Overview

Ligand Pharmaceuticals is a biopharmaceutical company that enables scientific advancement by supporting the clinical development of high-value medicines. The company’s business model focuses on generating revenue streams from licensing its technologies, purchasing royalty rights, and funding drug development programs in exchange for economic rights.

Ligand operates two main technology platforms - Captisol, a chemically modified cyclodextrin that improves drug solubility and stability, and NITRICIL, which allows for adjustable drug release profiles. The company has established partnerships with leading pharmaceutical companies like Amgen, Merck, and Gilead to leverage its technologies and generate revenue from royalties, material sales, and milestone payments.

Financial Performance

In the first quarter of 2025, Ligand reported total revenue and other income of $45.3 million, a 46% increase from the same period in 2024. This was driven by:

• A 44% increase in royalties to $27.5 million, primarily due to income from the Qarziba financial royalty asset and higher Filspari sales.
• A 46% increase in Captisol material sales to $13.5 million, due to the timing of customer orders.
• A 64% increase in contract revenue and other income to $4.4 million, mainly from a regulatory milestone payment.

However, the company’s operating costs and expenses also increased significantly, rising 191% to $81.5 million. This was largely due to:

• A 68% increase in the cost of Captisol sales to $4.8 million.
• A $44.1 million increase in research and development expenses, primarily related to a funding arrangement for the D-Fi royalty rights acquisition.
• An $7.8 million increase in general and administrative expenses, driven by employee costs and operating expenses for the Pelthos business.

As a result, Ligand reported a net loss of $42.5 million for the quarter, compared to net income of $86.1 million in the same period of 2024. This was primarily due to the $123.1 million swing in gains/losses from short-term investments, which saw a $12.4 million loss in Q1 2025 compared to a $110.8 million gain in Q1 2024.

Strengths and Weaknesses

Strengths:

• Diversified revenue streams from royalties, Captisol material sales, and contract revenue
• Partnerships with major pharmaceutical companies provide a steady flow of milestone payments and royalties
• Captisol and NITRICIL technology platforms offer valuable drug delivery solutions
• Selective acquisitions and funding opportunities bring in new assets and revenue potential

Weaknesses:

• Heavy reliance on partner product sales to generate royalty revenue
• Significant fluctuations in investment gains/losses impact overall profitability
• Rising operating costs, particularly in R&D and general/administrative expenses
• Potential legal risks from ongoing litigation

Outlook

Ligand remains focused on continuing to grow its diversified portfolio of revenue streams through partnerships, acquisitions, and strategic investments. The company’s recent $75 million royalty financing agreement with Castle Creek Biosciences to support the D-Fi gene therapy program demonstrates its ability to identify and fund promising late-stage development opportunities.

The upcoming merger with Pelthos Therapeutics is also expected to accelerate the commercialization of the ZELSUVMI topical gel for molluscum contagiosum infections. With $50 million in new capital raised, the combined company will be well-positioned to drive the product’s launch and expansion.

However, Ligand will need to carefully manage its rising operating costs, particularly in R&D, to maintain profitability. The company’s reliance on partner product sales for royalty revenue also leaves it vulnerable to any slowdowns or setbacks in its partners’ pipelines.

Overall, Ligand appears to be navigating a period of significant growth and investment, balancing the promise of its diversified business model with the challenges of managing a rapidly expanding cost structure. Investors will be watching closely to see if the company can continue to deliver on its strategy of profitable, sustainable expansion.