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DATE

Thursday, Nov. 6, 2025, at 8:30 a.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer — Todd Davis
  • Chief Financial Officer — Tavo Espinoza
  • Vice President of Strategic Planning and Investment Analytics — Lauren Hay
  • Vice President, Investor Relations — Melanie Herman

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RISKS

  • R&D Expense Spike – R&D expenses rose to $21 million from $5.7 million in the prior year period, driven by a $17.8 million one-time charge related to the Orchestra BioMed investment.
  • Human Capital Constraints – CFO Espinoza stated, At this point, we're not limited by dollars. We're limited by human capital. indicating expansion of the investment team is necessary to address deal flow.

TAKEAWAYS

  • Total Revenue and Other Income -- $115.5 million, up from $51.8 million in the same quarter last year, including $53.1 million from the Peltos transaction.
  • Royalty Revenue -- $46.6 million, up 47% year-over-year, driven by performance across multiple recently approved products.
  • Adjusted EPS -- $3.09 adjusted EPS, up 68%, capturing increased royalty revenue and the ZELZUVY out-license gain.
  • GAAP Net Income -- $117.3 million ($5.68 per share) net income, compared to a net loss of $7.2 million ($0.39 per share) in Q3 2024.
  • Operating Cash Flow -- Now exceeding $150 million on an annualized basis.
  • Capital Deployment Capacity -- $1 billion in deployable capital, with $665 million in cash/investments plus a $200 million undrawn credit facility and equity holdings in Peltos.
  • Peltos Equity Value -- Estimated at $138 million at quarter end, with a lockup expiring 12/31/2025.
  • Convertible Debt Financing -- $460 million five-year note, 75 basis point coupon, 32.5% conversion premium on the convertible note issued in August, and net share settlement structure designed to limit dilution up to $294 per share.
  • Full-Year 2025 Guidance Raised -- Core revenue now expected at $225 million-$235 million; adjusted EPS $7.40-$7.65 (up ~30% from prior year); royalty revenue $147 million-$157 million; Captisol sales $40 million; contract revenue $38 million.
  • Five-Year Royalty Growth Outlook -- Management projects a royalty receipts compound annual growth rate (CAGR) exceeding 22%, with the portfolio alone supporting 18% CAGR and at least 4% additional growth possible from new investments.
  • Portfolio Transactions -- Committed $35 million to Orchestra BioMed for royalty interests, $5 million additional equity in Orchestra’s $111 million private placement, and $11 million to Evercore for royalty rights and milestone/technology fees on Sanofi’s efderolperin alfa (AT-292).
  • Key Product Launches -- Merck’s O2VARE, Cavaxi, Trevyr’s Tilspari, and the commercial launch of ZELSUMI identified as major royalty revenue drivers.
  • ZELSUMI Launch -- CEO Davis reported strong uptake of ZELSUMI in the early launch phase, and management noted peak sales guidance of $175 million for the launch phase, though called this “conservative.”
  • O2VARE Sales Trajectory -- Q3 sales grew 32% sequentially; consensus forecasts now project $2 billion in sales by 2029 (up from $1.2 billion), with Ligand Pharmaceuticals (LGND +9.37%) holding a 3% royalty position.
  • Filspari Performance -- Sales reached $90.9 million, representing 26% sequential and 155% year-over-year growth; Ligand earns a 9% royalty on sales, which management identified as the largest royalty generating asset on an annualized run rate basis according to CFO Espinoza.
  • FDA and Regulatory Progress -- Four pipeline assets received FDA approvals in 2024; significant portfolio progress including FDA-accelerated reviews such as Sanofi’s TZEAL nomination under the National Priority Voucher and Cavaxib approval in Japan.

SUMMARY

Ligand Pharmaceuticals (LGND +9.37%) management delivered a data-focused update, highlighting a dramatic increase in both revenue and adjusted earnings per share, stemming from rapid expansion in the company’s royalty portfolio and recent strategic transactions. Extensive capital deployment and business development activity were emphasized, as the company leverages its enhanced liquidity to pursue a diversified pipeline of late-stage royalties and equity investments. Management raised guidance for core revenue and adjusted earnings per share, directly attributing the improvement to portfolio outperformance, accelerating product launches, and favorable transactional gains. Outlook for multi-year royalty growth was reaffirmed, supported by above-guidance product launches and projections.

  • CEO Davis identified the recent convertible debt transaction as providing additional flexibility to pursue strategic opportunities that support growth initiatives.
  • CFO Espinoza explained the deconsolidation and ensuing gain from the Peltos transaction, specifying the $53 million gain recognized, $24.5 million related to the sale of the MiOut license and $28.6 million from the business sale.
  • Vice President Hay cited the positive impact of the FDA Commissioner’s National Priority Voucher on Sanofi’s TZEALD, projecting a significantly expanded indication in the near term.
  • The company reported active review of approximately 32 investment opportunities, reflecting robust origination activity and ongoing expansion of the business development team.
  • Peltos share appreciation -- rising from $52 million at issuance on July 1 to $138 million at quarter end -- was cited as evidence of transaction value and market confidence.
  • The R&D spike was driven by a fully expensed $17.8 million investment in Orchestra BioMed, classified as project-related and non-recurring for the period.

