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What changed in LIGAND PHARMACEUTICALS INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of LIGAND PHARMACEUTICALS INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+486 added−379 removedSource: 10-K (2024-02-29) vs 10-K (2023-02-28)

Top changes in LIGAND PHARMACEUTICALS INC's 2023 10-K

486 paragraphs added · 379 removed · 198 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

78 edited+72 added−61 removed41 unchanged
Biggest changeApproved Partner Name Program Therapeutic Area Acrotech/CASI Evomela Cancer Alvogen/Adalvo Teriparatide Women's Health Alvogen/Hikma/Nanjing King-Friend Voriconazole Infectious Disease Amgen/Beigene/Ono Kyprolis Cancer Aziyo ECM portfolio Medical device/Cardiology Baxter Nexterone Cardiovascular Biocad Teberif Inflammatory/Metabolic Exelixis/Daiichi-Sankyo Minnebro Cardiovascular Gilead Veklury Infectious Disease Jazz Rylaze Cancer Melinta Baxdela Infectious Disease Menarini Frovatriptan Central Nervous System Merck Noxafil-IV Infectious Disease Merck Vaxneuvance Infectious Disease Par Posaconazole Infectious Disease Pfizer Duavee Inflammatory/Metabolic Pfizer Vfend-IV Infectious Disease Sage Zulresso Central Nervous System Sedor/Lupin Sesquient Central Nervous System Serum Institute of India Pneumosil Infectious Disease Zydus Cadila Vivitra Cancer Zydus Cadila Bryxta/ZyBev Cancer Zydus Cadila Maropitant Central Nervous System Zydus Cadila Exemptia Inflammatory/Metabolic Zydus Cadila Vortuxi Inflammatory/Metabolic Phase 3/Pivotal or Regulatory Submission Stage Partner Name Program Therapeutic Area Aldeyra Reproxalap Other/Undisclosed BendaRx Bendamustine Oncology Cantex CX-01 Oncology Eisai FYCOMPA Central Nervous System Escape Bio S1P5 agonist TBD Marinus Ganaxalone IV Central Nervous System 6 Meridian ML-141 Oncology Merck V116 Pneuococcal adult Novan SB206 Infectious Disease Novartis Mekinist (CE-Trametinib) Cancer Opthea OPT-302 Ophthalmology Outlook Therapeutics ONS-5010 Other/Undisclosed Palvella PTX-022 Other/Undisclosed Serum Institute CRM197 Infectious Disease SQ Innovation CE-Furosemide Cardiovascular disease Sunshine Lake Vilazodone Central Nervous System Travere Sparsentan Severe and Rare Verona Ensifentrine (RPL554) Respiratory Disease Various Teriparatide Women's Health Xi'an Xintong Pradefovir Infectious Disease Phase 2 Partner Name Program Therapeutic Area Acrivon ACR-368 Cancer Corvus Ciforadenant Cancer DeNovo Lisfensine Neurology Merck V116 Infectious Disease Oncternal Cirmtuzumab Cancer Phoenix Tissue PTR-01 Genetic Disease Seelos Aplindore Central Nervous System Sermonix Lasofoxifene Cancer Ohara Pharmaceuticals JPH-203 Cancer Verona Ensifentrine Asthma Verona Ensifentrine Cystic Fibrosis Viking VK5211 Inflammatory/Metabolic Viking VK2809 Inflammatory/Metabolic Xi'an Xintong MB07133 Cancer Phase 1 Partner Name Program Therapeutic Area Apotex Meloxicam Migraine China Resources Double Crane CX2101A COVID 19 CSL CSL-324 Immunology Foghorn FHD-609/BRD9 Cancer Jazz JZP-341 Long Acting Erwinia Asparaginase MEI Pharma ME-344 Cancer Merck V117 Pneumococcal Novartis MIK-665 Cancer Novartis BCL-201 Cancer 7 Nucorion NUC-1010 Infectious disease Revision Therapeutics Rev0100 Ophthalmology Sage SAGE-689 Central Nervous System Takeda TAK-925 Severe and Rare Takeda TAK-243 Cancer Vaxxas Nanopatch Infectious Disease Viking VK-0214 Genetic Disease Jupiter Biomed Viright Cancer Acquisitions We are a company devoted to identifying cutting-edge science and have exhibited a track record of capital deployment to create a high growth business model that operates with an efficient and low corporate cost structure.
