LIGAND PHARMACEUTICALS INC (LGND)

Business overview

Business Overview We are a biopharmaceutical royalty company focused on deploying capital and licensing technologies to acquire and create diversified royalty streams from high-value medicines. Our primary business is investing in and structuring royalty interests in mid- to late-stage development and commercial biopharmaceutical products, allowing us to generate long-duration, non-dilutive cash flows supported by a lean corporate cost structure. Capital deployment and technology licensing are the primary drivers of our long-term growth. We partner capital through a range of transaction structures—including royalty purchases, development-stage financing arrangements, and acquisitions of companies or assets with embedded royalty rights—designed to create cash flowing royalties and produce attractive risk-adjusted returns. Our goal is to provide investors with exposure to biopharmaceutical innovation through a diversified portfolio of royalty interests while mitigating the binary risk and capital intensity traditionally associated with drug development.

In addition to our royalty investment activities, we operate two infrastructure-light, royalty-generating platform technologies, Captisol ® and NITRICIL ® . These technologies exemplify our platform technology investment criteria: infrastructure-light, scalable intellectual property with existing royalty streams and the potential to generate incremental royalties through partner-driven development and commercialization. Our revenue is generated primarily from royalties on sales of products commercialized by our partners, supplemented by Captisol material sales and contract revenue from license fees and milestone payments. We partner with leading biopharmaceutical companies to leverage their capabilities in late-stage development, regulatory execution, and commercialization, while we focus on disciplined capital deployment, portfolio construction, and risk management. This also allows us to leverage our partner's asset infrastructure in sales and marketing, manufacturing and R&D to avoid high cost infrastructure ourselves.

Strategy and Execution Investment Strategy We are a biopharmaceutical royalty aggregator, focused on disciplined capital allocation to differentiated late-stage assets and operation of royalty-generating, infrastructure-light platform technologies. We have 12 major commercial stage royalty assets comprising the majority of our royalty revenue. We maintain a portfolio of more than 90 additional commercial and development-stage programs. In 2022, Ligand made a strategic decision to refine our strategy and focus on a more efficient, high margin, low infrastructure version of our historical model. Following the spin-off of our OmniAb antibody discovery business in November 2022 and our Pelican Expression Technology subsidiary in September 2023, and continuing through and after the carve-out of our Pelthos Therapeutics business in July 2025 in connection with the Pelthos Transaction, our focus has been to continue to expand our pipeline by aggregating royalty rights in mid- to late-stage development and commercial biopharma products, while maintaining a lean infrastructure and high-margin business.

Our business model is highly differentiated from a traditional biotechnology company in several important ways. First, we have limited infrastructure requirements, enabling us to maintain relatively high operating margins. Second, we can enable development over a broad range of therapeutic areas and can be strategic and balanced about the size of our investments to achieve a highly diversified portfolio. Third, we believe our business model significantly mitigates the high volatility and risk associated with building a business around a single or small number of assets. With this approach, we have the ability to mitigate the impact of binary clinical outcomes inherent in the biopharmaceutical industry, thereby facilitating cash flows that are more predictable.

Finally, we can target the size of our investments to achieve appropriate diversification across the portfolio. Since refocusing the business in 2022, we have built a highly experienced business and investment team to execute our strategy. There is high demand for capital and low availability of structured capital in the segment of the biopharmaceutical market in which we operate, creating significant investment opportunities for Ligand. Unlike open-market equity investing, many of our investments take place under Confidential Disclosure Agreements and similar agreements of confidentiality (“CDAs”), facilitating access to in-depth proprietary information and data. Our flexible investment structures are designed to mitigate risks and help accommodate different transaction structures in line with our partners’ goals.

We believe our business model is highly scalable and has significant growth potential. We have assembled a talented, long-tenured team with deep industry relationships, investment experience and industry knowledge. Our investment opportunities are sourced through a combination of proprietary origination, deep industry relationships, and active engagement with biopharmaceutical partners. Our business development team works closely with potential counterparties under CDAs to access non-public clinical, regulatory and commercial diligence materials. This access allows us to evaluate opportunities earlier, structure transactions with greater precision, and selectively pursue investments with attractive, 1 asymmetric risk-reward profiles. […]

Management discussion and analysis

Management’s Discussion and Analysis of Financial Condition and Results of Operations Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) will help readers understand our results of operations, financial condition, and cash flows. It is provided in addition to the accompanying consolidated financial statements and notes. Our MD&A is organized as follows: 52 • Results of Operations. Detailed discussion of our revenue and expenses for twelve months ended December 31, 2025 and 2024. A comparison of our results of operations for twelve months ended December 31, 2025 and 2024 can be found under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report.

