Executive Summary

Q3 2025 materially beat Street expectations on revenue and EPS, driven by 47% royalty growth, a $24.5M ZELSUVMI out-license, and a $28.6M gain on sale of the Pelthos business; total revenue was $115.5M vs S&P Global consensus $58.1M, and adjusted diluted EPS was $3.09 vs $1.05 consensus, with EBITDA also ahead of consensus (see Estimates Context) .
Management raised full‑year 2025 guidance for the second time: core revenue to $225–$235M (from $200–$225M) and core adjusted EPS to $7.40–$7.65 (from $6.70–$7.00); royalties to $147–$157M, Captisol to $40M, and core contract revenue to $38M .
Key portfolio drivers: Merck’s Ohtuvayre (COPD) launch outperformance and Verona acquisition close, Travere’s FILSPARI REMS label update and 26% seq. sales growth, Recordati’s Qarziba, and Merck’s CAPVAXIVE; management reiterated the strategy to compound royalty receipts and highlighted ~$1B deployable capital following a $460M 0.75% 2030 convertible note (no dilution to $294/share) .
Management emphasized “pivotal quarter” actions—Pelthos deconsolidation and the Orchestra BioMed royalty investment—positioning Ligand to accelerate capital deployment into late‑stage, high‑value assets; CEO: “This was a pivotal quarter for Ligand” .

What Went Well and What Went Wrong

What Went Well
- Strong upside to financials and raised FY guide: revenue +123% YoY to $115.5M; adjusted diluted EPS $3.09 (+68% YoY); core revenue boosted by $24.5M ZELSUVMI out‑license while excluding the $28.6M Pelthos gain from core .
- Portfolio momentum: Ohtuvayre tracking ahead; CAPVAXIVE Q3 sales $244M; FILSPARI Q3 sales $90.9M (+26% q/q) with REMS monitoring eased, supporting adoption; management highlighted a 3% Ohtuvayre royalty and ~9% FILSPARI royalty .
- Balance sheet and financing: completed $460M converts at 0.75% coupon, 32.5% conversion premium; call spread eliminates dilution up to $294/share; quarter‑end cash and investments $664.5M .
What Went Wrong
- Non‑recurring and accounting complexity: large non‑operating gains (e.g., Pelthos equity mark) and one‑time Pelthos out‑license create optical volatility; management carved out $28.6M Pelthos sale gain from core metrics for comparability .
- Expense uptick: R&D rose to $21.0M in Q3 (from $5.7M) due to $17.8M Orchestra BioMed funding charge; G&A increased to $28.4M tied to Pelthos transaction costs .
- Tax and mix headwinds noted by CFO limiting near‑term operating leverage: higher foreign tax mix (UK Ohtuvayre entity, Austrian asset) and dilution from a higher share price modestly dampened flow‑through .

Financial Results

Headline P&L vs prior year and quarter

Metric	Q3 2024	Q2 2025	Q3 2025
Total Revenues and Other Income ($M)	51.8	47.6	115.5
Income (Loss) from Operations ($M)	3.1	8.4	54.9
Operating Margin (%)	6.1% (3.1/51.8)	17.7% (8.4/47.6)	47.6% (54.9/115.5)
GAAP Diluted EPS ($)	(0.39)	0.24	5.68
Adjusted Diluted EPS ($)	1.84	1.60	3.09

Notes: Operating margin calculated using reported operating income divided by total revenues and other income.

Revenue mix and drivers

Revenue Component ($M)	Q3 2024	Q2 2025	Q3 2025
Royalties	31.7	36.4	46.6
Captisol Sales	6.3	8.3	10.7
Contract Revenue & Other Income	13.8	2.9	58.2 (incl. $24.5M ZELSUVMI out‑license; $28.6M Pelthos gain)
Total Revenues and Other Income	51.8	47.6	115.5

Additional context: Royalties +47% YoY to $46.6M, driven by FILSPARI, Ohtuvayre and Qarziba; Captisol +70% YoY on order timing .

KPIs and balance sheet

KPI	Q3 2025
Cash, Cash Equivalents & Short‑Term Investments ($M)	664.5
2030 Convertible Notes Outstanding (Long‑term, net) ($M)	445.5
Convert coupon / conversion premium / anti‑dilution via call spread	0.75% / 32.5% / no dilution to $294/share
Partner sales: FILSPARI ($M)	90.9 (Q3 sales)
Partner sales: Ohtuvayre ($M)	136 (Q3 sales)
Partner sales: CAPVAXIVE ($M)	244 (Q3 sales)

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Core Total Revenue	FY2025	$200M–$225M	$225M–$235M	Raised
Core Adjusted EPS (diluted)	FY2025	$6.70–$7.00	$7.40–$7.65	Raised
Royalties	FY2025	$140M–$150M	$147M–$157M	Raised
Captisol Sales	FY2025	$35M–$40M	$40M	Raised (point est.)
Core Contract Revenue	FY2025	$25M–$35M	$38M	Raised