INDUSTRY GLOSSARY

  • Captisol: A proprietary cyclodextrin-based excipient used to improve solubility and stability of pharmaceutical compounds, licensed by Ligand Pharmaceuticals to pharmaceutical partners.
  • REMS (Risk Evaluation and Mitigation Strategy): FDA-mandated safety program for certain medications with serious safety risks, affecting product launch and monitoring requirements.
  • PDUFA Date: The target date set by the FDA to complete its review of a new drug application under the Prescription Drug User Fee Act.
  • Royalty Monetization: The process of selling or investing in future royalty streams from pharmaceutical products.
  • Out-License: The act of granting rights for a product or technology to a third party in exchange for financial consideration, typically royalties or milestone payments.
  • Binary Risk Situation: An investment scenario where outcome is highly contingent on a single event, such as regulatory approval, resulting in a binary result (success or failure).

Full Conference Call Transcript

CEO Todd Davis, Chief Financial Officer Tavo Espinoza, and Vice President of Strategic Planning and Investment Analytics Lauren Hay. This call is being recorded and the audio portion will be archived in the Investor section of our website. On today's call, we will make forward-looking statements regarding our financial results and other matters related to the company's business. Please refer to the Safe Harbor statement related to these forward-looking statements which are subject to risks and uncertainties. We remind you that actual events or results may differ materially from those projected or discussed, and that all forward-looking statements are based upon currently available information. Ligand Pharmaceuticals Incorporated assumes no obligation to update these statements.

To better understand the risks and uncertainties that could cause actual results to differ, we refer you to the documents that Ligand Pharmaceuticals Incorporated files with the Securities and Exchange Commission or SEC. That can be found on Ligand Pharmaceuticals Incorporated's website at ligand.com or on the SEC's website at sec.gov. With that, I will now turn the call over to Todd Davis.

Todd Davis: Thank you, Melanie, and good morning, everyone. Thank you for joining us today to discuss another exciting quarter for Ligand Pharmaceuticals Incorporated. This quarter was pivotal. Not only did we deliver another quarter of exceptional financial results, we also successfully completed a convertible debt financing providing us with additional flexibility to pursue strategic opportunities that support our growth initiatives. We are raising our full-year guidance for the second time this year. This increase in guidance is a result of the strength of our commercial royalty portfolio which has continued to outperform our expectations due to products like Merck's O2VARE and Cavaxi, as well as Trevyr's Tilspari.

Additionally, I'm proud of our deal team's ability to create superior risk-adjusted returns through transactions such as the strategic merger of Pylphos with Channel Therapeutics, which has driven substantial value creation for our shareholders. When we restructured Ligand Pharmaceuticals Incorporated in 2022, with the spinout of our antibody operations, we set a new strategic direction for Ligand Pharmaceuticals Incorporated. One grounded in focus and discipline. Since then, we have stayed true to that plan, scaling our deal team to accelerate growth in the late-stage pipeline and build a diversified portfolio of high-margin royalties designed to deliver superior returns.

The strategy has played out exactly as envisioned and I couldn't be more pleased with the progress we've made over the past few years. Royalty revenue grew 47% over the same quarter last year, and adjusted EPS increased 68%, reflecting strong performance across our portfolio. Key drivers contributing to the 47% growth in our royalty portfolio include the commercial launch of ZILLSUMI, strong launch of Merck's O2VARE and Capaxiv, growth of Recordati's Carziba, and the continued ramp-up of Filspari. We ended the quarter with a strong balance sheet including approximately $1 billion in deployable capital factoring in our undrawn credit facility, which will allow us to take advantage of our robust business development pipeline.

There's been strong uptake of ZELSUMI in the early launch phase, and we look forward to the continued momentum. The launch of ZELSUVNI is an exciting milestone for patients with molluscum, who now have an at-home treatment option for this burdensome skin infection. We encourage our investors to listen in on the Pylthos earnings call which will occur on November 13. We expect a robust update on the launch performance. Our deal team has been busy this quarter, committing $35 million to Orchestra Bio for royalty interest in their AVIM therapy and Virtu SAB.

Ligand Pharmaceuticals Incorporated has also invested an additional $5 million to help catalyze their equity private placement which successfully completed a total raise of $111 million including participation by AVIM partner Medtronic. We also committed $11 million to Evercore in exchange for royalty rights to a t two twenty and milestone and technology access fees for a t two ninety two, Sanofi's aldoraprin alpha program. We are pleased to report that just one month after our investment, Sanofi announced positive Phase two results from its trial demonstrating all primary and key secondary endpoints were met in adults with alpha one antitrypsin deficiency emphysema, a rare disease.

