Ligand Pharmaceuticals Incorporated (LGND) Earnings

Management highlights

- **Zoma Acquisition Integration and Portfolio Update** • The acquisition of Zoma Royalty has significantly scaled Ligand's diversified royalty portfolio and accelerated long-term growth, with management confident in the portfolio's near and long-term potential. • The acquisition added a large pipeline of assets, including 14 late-stage assets and over 100 preclinical/early clinical assets, with $2.3 billion in total contractual milestone rights. • Key acquired commercial assets include Vibismo (a top 3 Roche blockbuster for retinal conditions, with peak royalty to Ligand expected at ~$35 million) and Ojemda (a pediatric oncology asset with a mid-single-digit tiered royalty and peak sales consensus over $1 billion). - **Upcoming Catalysts (Next 18 Months)** • Up to 7 pivotal trial readouts are expected across the combined portfolio, including readouts for Ojemda (frontline PLGG label expansion), Leona Bio's Lazofoxafine (metastatic ER-positive HER2-negative breast cancer), Takeda's mesogidimab (ITP and IgA nephropathy), ozevanpator (major depressive disorder), Resolute's erosodotug (tumor hyperinsulinism), and Velixibat (primary biliary cholangitis). • A rolling NDA for Palvella's cuturin rapamycin (microcystic lymphatic malformations) is on track for completion by end of 2026, with potential approval in 2027. • Expected geographic expansion opportunities for already commercial royalty-generating products include Filspari (Japan), Otuver (China), and Ojemda (Japan). - **Investment and Business Development Strategy** • Management will continue Ligand's historical focus on sub-$100 million deals (typically $25-$75 million) for specific royalty assets or project financings, investing ~$100-$125 million annually, with capacity up to ~$200 million annually. • The Zoma portfolio includes multiple early/mid-stage assets that were valued at $0 in original underwriting; management is evaluating these for low-cost follow-on investment that could unlock significant upside, with all opportunities aligned to Ligand's core investment criteria (high unmet need, evidence of efficacy/safety, strong partner alignment). • Ligand will use follow-on equity investments as a tool to support partner companies and protect the value of its royalty positions, when appropriate.

Guidance

- The full contribution of the Zoma acquisition, including top-line revenue and cost/tax synergies, is already reflected in the previously announced guidance increase, with $1.50 2027 EPS expected to be fully driven by Zoma's top-line contribution and synergies. - Management expects to generate approximately $300 million in cash in 2027, partially from the Zoma acquisition's acquired tax attributes. - 2026 milestone revenue guidance remains unchanged at 10-20 million. Additional detail on milestone timing and probability will be provided at the December Investor Day. - Underwriting discipline, investment criteria, and target returns remain unchanged despite the low-cost $700 million financing completed for the acquisition.

Segment performance

No explicit segment financial performance (absolute revenue figures or revenue contribution percentages) for individual product or business segments was provided in this call. The call focused on the post-acquisition Zoma portfolio and pipeline opportunities rather than reporting historical quarterly or period-specific segment financial results.

Risks & headwinds

- Biopharmaceutical clinical development carries inherent binary risk, and management does not expect all upcoming 7 pivotal trial readouts over the next 18 months to deliver positive results. • Velixibat for primary sclerosing cholangitis (PSC) experienced a timeline delay: the FDA recommended a Phase 3 trial, pushing potential submission to the first half of 2027 from the second half of 2026. Management still holds conviction in the asset and expects the breakthrough therapy designation will facilitate iterative discussions with FDA to avoid a full Phase 3, but the delay introduces additional regulatory risk. • Early stage assets from the Zoma portfolio require additional small investment to validate proof of concept, and there is no guarantee these efforts will yield valuable, licensable assets.

Analyst Q&A

• Q: One month after closing the Zoma acquisition, have you found any unexpected developments in the portfolio, and how do Zoma's financial royalty structures compare to Ligand's historical approach?

  A: Multiple positive surprises emerged from assets that were originally valued at $0 during underwriting, which focused on later-stage assets. New opportunities for follow-on investment in mid and early-stage assets have been identified that align with Ligand's portfolio strategy. Zoma's approach focused on acquiring royalty portfolios from companies seeking liquidity, to capture net cash and tax assets. Ligand will not pursue very small low-asset deals, but will benefit from the cumulative tax benefits from Zoma's roll-up of these assets. Ligand's core focus remains on high-quality assets that can generate future royalty cash flow.

• Q: Post-Zoma acquisition, what is your business development strategy going forward, and how are you approaching the early stage assets in the Zoma portfolio?

  A: Ligand will continue its historical strategy of executing small to mid-sized deals (typically $25-$75 million, capped at $100 million per asset) for specific royalty assets, which remains a large, target-rich market with high demand for non-dilutive capital. Ligand's greater scale and capital access allows it to pursue low-cost validation investments in early-stage Zoma assets that were valued at zero in underwriting. All opportunities being evaluated align with Ligand's core investment criteria focused on high unmet need and strong partner teams.

• Q: For the 14 late-stage Zoma assets, which are most promising, and how does the low-cost recent capital change your underwriting approach?

  A: The most exciting near-term late-stage assets are those with upcoming pivotal readouts already highlighted in prepared remarks: Ojemda (pediatric low-grade glioma), mesogidimab, ozevanpator, Velixibat, and erosodotug. Up to seven pivotal readouts are expected in the next 18 months, a significant increase from just one major readout this year. Underwriting criteria, hurdle rates, and target deal sizes remain unchanged; the lower cost of capital simply increases the return spread for investors, and Ligand will continue focusing on the sub-$100 million deal market that it is built to serve.

• Q: What is the update on the Velixibat program for PSC after the FDA's recent Phase 3 recommendation?

  A: Management was disappointed by the decision but retains conviction in Velixibat for both PSC and primary biliary cholangitis. The FDA's recommendation came from a new review team and was not due to data deficiencies, and the program retained breakthrough therapy designation after the meeting. The approval timeline is pushed out, but the partner continues to believe an additional Phase 3 will not be required, and the PBC Phase 2b trial remains on track. No changes to overall projections have been made.