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By John Vandermosten, CFA

NASDAQ:LGND

READ THE FULL LGND RESEARCH REPORT

Ligand Pharmaceuticals, Inc. (NASDAQ:LGND) reported second quarter 2025 financial and operational results posting revenues of $47.6 million, a 15% rise over prior year levels. Drivers for the result were a 57% increase in royalty revenue and a 10% increase in Captisol revenue offset by a 73% decrease in Contract Revenue. Some of the individual portfolio constituents continuing to contribute to the year over year increase include Qarziba, Filspari and Ohtuvayre.

Adjusted core earnings per share were $1.60, up from 2Q:24’s $1.40. Ligand raised 2025 guidance by just under 12% for both revenues and earnings per share (EPS) resulting in a range of $200 to $225 million for revenues and $6.70 to $7.00 in EPS. Since the previous quarterly update, Ligand has divested Pelthos Therapeutics which has, in turn, launched Zelsuvmi, announced an investment and royalty deal with Orchestra BioMed and proposed a $400 million convertible debt offering. We also get a date for the investor day on December 9^th in New York.

Ligand provided a comprehensive update on all of its major portfolio constituents which included an acquisition, clinical trial progress, data readouts, partnerships and regulatory hurdles. One of the most publicized events was Merck’s acquisition of Verona and its Ohtuvayre asset. The $200 billion pharmaceutical company agreed to pay $10 billion to acquire Verona. We anticipate that Merck’s ownership will help accelerate growth of the COPD drug and help expand it internationally as compared to what Verona could accomplish on its own. Furthermore, Ohtuvayre is the subject of a Phase III trial in China and has met its primary and secondary clinical endpoints in the ENHANCE study, demonstrating improvements in lung function.

Palvella Therapeutics achieved full enrollment in its Phase III SELVA trial evaluating Qtorin rapamycin for the treatment of microcystic lymphatic malformations (MLM). Data readouts came from Agenus, which announced that its botensilimab and balstilimab (BOT/BAL) combination achieved a two-year survival rate of 42% along with a more mature 21-month median overall survival in an expanded cohort of 123 patients. Subjects were diagnosed with microsatellite-stable metastatic colorectal cancer without active liver metastases. Agenus also announced its entry into a partnership with Zydus to help accelerate clinical development and scale global manufacturing for BOT/BAL.

Filspari, which has been one of Ligands’ most impactful and highest potential assets, was recommended by England’s National Institute for Health and Care Excellence as an option to treat primary IgA nephropathy in adults with a urine protein excretion of 1.0 g/day or more. Filspari is also lined up for two target action dates in the United States. The first is a change from monthly to quarterly Risk Evaluation and Mitigation Strategy (REMS) monitoring later this month and the second is an indication expansion to focal segmental glomerulosclerosis (FSGS) in January of next year.

2Q:25 Financial and Operational Results

Ligand reported second quarter 2025 results in a press release and Form 10-Q filing with the SEC on August 8^th. A conference call was held with an accompanying slide deck to discuss results with investors following the release. For the quarter ending June 30^th, 2025 revenues of $47.6 million were recognized. GAAP net loss per share for 2Q:25 totaled $0.24 and core adjusted EPS was $1.60. For second quarter 2025 versus the same prior year period:

• Revenues of $47.6 million rose 15% from $41.5 million due to strong growth in royalties and Captisol partially offset by a fall in Contract Revenue. Royalty revenues rose by 57% driven by contributions from the acquisition of Qarziba and an increase in Filspari and Vaxneuvance royalties. Captisol sales rose 10% on contributions from Gilead’s Veklury. Contract revenue fell 73% due to prior year recognition of several milestones for Ohtuvayre, Capvaxive and Filspari;
• Cost of revenue, which is related to Captisol cost of goods sold, totaled $2.9 million, flat with prior year levels. This represents a gross margin on Captisol sales of 64.9%, up from 61.3%;
• Amortization of intangibles was flat at $8.3 million;
• Research and development expense totaled $6.6 million versus $5.4 million rising due to the expenses incurred by Pelthos in preparation for the Zelsuvmi launch;
• General & Administrative expenses were $20.2 million, up 14% from $11.0 million due to employee-related and operating costs associated with incubating the Pelthos business;
• Other adjustments include a $1.3 million adjustment to partner program derivatives, a $0.9 million gain from short term investments, $0.5 million in net interest income, and $1.4 million of other non-operating income;
• Income tax expense of $6.4 million represents a tax rate of 56.8% compared to income tax benefit of $13.5 million;
• Net income was $4.8 million versus a net loss of $51.9 million or $0.24 and ($2.88) per share, respectively. Adjustments to 2Q:25 GAAP earnings added back $1.36 per share to generate core earnings of $1.60 per share.^[1]

As of June 30^th, 2025, cash, equivalents and short-term investments totaled $245 million. This amount compares to the $256 million balance held at the end of 2024. Operational cash use and purchase of property and equipment in the second quarter totaled ($15.6) million while cash used in financing generated $15.0 million, in part due to proceeds from Pelthos investors. The company maintains access to a revolver credit and an at-the-market (ATM) facility with Stifel, Nicolaus that can expand its access to capital as needed. Ligand raised its 2025 guidance for revenues from $180 – $200 million and core EPS of $6.00 – $6.25 to revenues of $200 – $225 million and core EPS of $6.70 – $7.00. A week after reporting second quarter results, Ligand announced its intent to issue $400 million in convertible notes due 2030 with an option to purchase an additional $60 million.

Orchestra BioMed Holdings Investment

Ligand announced a $40 million investment in Orchestra BioMed Holdings (NASDAQ:OBIO) on July 31^st, 2025. It consists of a royalty investment and equity private equity placement. The arrangement provides Ligand with a tiered royalty on future sales of Orchestra’s atrioventricular interval modulation (AVIM) therapy for the treatment of uncontrolled hypertension in pacemaker-indicated patients and from its Virtue Sirolimus Angioinfusion Balloon (SAB) programs. The AVIM program is being developed in partnership with Medtronic and the SAB program with Terumo. Both Medtronic and Terumo are expected to commercialize the product in their respective programs. We expect that first revenues from the AVIM and SAB programs will begin in the 2029/2030 timeframe.

Ligand’s investment begins with a $20 million royalty investment at the closing of the deal and $5 million in an equity investment. At the nine-month anniversary of the transaction closing, Ligand will invest another $15 million, which will complete the transaction and entitle Ligand to a tiered royalty on sales of the AVIM therapy and Virtue SAB. A high teens royalty will be paid on net sales under $100 million for all of AVIM and SAB indications. A mid-single digit royalty will be paid on net sales over $100 million from AVIM therapy in uncontrolled hypertension and increased cardiovascular risk indications and Virtue SAB in coronary artery disease.

Further details of the arrangement were included in a Form 8-K filed by Orchestra BioMed outlining the royalty tiers. Annual net sales of the AVIM and SAB less than or equal to $100 million in any field will generate a 17% royalty for Ligand. Sales of the two products above $100 million will yield a 4% royalty to be paid to Ligand. Ligand will pay $20 million upon close of the deal and another $15 million 270 days after the close. If certain undisclosed milestones are not met for the Backbeat clinical study by January 1^st, 2027, the royalty tiers will increase to 20% and 7%. Ligand also receives a warrant to buy two million shares at a price to be determined based on market activity. As part of the royalty investment, other capital from Medtronic and a public offering secured over $111 million in proceeds and committed capital for Orchestra as detailed in a press release on August 5^th, 2025.

Orchestra Background

Orchestra was founded in 2018 and uses a partnership-enabled business model. It works with established medical device companies Medtronic and Terumo to develop, innovate and commercialize its products. Its pipeline contains two product platforms. The most advanced is the AVIM Therapy which is the subject of three studies including the Backbeat global pivotal study. The second platform is the Virtue Sirolimus AngioInfusion Balloon which is the subject of four studies.

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