Since restructuring in 2022, we've been executing on our current strategy and have seen significant growth across the core revenue as well as adjusted EPS. I'd like to point out that in 2024, there were four FDA approvals of assets in our pipeline: MERVSCAP vaccine, Merck's o two there, pelfastuzumab, and the full approval of Trevyr's Valspari. With these four products all in early stages of their launch, the potential for both indication expansion as well as geographic expansion, we expect this growth to continue in the coming years. I would like to look ahead now to 2029 and discuss our five-year royalty receipts outlook which we first presented at our Investor Day in December 2024.

We believe our long-term royalty growth is on pace to meet or exceed the 22% compound annual growth rate we outlined at that time. The existing portfolio alone supports a royalty receipts CAGR of 18%. Future investments should add at least 4% to this with potential upside on top of the current outlook. The strength of our existing portfolio is evident across both our commercial and development stage programs. However, we believe that what truly differentiates Ligand Pharmaceuticals Incorporated as a royalty aggregator is the expertise of our deal team in sourcing and executing high-quality investment opportunities and the ability to drive superior returns with our operating capabilities and our special situations initiatives.

It is through the strength of this team that growth across the future investment segment of this chart has the potential to surpass expectations. Turning to the next slide, I'll highlight a few positive developments since our long-term outlook was presented last December. Each of which has the potential to meaningfully enhance our long-term royalty projections. First, o two there is tracking well ahead of the initial forecast and continues to be the strongest launch in COPD history. Q3 sales grew 32% sequentially and consensus forecast now project $2 billion in sales by 2029, up from $1.2 billion previously. As a 3% royalty holder, Ligand Pharmaceuticals Incorporated stands to benefit materially from this upside.

Second, Tospara continues to perform well commercially in IgA nephropathy with Q3 sales growing 26% over the prior quarter. Additionally, there's potential upside if approved in FSGS. If approved, the FSGS indication could significantly expand Tulspari's market opportunity, potentially north of $1 billion in FSGS alone, according to sell-side analysts. Turning to one of our development stage programs, let's look at Tauvela's Qtorin and rapamycin programs. We'll hear updates on their phase two program in cutaneous venous malformations in the fourth quarter and their phase three program in microcystin lymphatic malformations in 2026. Analysts expect peak sales from these two indications could be $1 billion.

In 2025, we continue to execute our strategy of partnering with life sciences companies to provide innovative, non-dilutive capital solutions. Since the beginning of the year, we've closed five new investments including the final O2VARE inventor monetization.

Operator: Castle Creek Orchestra Biomed.

Todd Davis: The merger of Pylphos Therapeutics with Channel Therapeutics and our most recent investment in EraCore. These transactions reflect the unique flexibility of our investment strategy and are well diversified across our investment tactics including royalty monetization, project financing, and special situations. Our investment to fund Castle Creek's Phase three clinical study of DFI in patients with dystrophic epidermolysis bullosa is an exciting opportunity to advance an orphan drug designated gene-modified cell therapy for a serious unmet clinical need. This collaboration reflects our commitment to invest in groundbreaking derisk treatments that have the potential to transform patients' lives and it also strengthens our late-stage portfolio.

Our partnership with Orchestra Biomed also expands our pipeline of development stage partnerships with potential royalties on two late-stage partnered cardiology programs. Orchestra's AIDM therapy partnered with Medtronic and Virtu SAP has received FDA break device designations, and the products target high-risk patient populations with hypertension and arterial disease. Two significant global health challenges. Next slide. We have seen record-setting origination activity this year. Reviewing more than 130 investment opportunities through the first March of the year, we remain disciplined in our approach prioritizing investments that offer compelling return potential and strategic alignment while deprioritizing those that do not meet our long-term objectives.

At present, we have approximately 32 active investment opportunities under review, representing a mix of accretive and preapproval transactions. I'd like to take this opportunity to remind everyone of our upcoming Investor Day which will be held on December 9 in New York at the Harvard Club. The registration link can be found on our website. We'll be evaluating consensus updates and commercial progress as well as clinical progress of our assets in our farm team to share a refreshed view of this long-term outlook with you at that time, and we hope you can join us. I'll turn it over now to Lauren for a portfolio update.

Melanie Herman: Thank you, Todd. Turning to a portfolio review, I'd like to provide some important updates on Ligand Pharmaceuticals Incorporated's key portfolio assets.

Lauren Hay: I will go into more details on Merck's O2VAR Trevyr's sulspari and Palvella's Qtorin Rapamycin programs on the subsequent slides, but I'd like to briefly discuss updates on two of our key pipeline assets. Sanofi's TZEAL and Agenesis BotVal. In October, the FDA nominated TZEALD as one of nine products selected for the prestigious new Commissioners National Priority Voucher. These vouchers are designed to recognize and reward products with significant potential to address major national priorities. As meeting a large unmet medical need, reducing downstream health care utilization, or addressing a public health crisis. This overlaps perfectly with Ligand Pharmaceuticals Incorporated's mission. Delivering high clinical value to patients impacted by serious disease.

New commissioner's voucher program aims to shorten the standard ten to twelve month FDA review timeline to just one to two months is remarkable. While we have heard concerns surrounding volatility at FDA, today we have not seen any impact in terms of delays or other issues related to our key portfolio assets. In addition, we have seen a new willingness by the agency to accelerate timelines and provide incentives that spur real innovation. We believe this new FDA orientation is forward-thinking and very good for patients.