• Liquidity and Capital Resources. Discussion of key aspects of our consolidated statements of cash flows, changes in our financial position, and our financial commitments. • Critical Accounting Policies and Estimates. Discussion of significant changes we believe are important to understand the assumptions and judgments underlying our consolidated financial statements. • Recent Accounting Pronouncements. For summary of recent accounting pronouncements applicable to our consolidated financial statements, see “Item 8.

Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 1, Basis of Presentation and Summary of Significant Accounting Policies.” Results of Operations Revenue and Income FY 2025 vs. FY 2024 (Dollars in thousands) 2025 2024 Change % Change Revenue from intangible royalty assets $ 132,534 $ 95,329 $ 37,205 39 % Income from financial royalty assets 28,467 13,444 15,023 112 % Royalties 161,001 108,773 52,228 48 % Captisol 40,213 30,883 9,330 30 % Contract revenue and income 66,873 27,477 39,396 143 % Total revenue and income $ 268,087 $ 167,133 $ 100,954 60 % Total revenue and income increased by $101. 0 million, or 60%, to $268. 1 million in 2025 compared to $167.

1 million in 2024 primarily due to the $52. 2 million increase in royalties and $39. 4 million increase in contract revenue and income. The increase in royalties in 2025 was primarily due to income from Qarziba financial royalty asset acquired in the third quarter of 2024 and an increase in sales of Filspari, Ohtuvayre and Capvaxive. Captisol sales increased by $9. 3 million to $40.

2 million in 2025 compared to $30. 9 million in 2024. The increase in Captisol sales were due to the timing of customer orders. Contract revenue and income increased by $39. 4 million, with the change primarily due to income from the Pelthos Transaction. During the third quarter of 2025, we recognized $53.

1 million in total income related to the divestiture of LNHC in connection with the Pelthos Transaction. Revenue from intangible royalty assets is a function of our partners’ product sales and the applicable royalty rate. The following table represents revenue from intangible royalty assets by program (in millions): (in millions) 2025 Estimated Partner Product Sales Effective Royalty Rate 2025 Royalty Revenue 2024 Estimated Partner Product Sales Effective Royalty Rate 2024 Royalty Revenue Kyprolis $ 1,529 2. 3% $ 35. 5 $ 1,627 2. 4% $ 38.

4 Filspari 355 9. 0% 32. 0 136 9. 0% 12. 2 Rylaze 395 3. 4% 13.

4 409 3. 3% 13. 7 Capvaxive 752 1. 3% 10. 1 96 0. 6% 0.

6 Ohtuvayre (1) 488 2. 0% 9. 8 42 1. 9% 0. 8 Teriparatide injection (2) 34 23. 8% 8.

1 30 27. 3% 8. 2 Vaxneuvance 801 0. 9% 7. 4 791 0. 7% 5.

2 Evomela 30 20. 0% 5. 9 44 20. 0% 8. 7 Other 441 2. 3% 10.

3 314 2. 4% 7. 5 Total $ 4,825 $ 132. 5 $ 3,489 $ 95. 3 (1) Our royalty rate on Ohtuvayre is 3%, of which 2% is recognized in revenue from intangible royalty assets and the remaining 1% is accounted for as financial royalty asset. (2) We receive tiered profit sharing of 25% on quarterly profits less than $3.