Core definitions: management excludes the $28.6M Pelthos business sale gain from core, but includes the $24.5M ZELSUVMI out‑license as core given its strategic nature .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2 2025)	Current Period (Q3 2025)	Trend
Capital deployment & BD funnel	Q1: Castle Creek royalty financing ($50M share of $75M syndicate) ; Q2: $40M commitment to Orchestra BioMed with Medtronic partnership; strong origination, 25+ active opps	$460M converts at 0.75% coupon; ~$1B deployable capital; plan to expand BD/investment teams	Increasing capacity and pace
Ohtuvayre (COPD)	Q1: Strong U.S. launch trajectory	Q3 sales $136M (+32% q/q); Verona acquired by Merck; 3% royalty to LGND	Strengthening
FILSPARI (IgAN/FSGS)	Q1: EU standard approval; FSGS sNDA submitted; REMS changes pending	Q3 sales $90.9M (+26% q/q); REMS monitoring reduced; FSGS PDUFA Jan 13, 2026	Positive adoption; label tailwinds
ZELSUVMI (molluscum)	Q1: Pelthos merger announced ; Q2: commercial launch; $5M milestone to LGND	Q3: $24.5M out‑license income recognized; deconsolidation of Pelthos; early script trends “encouraging”	Building
Regulatory posture / FDA	—	Tzield sBLA accepted with Commissioner’s National Priority Voucher for expedited review; mgmt sees more pragmatic FDA in severe diseases	More acceleration signals
Financing structure & dilution	—	Net share settlement; call spread removes dilution to $294; prioritizing late‑stage, de‑risked assets	Shareholder‑friendly

Management Commentary

Strategic message: “This was a pivotal quarter for Ligand… We successfully completed a convertible debt financing… and raised our full-year guidance… due to the continued strength and momentum of our growing commercial royalty portfolio” (CEO) .
Investment strategy: Focus on late‑stage, high‑margin royalties and special situations that can generate superior risk‑adjusted returns; ~130 opportunities reviewed YTD with a disciplined selection process (CEO) .
Portfolio outlook: Ohtuvayre tracking “well ahead” of initial forecast; CAPVAXIVE gaining share; FILSPARI ramping with REMS easing and FSGS catalyst; Palvella’s QTORIN programs approaching readouts (VP Strategy) .
Balance sheet & capital allocation: “Total deployable capital to approximately $1 billion… we’re not limited by dollars… planning to expand our BD and investment teams” (CFO) .
Adjusted earnings quality: Pelthos out‑license retained in core/adjusted; $28.6M Pelthos sale gain excluded to enhance comparability (CFO) .

Selected quotes:

“Royalty revenue grew 47%… adjusted EPS increased 68%” (CEO) .
“We executed on a $460 million convertible… 0.75% coupon… no dilution to our stock up to $294 per share” (CFO) .
“FILSPARI has now become our largest royalty‑generating asset on an annualized run rate basis” (CFO) .

Q&A Highlights

Special situations pipeline: CEO described playbook (adding management, restructuring) and capacity limits—there are “way more of those to do than we can do,” hence adding operating talent .
Deal sizing and risk: No more than ~$50M per binary risk situation; larger checks possible for multi‑asset, de‑risked opportunities; equity used to catalyze partner financings (e.g., Orchestra BioMed) .
Competitive landscape in royalty capital: Little competition observed in development‑stage royalties; most of ~$12B royalty capital still targets commercial assets (CEO) .
Regulatory/FDA dynamics: Management sees alignment with focus on high‑value, severe disease assets and shorter review timelines, supportive of LGND’s pipeline partners (CEO) .
ZELSUVMI launch: Limited disclosures pre‑Pelthos call; mgmt views peak sales guide of ~$175M as conservative at this early stage (CEO) .

Estimates Context

Q3 2025: Actual vs S&P Global Consensus

Metric	Consensus	Actual	Surprise
Revenue ($)	58,051,000	115,461,000	+99%
EPS (Primary/Adjusted) ($)	1.05	3.09	+194%
EBITDA ($)	41,276,000	63,255,000	+53%
# EPS Estimates	6	—	—
# Revenue Estimates	7	—	—

Values retrieved from S&P Global.

Implications: Large beats on revenue and adjusted EPS reflect both organic royalty outperformance (FILSPARI, Ohtuvayre, CAPVAXIVE) and transactional income ($24.5M ZELSUVMI out‑license), plus partner equity valuation gains supporting GAAP results; Street models likely to move higher on royalty lines and contract revenue, and on FY EPS given guidance raise .

Key Takeaways for Investors

Beat‑and‑raise quarter: Broad‑based upside in royalty streams plus $24.5M licensing income powered material beats and a second FY guide raise; operating leverage evident with operating margin ~48% .
Royalty growth engines accelerating: Ohtuvayre (Merck scale), FILSPARI (REMS easing; FSGS PDUFA Jan‑2026), CAPVAXIVE (share gains) likely sustain momentum into 2026 .
Quality of earnings disclosure improved: Management’s core/adjusted presentation appropriately excludes Pelthos sale gain, enhancing comparability of recurring economics .
Balance sheet firepower: $665M cash and 0.75% converts (no dilution to $294) provide ample capacity to add late‑stage royalties; funnel expansion expected .
Near‑term catalysts: Palvella QTORIN Phase 2 data (Dec‑2025), FILSPARI FSGS PDUFA (Jan‑13‑2026), continued Ohtuvayre/CAPVAXIVE launch updates, Pelthos launch KPIs .
Watch items: One‑time items add volatility; R&D/transaction charges (e.g., Orchestra BioMed) can elevate expenses; foreign tax mix modestly dampens EPS flow‑through near term .

Appendix: Additional Detail and Reconciliations

Pelthos/ZELSUVMI impacts: Q3 recognized $53.1M in contract revenue and other income from Pelthos divestiture—$24.5M out‑license (retained in core) and $28.6M sale gain (excluded from core) .
Q3 operating expenses: R&D $21.0M (+$17.8M Orchestra BioMed charge), G&A $28.4M (Pelthos transaction costs) .
Partner program updates: Lasix ONYU (Captisol‑enabled) FDA approval; LGND entitled to milestone, low‑single‑digit royalty and material sales .

LIGAND PHARMACEUTICALS INC (LGND)·Q3 2025 Earnings Summary