As a result of receiving the commissioner's voucher, the supplemental BLA for TZEALD in individuals eight years and older who have been recently diagnosed with stage three type one diabetes was accepted in October and will be reviewed expeditiously. Which is welcome news for patients and their families. We are excited about TZL's recent recognition and the potential for a significantly expanded indication in the near term. We congratulate our partner Sanofi on this exceptional accomplishment. Additionally, our partner Agenus plans to initiate a streamlined two-arm Phase III trial of Bot in patients with refractory nonliver metastatic microsatellite stable colorectal cancer in 2025.

The Phase two data are highly encouraging, demonstrating deep and durable responses in this difficult-to-treat population underscoring the meaningful benefit observed in patients who have failed standard therapies. Next, turning to Trevyris Filspari. In August, the REMS liver monitoring requirement was relaxed from monthly to quarterly for IgM patients during the first year of treatment. VILSPARI is becoming firmly entrenched as a foundational treatment for people living with IDAN and the approval of these streamlined monitoring requirements reflects the strong safety profile of Filspari. Simplifying treatment initiation for patients. In Japan, our partner, Rinalis Pharma, completed primary endpoint data collection in its Phase III IGAN trial, and top-line results are expected in the fourth quarter of this year.

In October, Chugai Pharmaceuticals announced plans to acquire Rinalis. Chugai is recognized for its rare disease and nephrology expertise and we believe they have the ability to accelerate access to FILSPARI for patients. In FILSPARI's second indication, FSGS the FDA has assigned a PDUFA date of 01/13/2026 and has informed Trevere that an advisory committee meeting is no longer required. If approved, Vilspari would be the first and only FDA-approved treatment option for FSGS and Trevere believes the FSGS commercial opportunity could be an even larger one with more rapid uptake as compared to IGAN. Moving on, on October 7, Merck closed its acquisition of the OT VERE marketer Verona Pharma for $10 billion.

Our 3% O2Ver royalty will now be assumed by the new marketer, Merck, who has significant geographic reach to expand the O2Ver footprint globally as well as robust clinical development infrastructure to accelerate development of O2VAR in indications such as non-cystic fibrosis bronchiectasis. Moving on, we're very pleased with the commercial performance and clinical and regulatory updates provided by Merck on Cavaxin this quarter. Merck expects that cat faxes will achieve majority market share in the adult setting in the pneumococcal vaccine category. Merck reported third-quarter sales of $244 million representing a significant increase over the prior quarter as well as a beat to analyst consensus. Cavaxib was approved to prevent pneumococcal disease in Japan in August.

And additionally, the FDA accepted Merck's SBLA for Cafaxin in children and adolescents at an increased risk of pneumococcal disease, with a PDUFA date of 06/18/2026. Next slide. Palvella completed full enrollment ahead of schedule in their Phase III trial in microcystic lymphatic malformations in June, with results anticipated in 2026. Additionally, Phase II trials in cutaneous venous malformations are expected in December. Talvella recently announced a third Qtorin rapamycin indication in clinically significant angiokeratomas. Calvella plans to meet with the FDA in 2026 to discuss this Phase two trial design. I'd also like to briefly discuss the commercial opportunities specific to Qtorin rapamycin for the treatment of microcystic lymphatic malformations.

Phase III results are expected in the first quarter of next year and this promising product has the potential to be the first and only FDA-approved treatment with strong prescriber interest. The therapy targets a concentrated population of over 30,000 diagnosed patients primarily treated at 400 vascular anomaly centers. Enabling a lean sales force strategy. Validated orphan pricing models and high unmet clinical needs suggest significant revenue potential in MLM. Qtorin and rapamycin, Palbella is building a compelling pipeline and a product which could represent a sizable royalty opportunity for Ligand Pharmaceuticals Incorporated. This franchise strategy outlines a phased approach targeting rare dermatological conditions starting with microcystic lymphatic malformations, followed by cutaneous venous malformations and clinically significant angiokeratomas.

Palvella's longer-term plans include expanding to potential future indications, which Palvella believes could potentially grow the addressable patients by a factor of 10x. This represents a significant opportunity for market growth and our 8% to 9.8% royalty extends across any and all approved Qtorin Rapamycin indications. With that, I will turn the call over to Tavo. Thank you, Lauren.

Todd Davis: Before getting into the broader overview,

Tavo Espinoza: I want to start with the deconsolidation of Peltos. Since it provides important context for this quarter's results. The spinout became effective on July 1, and from that date, Telfel has been deconsolidated from Ligand Pharmaceuticals Incorporated's financials. Historical operating costs through June 30 remain on Ligand Pharmaceuticals Incorporated's books but beginning July 1, Peltos expenses are now reflected under the newly merged Peltos Channel Therapeutics entity. Operating independently as a publicly traded company under the ticker symbol PTHS. With its own board and management team. Similar to our equity interest in Viking and Pavela Therapeutics, we hold an equity stake in Peltos approximately 50% of its outstanding shares.