Biggest changeApproved Partner Name Program Therapeutic Area Acrotech/CASI Evomela Cancer Alvogen/Adalvo Teriparatide Women's Health Alvogen/Hikma/Nanjing King-Friend Voriconazole Infectious Disease Amgen/Beigene/Ono Kyprolis Cancer Baxter Nexterone Cardiovascular Biocad Teberif Inflammatory/Metabolic Eisai FYCOMPA Central Nervous System Elutia ECM portfolio Medical device/Cardiology Exelixis/Daiichi-Sankyo Minnebro Cardiovascular Gilead Veklury Infectious Disease Ingenus ML-141 Cancer Jazz Rylaze Cancer Melinta Baxdela Infectious Disease Menarini Frovatriptan Central Nervous System Fareva Noxafil-IV Infectious Disease Merck Vaxneuvance Infectious Disease Novan SB206 Infectious Disease 13 Novartis Mekinist Cancer Par Posaconazole Infectious Disease Pfizer Duavee Inflammatory/Metabolic Pfizer Vfend-IV Infectious Disease Sage Zulresso Central Nervous System Sanofi Tzield Metabolic Sedor/Lupin Sesquient Central Nervous System Serum Institute of India Pneumosil Infectious Disease Serum Institute of India Meningococcal Infectious Disease Travere Filspari Metabolic Zydus Cadila Vivitra Cancer Zydus Cadila Bryxta/ZyBev Cancer Zydus Cadila Maropitant Central Nervous System Zydus Cadila Exemptia Inflammatory/Metabolic Zydus Cadila Vortuxi Inflammatory/Metabolic Phase 3/Pivotal or Regulatory Submission Stage Partner Name Program Therapeutic Area Aldeyra Reproxalap Other/Undisclosed BendaRx Bendamustine Oncology Marinus Ganaxalone IV Central Nervous System Merck V116 Pneumococcal adult Ohara Pharmaceuticals JPH203 Cancer Opthea OPT-302 Ophthalmology Outlook Therapeutics ONS-5010 Other/Undisclosed Palvella PTX-022 Other/Undisclosed Sermonix Lasofoxifene Cancer SQ Innovation CE-Furosemide Cardiovascular disease Sunshine Lake Vilazodone Central Nervous System Takeda Soticlestat Central Nervous System Verona Ensifentrine (RPL554) Respiratory Disease Xi'an Xintong Pradefovir Infectious Disease Phase 2 Partner Name Program Therapeutic Area Acrivon ACR-368 Cancer Anebulo ANEB-001 Central Nervous System Corvus Ciforadenant Cancer CurX CE-Topiramate Central Nervous System Phoenix Tissue PTR-01 Genetic Disease Oncternal Zilovertamab Cancer Sato SB206 (Japan) Infectious Disease 14 Takeda TAK-981 Cancer Takeda TAK-925 Central Nervous System Verona Ensifentrine Asthma Verona Ensifentrine Cystic Fibrosis Viking VK5211 Inflammatory/Metabolic Viking VK2809 Inflammatory/Metabolic Xi'an Xintong MB07133 Cancer Phase 1 Partner Name Program Therapeutic Area Apotex Meloxicam Migraine Arcellx ACLX-001 Cancer Arcellx ACLX-002 Cancer China Resources Double Crane CX2101A COVID 19 CSL CSL-324 Immunology Jazz JZP-341 Long Acting Erwinia Asparaginase Jupiter Biomedical Research Viright Cancer MEI Pharma ME-344 Cancer Merck V117 Pneumococcal Novartis MIK-665 Cancer Nucorion NUC-1010 Infectious disease Revision Therapeutics Rev0100 Ophthalmology Sage SAGE-689 Central Nervous System Takeda TAK-243 Cancer Vaxxas Nanopatch Infectious Disease Viking VK-0214 Genetic Disease Summary of selected programs available for license In addition to Zelsuvmi, discussed above, we have a number of unpartnered programs focused on a wide-range of potential indications or diseases with the potential for further development or licensing: Program Development Stage Targeted Indication or Disease CE-Iohexol Phase 2 Diagnostics Luminespib/Hsp90 Inhibitor Phase 2 Oncology CE-Sertraline, Oral Concentrate Phase 1 Depression CCR1 Antagonist Preclinical Oncology CE-Busulfan Preclinical Oncology CE-Cetirizine Injection Preclinical Allergy CE-Silymarin for Topical formulation Preclinical Sun damage FLT3 Kinase Inhibitors Preclinical Oncology GCSF Receptor Agonist Preclinical Blood disorders 15 Manufacturing We contract with a third-party manufacturer, Hovione, for Captisol production.