75 million, 35% on quarterly profits greater than $3. 75 million but less than $7. 5 million and 40% on quarterly profits greater than $7. 5 million. 53 Operating Costs and Expense FY 2025 vs. FY 2024 (Dollars in thousands) 2025 2024 Change % Change Cost of Captisol $ 14,549 $ 11,074 $ 3,475 31 % Amortization of intangibles 32,708 32,959 (251) (1) % Research and development 81,182 21,425 59,757 279 % General and administrative 92,449 78,654 13,795 18 % Financial royalty assets impairment 6,197 30,572 (24,375) (80) % Fair value adjustment to partner program derivatives — 15,055 (15,055) (100) % Total operating costs and expenses $ 227,085 $ 189,739 $ 37,346 20 % Total operating costs and expenses for 2025 increased by $37. 3 million or 20% compared with 2024. […]

Key risk disclosures

under the caption “Risk Factors” of this report could negatively affect our results of operations, financial condition and the trading price of our stock. The cautionary statements made in this report are intended to be applicable to all related forward-looking statements wherever they may appear in this report. We urge you not to place undue reliance on these forward-looking statements, which reflect our good-faith beliefs (or those of indicated third parties) and speak only as of the date of this report. Except as required by law, we disclaim any intent or obligation to update these forward-looking statements beyond the date of this report, even if new information becomes available in the future.

This caution is made under the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended. References to “Ligand Pharmaceuticals Incorporated,” “Ligand,” the “Company,” “we,” “our” and “us” include Ligand Pharmaceuticals Incorporated and our wholly-owned subsidiaries. Partner Information Information regarding partnered products and programs comes from information publicly released by our partners and licensees. Trademarks This Annual Report on Form 10-K includes trademarks, trade names and service marks owned by us. Ligand ® , Captisol ® , CyDex ® , LTP ® , LTP Technology ® , NITRICIL TM and Zelsuvmi ® are protected under applicable intellectual property laws and are our property.

All other trademarks, trade names and service marks including, but not limited to Pelican Expression Technology ® , PeliCRM ® , Pfenex Expression Technology ® , OmniAb ® Kyprolis ® , Evomela ® , Veklury ® , Livogiva ® , Bonteo ® , Zulresso ® , Rylaze ® , Vaxneuvance™, Pneumosil ® , Minnebro ® , Baxdela ® , Nexterone ® , Noxafil ® , Duavee ® , Filspari ® , Ohtuvayre™, Qarziba ® and Xepi ® are the property of their respective owners. Solely for convenience, trademarks, trade names and service marks referred to in this report may appear without the ®, ™ or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to such trademarks, trade names and service marks.

Use or display by us of other parties’ trademarks, trade dress or products is not intended to and does not imply a relationship with, or endorsement or sponsorship of, us by the trademark or trade dress owners. Item 1. Business Overview We are a biopharmaceutical royalty company focused on deploying capital and licensing technologies to acquire and create diversified royalty streams from high-value medicines. Our primary business is investing in and structuring royalty interests in mid- to late-stage development and commercial biopharmaceutical products, allowing us to generate long-duration, non-dilutive cash flows supported by a lean corporate cost structure. Capital deployment and technology licensing are the primary drivers of our long-term growth.

We partner capital through a range of transaction structures—including royalty purchases, development-stage financing arrangements, and acquisitions of companies or assets with embedded royalty rights—designed to create cash flowing royalties and produce attractive risk-adjusted returns. Our goal is to provide investors with exposure to biopharmaceutical innovation through a diversified portfolio of royalty interests while mitigating the binary risk and capital intensity traditionally associated with drug development. In addition to our royalty investment activities, we operate two infrastructure-light, royalty-generating platform technologies, Captisol ® and NITRICIL ® . These technologies exemplify our platform technology investment criteria: infrastructure-light, scalable intellectual property with existing royalty streams and the potential to generate incremental royalties through partner-driven development and commercialization.

Our revenue is generated primarily from royalties on sales of products commercialized by our partners, supplemented by Captisol material sales and contract revenue from license fees and milestone payments. We partner with leading biopharmaceutical companies to leverage their capabilities in late-stage development, regulatory execution, and commercialization, while we focus on disciplined capital deployment, portfolio construction, and risk management. This also allows us to leverage our partner's asset infrastructure in sales and marketing, manufacturing and R&D to avoid high cost infrastructure ourselves. Strategy and Execution Investment Strategy We are a biopharmaceutical royalty aggregator, focused on disciplined capital allocation to differentiated late-stage assets and operation of royalty-generating, infrastructure-light platform technologies. We have 12 major commercial stage royalty assets comprising the majority of our royalty revenue. We maintain a portfolio of more than 90 additional commercial and development-stage programs. […]

Source and methodology

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