These are carried on our balance sheet as a long-term investment and remain restricted until the six-month lockup period expires on 12/31/2025. The current estimated fair value of our holdings in Pelfos is about $180 million as of yesterday's close. On July 1, recognized a $53 million gain related to the Peltos transaction, reflecting the difference between the $62 million fair value of the consideration received and the $9 million of net assets sold. As noted on our Q2 call, this gain includes value associated with the sales of Me Out license, which we've now quantified at $24.5 million and retained in adjusted earnings.

While the out license itself is a onetime event, out licensing is core to our business strategy and the Peltos equity we received represents tangible value. For that reason, the remaining $28.6 million of the gain included it in core revenue and adjusted EPS. along with the historical incubation costs, have been excluded from non-GAAP results to maintain comparability with recurring operations. In addition to the gain on Peltos we recorded a $76 million unrealized gain tied to the increase in Peltos' share value. From $52 million at issuance on July 1 to $138 million at quarter end. This appreciation underscores both market confidence in Peltos and the strategic value of the transaction to Ligand Pharmaceuticals Incorporated.

I'll walk through the financial implications of the Peltos transaction in more detail on the next few slides. Moving now into the quarter's financial highlights. This was an exceptional quarter for Ligand Pharmaceuticals Incorporated. Marked by record financial performance driven by the continued strength in several assets in our royalty portfolio and the recognition of the aforementioned Xeluzviolt license component following the spinout and merger of the Peltos business. We also capitalized on favorable conditions in the convertible debt markets in August, securing a five-year $460 million convertible note which further strengthens our balance sheet.

Total revenue and other income for Q3 2025 on a GAAP basis came in at $115.5 million up from $51.8 million in the same quarter last year. Of that, $53.1 million was tied to the Peltos transaction including $24.5 million from the sales of MiOut license and a $28.6 million gain on the sales of the business to Channel Therapeutics. As discussed earlier, we're including the $24.5 million representing the estimated standalone value of the Celsius Mia license as core revenue. The $28.6 million gain on sale of the business has other financial highlights to note. Royalty revenue rose 47% year over year to $46.6 million reflecting strong launch trajectory and outperformance across several recently approved products in our portfolio.

Adjusted EPS grew 68% from the same period last year to $3.09. Given the strong financial performance, we're raising full-year 2025 guidance. We now expect core revenue of $225 million to $235 million and adjusted earnings per share of $7.4 to $7.65 per share. We closed the quarter with $665 million in cash and investments. That brings total deployable capital to approximately $1 billion a strong position that continues to fuel a very active business development pipeline. The funnel remains robust. At this point, we're not limited by dollars. We're limited by human capital. And we're planning to expand our very pleased with the pricing terms and secured a 75 basis point coupon rate and a 32.5% conversion premium.

We also structured the transaction to be net share settlement to further reduce dilution. In conjunction with the notes, executed an up 100% cost spread in which will result in no dilution to our stock up to a price of $294 per share, the net proceeds not only bolster our balance sheet but are accretive to earnings and allow us to take advantage of our robust business development pipeline. Moving on to the next slide. Let me expand on our capital deployment capacity. We continue to generate robust annual operating cash flow of, now exceeding $150 million on an annualized basis. And our current investment pace ranges between $150 million to $250 million.

Against this backdrop, decision to pursue a convertible debt financing was strategic driven in large part by favorable conditions in the convertible debt markets. As of 09/30/2025, we held $665 million in cash and short-term investments and maintained access to a $200 million credit facility bringing our total financial capacity to roughly $1 billion inclusive of our holdings in Pelsos. We own approximately 50% of Peltos outstanding shares, carried on our balance sheet as a long-term investment with an estimated fair value of $138 million at quarter end which we view as another potential liquidity lever.

Looking ahead, given the robustness of our business development funnel, and the ongoing expansion of our business development function, we may look to incrementally increase our capital deployment pace. We believe our bolstered balance sheet positions us well to pursue high-quality opportunities that align with our strategic financial and financial objectives. Moving on to the next slide, key drivers of royalty revenue growth this quarter include strong performance from Trevyr's Tilspari Merck and Veronis' O2Ver, Merck's Cabaxiv, and Recordati's Carziba. Expanding briefly on a few of these, starting with Filspari, Trevia reported third-quarter sales of $90.9 million. A 26% sequential and 155% year-over-year increase.

They also received 731 new patient start forms during the quarter, that momentum underscores the expanding use of Tulspari in IgA nephropathy. showing continued adoption among both new and repeat prescribers. As a reminder, Ligand Pharmaceuticals Incorporated earns a 9% royalty on sales, translating to nearly $9 million in royalty revenue this quarter, including our internal estimate of $7 million from sales generated by CSL Viper in Europe. We're pleased to share that Filspari has now become our largest royalty generating asset on an annualized run rate basis. Turning to O2V.

Todd Davis: Vaccine space.

