Ligand Pharmaceuticals said its royalty aggregator model is gaining scale after the mid-July acquisition of XOMA, expanding its partnered programs to more than 220 and positioning the biotech firm for accelerated earnings growth.
The San Diego-based company, which trades at a $5.69 billion market capitalization, reported second-quarter total royalties of $48 million, led by its 9% royalty on FILSPARI, an approved treatment for focal segmental glomerulosclerosis and IgA nephropathy. FILSPARI’s first-quarter sales post-FSGS approval exceeded analyst expectations, according to Chief Financial Officer Tavo Espinoza.
Ligand raised its full-year 2024 adjusted earnings-per-share guidance to a range of $9.00 to $9.50 from $8.50 to $9.50, citing contributions from the XOMA deal. The acquisition added $0.50 per share to 2024 earnings and is expected to contribute at least $1.50 per share in 2025. XOMA’s operating costs were reduced from over $30 million to less than $5 million, and the deal brought $110 million in Section 174 R&D tax credits and net operating losses.
The company deployed $1 billion across 19 transactions over the past three years, with $700 million remaining deployable capital after the XOMA acquisition. Ligand’s June 2024 $700 million convertible debt financing at a 0% coupon rate preserved shareholder value through a 100% call spread, eliminating dilution up to $524 per share. Shares repurchased totaled 229,000 for $60 million.
Royalty receipts are projected to grow at a 23% compound annual rate, with underlying cash flows expanding 20% to 30% annually. Ligand’s portfolio now includes 15 key commercial partnered royalty programs, nine of which were added or approved since 2022. The company expects up to seven pivotal study readouts by the end of 2027, compared with zero in 2023 and one in 2024.
Management highlighted Palvella’s mTOR inhibitor for microcystic lymphatic malformations, with a tiered royalty rate of 8% to 9.8%. Analysts estimate a potential $1 billion to $3 billion franchise, translating to $100 million to $300 million in annual royalties. Lauren Hay, Vice President of Portfolio Strategy and Investments, noted that 98% of patients completing the efficacy period opted to continue treatment in the open enrollment phase.
Ligand also retains a 25% share of litigation proceeds tied to the TREMFYA contingent value right, with no legal costs incurred. The company’s stock has delivered a 76% return over the past year and 49% year-to-date, trading at $285.73 per share with a P/E ratio of 31.
