By John Vandermosten, CFA
NASDAQ: LGND
READ THE FULL LGND RESEARCH REPORT
Ligand Pharmaceuticals, Inc. (NASDAQ: LGND) reported first quarter 2026 results with revenues of $51.7 million and adjusted core earnings per share (EPS) of $1.63. Revenue growth of 14% generated a 23% EPS increase. By line item, royalties rose 56% while Captisol and Contract revenue fell. The big news since the prior financial update was the XOMA Royalty transaction, which adds over 100 new assets to the portfolio, including seven key royalty-generating assets. Other activity since the start of the year includes the approval of Filspari for focal segmental glomerulosclerosis (FSGS) and advancement of Palvella’s QTORIN rapamycin on several fronts, including an upcoming regulatory submission and start of two clinical trials. Additionally, Ligand gave notice to Viking Therapeutics regarding the TR-Beta program and remitted an additional $15 million to Orchestra Biomed, along with expanded clinical work in other portfolio assets.
Along with the XOMA announcement on April 27th, Ligand raised its revenue and earnings guidance for 2026 and earnings guidance for 2027. 2026 revenue guidance was increased by $25 million to a range of $270 million to $310 million, and earnings per share were increased by $0.50 to a range of $8.50 to $9.50. For 2027, Ligand anticipates that XOMA revenues will add $1.50 to EPS.
1Q:26 Financial and Operational Results
Ligand reported first quarter financial and operational results disclosed in a press release and Form 10-Q filing with the SEC on May 7th and 8th, respectively. A conference call was held with an accompanying presentation to discuss results with investors following the release. For the quarter ending March 31st, 2026, Ligand recognized revenues of $51.7 million. GAAP loss per share for 1Q:26 totaled $0.67, and adjusted core EPS was $1.63, with the primary difference related to a change in fair value of the Pelthos holdings. For 1Q:26 versus the same prior year period:
- Revenues of $51.7 million rose 14% from $45.3 million, driven by strong growth in royalties. Intangible royalties grew 53% to $32.9 million, and financial royalties grew 70% to $10.0 million. Captisol revenues were $8.7 million, falling 36%. Despite the decline, management has visibility into sales over the next year and maintains its 2026 guidance of $35 to $40 million. Contract revenue and other income fell 97% to $110,000 as a regulatory milestone from Xi’an Xintong recognized in the prior year was not repeated;
- Cost of revenue, which is related to Captisol cost of goods sold, totaled $3.3 million, falling 33% over prior year levels. The decrease is due to lower Captisol sales. Captisol gross margin fell to 62.2% from 64.0%;
- Amortization of intangibles was $8.1 million vs. $8.3 million, with the change due to deconsolidation of LNHC, the holding vehicle for the spin-out of Pelthos, on July 1st, 2025;
- Research and development expense fell 96% to $2.1 million versus $50.1 million. The decline was due to the absence of a funding payment for D-Fi royalty rights and expenses related to Pelthos;
- General & Administrative expenses were $20.8 million, up 11% from $18.8 million, with the increase primarily due to increases in headcount, higher employee-related costs, and share-based compensation;
- There were no fair value adjustments to partner program derivatives compared to a $443,000 expense;
- Total non-operating expense was $41.6 million vs. $14.0 million. Material items include a $49.2 million loss related to Pelthos holdings, a $3.9 million gain from short-term investments related to increases in Palvella stock, partially offset by declines in Viking stock, and $1.5 million in gains from other equity securities and financial instruments. This line item also includes net interest income, which totaled $4.9 million;
- Income tax benefit of $10.9 million represents a tax rate of 45.0%;
- Net loss was $13.3 million ($0.67 per share) versus a net loss of $42.5 million ($2.21 per share). Adjustments to 2025 GAAP earnings added $2.30 per share to generate core earnings of $1.63 per share.[1] Material adjustments include $2.32 for Pelthos offset by ($0.77) for income tax effect, among other items.
As of March 31st, 2026, cash, equivalents, and short-term investments totaled $779 million. This amount compares to the $734 million balance held at the end of 2025. Free cash flow for the quarter totaled $48.5 million, while cash used in financing was $14.1 million, entirely related to taxes paid for equity awards. The company maintains access to a revolving line of credit and an at-the-market (ATM) facility with Stifel, Nicolaus, that can expand its access to capital as needed. Following the end of the quarter, Ligand announced that it intends to acquire XOMA for $739 million to be funded with cash on the balance sheet and accessing an existing revolving credit facility.[2] Access to the two sources of capital, along with future anticipated cash flows, is expected to continue to allow Ligand to deploy from $150 to $250 million on new royalty assets.
Viking Therapeutics Program Termination
Viking Therapeutics’ (NASDAQ: VKTX) TR-Beta program is a licensed thyroid hormone receptor beta agonist platform. It is developing VK2809 for MASH and VK0214 for X-linked adrenoleukodystrophy. The core license behind the TR-Beta program was part of a Master License Agreement signed on May 21st, 2014, with Ligand’s subsidiary Metabasis Therapeutics.
On April 24th, 2026, Ligand delivered written notice to Viking, notifying them of termination of the TR-Beta Program. Details of the notification were included in a Form 8-K filed on April 30th. The termination was based on Ligand’s assertion that Viking materially breached its obligation to develop and commercialize the TR-Beta program. Upon successful termination, Viking must grant Ligand a non-exclusive, worldwide, royalty-bearing sublicense under any patent rights controlled by Viking. Viking disputes Ligand’s right to terminate the program, and we anticipate that the parties are reviewing the matter. Ligand’s goal is to get the programs based on TR-Beta developed due to the substantial unmet need, particularly for Metabolic Dysfunction-Associated Steatohepatitis (MASH) and replicate the success of other commercially available therapies.
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[1] Details of the GAAP to core earnings reconciliation are in Ligand’s earnings press release. Material adjustments include Share-based compensation expense, Amortization, change in fair value for Pelthos securities and gain on sale of Pelthos.
[2] Ligand has access to a $125 million credit facility with Citibank, of which $124.4 million is available as of March 31st, 2026.