Tavo Espinoza: CapActive generated $44 million in sales an 89% sequential increase and a 46% increase over consensus. On Captisol, we recorded $10.7 million in material sales this quarter, compared to $6.3 million in 2024. The increase was driven primarily by the timing of customer orders. We recorded $58.2 million in contract revenue this quarter, up significantly from the $13.8 million in the prior year period. This includes the previously mentioned $28.6 million gain on the sale of the Taltose business and the $24.5 million of sales of the EL license. Turning to operating expenses. For Q3 2025, G and A expenses were $28.4 million up from $24.5 million in the prior year quarter.

Primarily due to recognition of transaction costs related to the Peltos transaction. R and D expenses rose $21 million from $5.7 million in the prior year period driven by a $17.8 million one-time charge tied to our investment in Orchestra Biomed. This funding supports late-stage partnered cardiology programs, and is accounted for as an R and D funding arrangement fully expensed in the period of investment. Other income for the quarter totaled $86.2 million compared to other expense of $9.5 million in Q3 2024.

This year-over-year swing was primarily driven by unrealized gains from the increase in value of our equity holdings in Peltos and Talvella, and higher interest income reflecting the impact of our strengthened cash position following the convertible note transaction. GAAP net income for Q3 2025 was $117.3 million or $5.68 per share compared to GAAP net loss of $7.2 million or $0.39 per share in Q3 2024. On a non-GAAP basis, adjusted net income was $63.8 million or $3.09 per share up from $35.3 million or $1.84 per share in the prior year period. The 68% increase in adjusted EPS was primarily driven by the $14.9 million increase in royalty revenue and the $24.5 million ZELZUVY out license component.

Turning to guidance, as mentioned, we are raising total core revenue forecast to a range of $225 million to $235 million and adjusted earnings per share is now expected to be between $7.4 and $7.65 a roughly 30% increase over last year's EPS of $5.74. With that context, here's how our revised full-year 2025 guidance is shaping up. Royalty revenue is now expected to be between $147 and $157 million up from the prior range of $141 to $150 million. Captisol sales are expected to come in at $40 million. Contract revenue, which is where we captured the value of the Cellxumi out license.

Todd Davis: Component.

Tavo Espinoza: Has increased to $38 million. Up from $25 million to $35 million. Again, to reiterate, total core revenue is now expected to be in the range of $225 million to $235 million up from $202 to $225 million and we're raising core adjusted EPS to $7.4 to $7.65 compared to the previous range of $6.7 to $7. These updates reflect not only the impact of the Peltos transaction, also strong underlying growth and increased visibility into our royalty streams. Particularly from Vilsparri, O2Ver, Carziva and Cavaxiv. That concludes my remarks. I'll now turn the call back over to Todd for closing comments.

Todd Davis: Thank you, Tavo. We are very pleased with the strong launch momentum across multiple products, including Cat Backseed, O2VARE, Valspari, and Valsumi, and believe there are significant opportunities for both indication expansion as well as geographic expansion for these products. Which represent further upside for Ligand Pharmaceuticals Incorporated. We believe that Merck's global reach will accelerate o two vera's rollout and their plans to invest in the insulin training pipeline programs will maximize its potential. Additionally, encouraged by the great progress the Telco's team is making in Zosuni, look forward to watching the continued launch momentum in the coming months.

With a solid base of royalty generating assets, and late-stage pipeline, we are well positioned to deliver sustained compounding growth and long-term value for shareholders. Additionally, our strong origination capabilities, our investment team, and our robust investment process is driving meaningful portfolio growth. Our deal team's ability to identify, access, and execute high-quality investments sets Ligand Pharmaceuticals Incorporated apart. Thank you, everyone, for joining us for today's earnings call. I will now pass it back to the operator and open it up for questions.

Operator: Thank you. We will now begin the question and answer session. Speaker on your device, pick up your handset and ensure that your phone is not on mute when asking your question. And your first question comes from the line of Trevor Allred with Oppenheimer. Please go ahead.

Trevor Allred: Hey, good morning. Thanks for taking my questions. I've got a few.

Tavo Espinoza: First, we've seen both Peltos and Pavallo generate enormous value over the past year. Is there anything you can share on the available opportunities in special situation?

Todd Davis: Thank you, Trevor. This is Todd. And I think the opportunity set there is quite robust. Just to kind of frame this, the special opportunities, is when one of the kind of the value components is missing. We need to be more active in the investment in terms of adding team members, restructuring, and things of this nature. When we look at any investment, we're looking at kind of those three components. Company's financial strength or access to capital, and if that's all they need, then we're usually looking at a royalty investment, a royalty monetization, or simply providing capital. The other thing is strong management teams. We really need strong counterparties.

Because we want to have as much operating leverage as possible. So we're partnering with people that have clinical development capabilities and infrastructure. Sales and marketing capabilities and infrastructure. Manufacturing capabilities and infrastructure. When those when that portion of the component breaks down, then we have to get more involved in just providing capital, and we'll bring other you know, complementary management into the mix. And those are restructurings. So there are many opportunities like that out there. And the last component is just general financial strength aside from our financing. Because we need companies that have strong access to capital. And we have to exist in this ecosystem. And equity is a very important component of what we do.

