double-digit royalty on worldwide annual net sales of AvenCell pipeline assets.
• Palvella plans to initiate a Phase 3 trial for Qtorin rapamycin in Q4 2026 and received FDA Priority Review for microcystic lymphatic malformations with a PDUFA date of February 28, 2027.
• Orchestra BioMed's AVIM Therapy surpassed full enrollment in the BACKBEAT global pivotal trial with 330 patients randomized.
• Pelthos reported 11,925 Zelsuvmi units dispensed in Q2 2026, with over 25,000 patients prescribed since launch; Xepi launch expected in Q1 2027.
• Mirum Pharmaceuticals received Breakthrough Therapy Designation for volixibat for cholestatic pruritus due to PSC.
• Ipsen announced MHLW approval of Ojemda for low-grade glioma harboring a BRAF mutation or fusion gene in Japan.
• Rezolute received an FDA recommendation for a pre-BLA meeting for ersodetug following a preliminary review of Phase 3 sunRIZE study data.

Market and Competitive Landscape:

• Ligand continues to execute a royalty aggregation strategy with a portfolio of over 200 commercial, clinical, and preclinical stage assets.
• The company expanded its portfolio management and origination platform to scale its larger royalty portfolio, resulting in increased headcount and employee-related costs.
• The company faces competition in acquiring royalties and locating suitable assets to acquire.

Risks and Challenges:

• Reliance on collaborative partners for milestone payments, royalties, and revenue projections, which may not be received as expected.
• Royalty revenue from partners not yet reporting sales is based on estimates that may differ from actual results.
• Dependence on a single source supplier for Captisol, where failures could result in delays or inability to meet demand.
• Risks associated with the integration of the XOMA portfolio and realization of anticipated benefits.
• Potential for non-cash mark-to-market losses on equity-method investments and other investments to impact net income.
• Regulatory approval risks for products under development by Ligand or its partners.
• Risks related to the insolvency of collaboration partners or termination of agreements.

Management Commentary and Tone:

• CEO Todd Davis described the quarter as "another strong quarter," highlighting 51% royalty revenue growth driven by the XOMA portfolio and commercial momentum.
• Management expressed confidence in the company's strong balance sheet and its position to continue executing the royalty aggregation strategy.
• The tone indicates a focus on capital deployment into differentiated assets and scaling the origination platform.

Other Key Points:

• Completed the acquisition of XOMA Royalty on July 14, 2026, adding significant commercial and clinical assets to the portfolio.
• Issued convertible senior notes due 2031, the proceeds of which partially offset cash used for the XOMA acquisition.
• As of September 30, 2026, cash, cash equivalents, and short-term investments totaled $447.4 million, down from $733.5 million at December 31, 2025.
• Ligand has approximately $750 million of deployable capital available (including equity investments and credit facility availability) to pursue additional royalty acquisitions.
• Ovid Therapeutics acquired global rights to soticlestat, with Ligand entitled to royalties and a share of milestones.
• Immedica plans to advance IV ganaxolone for refractory status epilepticus and initiate a new Phase 3 study in 2027.
• LeonaBio is on track to complete enrollment of approximately 600 patients in the Phase 3 Elaine-3 clinical trial for lasofoxifene in Q4 2026.