Royalty capital needs to be a portion of the company's capital structure, but certainly can't rely solely on it or even predominantly on it. So when these situations arise, if they just need capital, it's usually not a special situations. No the no van situation where we picked up DelSubme and the nitric oxide platform is a good example. There, you had a very good technical team, which we still work with today. We brought them into a subsidiary at Ligand Pharmaceuticals Incorporated. And they have what we believe was a great asset. And so we brought that into the subsidiary as well, restructured it,

Tavo Espinoza: and eventually,

Todd Davis: we reset the marketing plan for Zelle Summe once we got that

Lauren Hay: Cooperation with the

Todd Davis: counterparties, though, where they know those components are missing.

Tavo Espinoza: And the one other consideration on those is that they are quite consuming. They take a deal team. It takes a lot of attention. So you really have to go after deep value and significant returns which we believe we will achieve in the Peltos situation and in others like that we taken on. There's let me put it this way. There's way more of those to do than we can do. And that's why we are adding a little bit to our management and guild team, the operating components that we have, which help us manage through these situations.

Trevor Allred: Got it. Thanks, Scott. That's helpful. Then my second question is a bit of a two-parter. Can you comment on how the number of investment opportunities has shifted over the past year? Are you seeing accelerating capital demands? And then can you also comment on how your new cash balance changes either the scope or the size of how you're approaching deal making, if at all?

Tavo Espinoza: Sure. Yeah. So taking the latter first, you know, I think that our diversification strategy right now has us pegged it about. As we've been saying, we don't want to put any more than $50 million in into a binary risk situation. And we're seeking out things that have, you know, significant evidence safety and efficacy and on a relative basis are derisked. But still we are buying risk we don't want to put more than 50 right now into a potential binary risk situation. You know, that said, we view diversification by asset. So in multiple asset situations, we can size up the deals you know, very significantly.

And we also as you know, we will use equity as a tool here. This makes us a very good partner. I think the Orchestra example, which Paul led for us, is a good one. We got what we think is a very good royalty investment in two great product development programs there. But we were also able to facilitate or catalyze, if you will, a broader equity round and get the company into a much greater position overall of financial strength.

So that we are, in fact, coexisting with significant amounts of equity in that situation at this point, and we believe the company has a great management team and has now much, much better access to capital in the long term as well. So we can be very good partners because we are able to support companies kind of throughout their capital structure. Getting to the overall, you know, kind of deal types and demand, I would just say that you know, royalty

Lauren Hay: capital

Tavo Espinoza: for lack of a better term, is really 5% or less of the market. And I would say on the development side, significantly less. And that's where capital is most needed. So I think there's a huge opportunity there. There's way more to do than we can do. So the deal flow does move around a little bit. Mostly in style, not in amount. As the capital markets change, for example, when an IPO market opens up, a lot of the late-stage private companies want to get public. So they're more inclined to do that so they can provide liquidity for their equity investors.

But still, you know, even in those cases, with very strong companies and strong equity syndicates as was the case with Castle, Creek. They want and there's a there's a rationale for having royalty capital be a component, of your total capital structure.

Trevor Allred: Sounds great. Thanks for taking the questions.

Lauren Hay: Yep.

Operator: Your next question comes from the line of Matt Hubert with Craig Hallum. Please go ahead.

Tavo Espinoza: Hello and congrats

Todd Davis: on the quarter. This is Tolf Korman on for Matt Hewitt. So last week, the FDA announced it wants to speed up the process

Sahil Dhingra: personalized gene therapy How should we think about the Castle Creek investment and general opportunities in gene therapies going forward? Thank you.

Tavo Espinoza: Yeah. I think that's one of the points that Lauren was making earlier in the call here is that there's there's some concerns around some volatility and changes that the FDA But we're focused, as we've said many times, on high value assets targeted towards severe clinical need. They're they can be really impactful. And that's kind of the FDA's core reorientation strategy as well. We think there's great overlap between just our investment strategy in general investing in products that will make the most amount of difference for patients, and what the FDA is

Todd Davis: is

Tavo Espinoza: orienting around in that regard. And so I can't say that we'll have a specific impact on any in individual asset or company, although we know that, you know, 's yield has already benefited from that. But there clearly is an effort to be more pragmatic in severe diseases where there are certainly where there are currently no treatments, but also where there's know, added marginally adequate types of treatments available. And I think that's a sensible strategy, and it's they're talking about shortening the review timelines from twelve months to a couple to a few months. And, you know, that's very positive for us.

As you know, our general strategy also is to invest in assets that are within, you know, at least three or four years of a potential approval. And we sometimes will invest phase two. That's where we originally invested at Palvella. And in those situations, we rely heavily on third party data. For example, off label use of rapamycin in some of the conditions that paldella's currently exploiting had existed prior to that investment. So there's real world evidence of efficacy and safety even though it was for us an earlier stage asset.

So we view that as derisked but it still had the full timeline to march through now on top of being able to take advantage of those types of repurposed and derisked assets, we also potentially in general, can be looking at shorter timelines for approval and review.

Sahil Dhingra: Appreciate it. Thank you.

Operator: And the next question comes from the line of Jade with Stifel. Please go ahead.

Sahil Dhingra: Hey, this is Jayed on for Annabel. Congrats on the strong quarter. I still have two questions.

Tavo Espinoza: One,

Sahil Dhingra: is there any additional color you can provide for the results that we launched? I know you talked about it a bit, but is there what do you expect going forward for the next couple of quarters And then my second question is if there's any other details you could provide for Evercore transaction, typically for a t $2.09 2 that's being developed by Sanofi. What does the royalty rate look like? Any details there would be helpful.

Tavo Espinoza: Sure. I'll cover the DelSumi launch and you'll be disappointed with the additional information I can't share because I can't share much more And then I'll have Lauren discuss a t $2.92. And our arrangements there. In terms of the Zelsusmi launch, they're reporting, I think, the thirteenth where you will get a lot more information We just followed a general script data and I can tell you it's from our perspective, that's encouraging. That's something that, you know, analysts and everybody else has access to as well. But they haven't changed their guidance yet going forward.

I think that they're the general guidance they've they've they've offered at the point, which is sensible early in a launch because launches are very hard. Is peak sales of $1.75 or a 175,000,000. And know, in general, I think that's conservative. The management team there's appropriately

Todd Davis: conservative.

Tavo Espinoza: At this point in a launch, but there'll be a lot more specifics available for that on the thirteenth when they have their earnings call. And with that, I'll hand it off to Lauren just to discuss the EraCore and a t $2.92.

Lauren Hay: Great. Thanks, Todd. So sure. Thanks for the question. On AT-two ninety two or efderolperin alfa, we're really excited about that asset. You know, we view it as being highly differentiated versus the standard of care. This is a treatment that is designed for patients with alpha-one antitrypsin deficiency. It was licensed to inhibit and then acquired by Sanofi in 2024 for $1.7 billion. So clearly, they have a lot of conviction around the asset as well. What's differentiated about it is that we're seeing a potential movement from plasma drive to recombinant treatments. And also a much more convenient dosing regimen for patients.

And then as Todd mentioned in his remarks, we were really encouraged to see Phase two potentially pivotal data released by Sanofi, which was very positive just last month. So we're really encouraged by the progress of this asset in the very short time since we've closed the transaction. And then with regards to the royalty exposure here, these are actually technology access fees. And that's what we're we're able to disclose in terms of what we will receive on this asset. So thanks for the question.

Sahil Dhingra: Thank you for the answers.

Operator: And the next question comes from the line of Sahil Dhingra with RBC.

Tavo Espinoza: Hi. This is Sahil for Doug. Thank you for taking our questions.

Todd Davis: My first question is related to the competition.

Rich Baxter: You seen any changes in the competitive landscape for royalty asset as it relates to either on the market products or products that are in clinical stage. And then I have a follow-up.

Todd Davis: Sure. Yeah.

Tavo Espinoza: Just in you know, not yet. I think there will be people interested in this space. Because it makes so much sense. I think that this is a very, very logical place for Royalty Capital to, focus on. And I've thought that for a long time. But there was a lot of inertia around the initial funds because they were they were funded mostly by large debt allocators like pension funds, that were following debt metrics and wanted debt levels of risk So you really couldn't go into the development side. So I think that will change over time. Our view is that there will be competition We haven't seen, any yet. Frankly.

We haven't been competitive in very many deals at all. Most of the folks that do development stage clinical investing are much, much larger than we are. That's that's one component. Of it. And then the other component is that you know, in excess of $12 billion of royalty capital that is available, the very significant majority of that is focused on commercial stage assets. As opposed to development stage assets.

Rich Baxter: Yes. Thanks. That is helpful. And then my follow-up question is related to the recent approval of Lasix Anu, the product where you have royalties how do you see that product versus the existing products in the market, specifically FUROSAX that is that is marketed by a c pharma, which was recently acquired by another company, MannKind. And we also saw a recent approval of a nasal spray in the same category. So could you speak to what are your thoughts on the product and peak sales potential for that product?

Todd Davis: Thank you.

Lauren Hay: Sure. Thanks for the questions. Yeah. We were really encouraged to see the full approval for our SQ innovation. And, you know, I think the, you know, the existing product kind of has validated the potential for, you know, moving the treatment from the inpatient setting to the outpatient setting. And, you know, there's a lot of kind of macro momentum around trying to get patients out of the hospital more quickly. Kind of across, you know, the health care spectrum.

And so we're really encouraged to see patients have, you know, another treatment option and we believe that it's differentiated in several ways, including the size of the device and just sort of the convenience for patients and the commercial rollout strategy. So we'll look forward to seeing more, at this point, there's no information regarding guidance or anything like that. But we view this product as a very positive introduction into the marketplace.

Rich Baxter: Thank you.

Operator: Thank you. And this does conclude our question and answer session. I would like to thank our speakers for today's presentation, and thank you all for joining us. This concludes today's conference call. You may now disconnect.