We supply Captisol to Baxter for use in accordance with the terms of the license agreement under a separate supply agreement. Under the terms of the license agreement, we will continue to earn milestone payments, royalties, and revenue from Captisol material sales. We earn royalties on net sales of Nexterone through early 2033.
We supply Captisol to Baxter for use in accordance with the terms of the license agreement under a separate supply agreement. Under the terms of the license agreement, we will continue to earn milestone payments, royalties, and revenue from Captisol material sales. We will earn royalties on net sales of Nexterone through early 2033.
Title Expiration (nominal) ‡ United States 7635773 Sulfoalkyl Ether Cyclodextrin Compositions 03/13/2029 United States 8410077 Sulfoalkyl Ether Cyclodextrin Compositions 03/13/2029 United States 9200088 Sulfoalkyl Ether Cyclodextrin Compositions 03/13/2029 United States 10117951 Sulfoalkyl Ether Cyclodextrin Compositions 03/13/2029 United States 9750822 Sulfoalkyl Ether Cyclodextrin Compositions 03/13/2029 United States 9493582 Alkylated Cyclodextrin Compositions And Processes For Preparing And Using The Same 2/27/2033 United States 10040872 Alkylated Cyclodextrin Compositions And Processes For Preparing And Using The Same 10/21/2033 United States 10864183 Injectable Nitrogen Mustard Compositions Comprising A Cyclodextrin Derivative And Methods Of Making And Using The Same 5/28/2030 United States 10940128 Injectable Melphalan Compositions Comprising A Cyclodextrin Derivative And Methods Of Making And Using The Same 5/28/2030 United States 11020363 Injectable Nitrogen Mustard Compositions Comprising A Cyclodextrin Derivative And Methods Of Making And Using The Same 5/28/2030 ‡ Expiration dates are calculated as 20 years from the earliest nonprovisional filing date to which priority is claimed, and do not take into account disclaimers or extensions that are or may be available in these jurisdictions.
Title Expiration (nominal) ‡ United States 7635773 Sulfoalkyl Ether Cyclodextrin Compositions 03/13/2029 United States 8410077 Sulfoalkyl Ether Cyclodextrin Compositions 03/13/2029 United States 9200088 Sulfoalkyl Ether Cyclodextrin Compositions 03/13/2029 United States 10117951 Sulfoalkyl Ether Cyclodextrin Compositions 03/13/2029 United States 9750822 Sulfoalkyl Ether Cyclodextrin Compositions 03/13/2029 United States 9493582 Alkylated Cyclodextrin Compositions And Processes For Preparing And Using The Same 2/27/2033 United States 10040872 Alkylated Cyclodextrin Compositions And Processes For Preparing And Using The Same 10/21/2033 United States 10864183 Injectable Nitrogen Mustard Compositions Comprising A Cyclodextrin Derivative And Methods Of Making And Using The Same 5/28/2030 United States 10940128 Injectable Melphalan Compositions Comprising A Cyclodextrin Derivative And Methods Of Making And Using The Same 5/28/2030 United States 11020363 Injectable Nitrogen Mustard Compositions Comprising A Cyclodextrin Derivative And Methods Of Making And Using The Same 5/28/2030 18 ‡ Expiration dates are calculated as 20 years from the earliest nonprovisional filing date to which priority is claimed, and do not take into account disclaimers or extensions that are or may be available in these jurisdictions.
Rylaze, which was approved by the FDA in June 2021, is a recombinant erwinia asparaginase used as a component of a multi-agent chemotherapeutic regimen for the treatment of acute lymphoblastic leukemia (ALL) or lymphoblastic lymphoma (LBL) in adult and pediatric patients one month or older who have developed hypersensitivity to E. coli-derived asparaginase.
RYLAZE, which was approved by the FDA in June 2021, is a recombinant erwinia 7 asparaginase used as a component of a multi-agent chemotherapeutic regimen for the treatment of acute lymphoblastic leukemia (ALL) and lymphoblastic lymphoma (LBL) in adult and pediatric patients one month or older who have developed hypersensitivity to E. coli-derived asparaginase.
Teriparatide Injection is a drug indicated for uses including the treatment of osteoporosis in certain patients at high risk for fracture. Teriparatide Injection was developed using our Pelican Expression Technology™ and was approved by the FDA in 2019 in accordance with the 505(b)(2) regulatory pathway, with FORTEO as the reference product.
Teriparatide injection is a drug indicated for various uses including the treatment of osteoporosis in certain patients at high risk for fracture. Teriparatide injection was developed using our Pelican Expression Technology and was approved by the FDA in 2019 in accordance with the 505(b)(2) regulatory pathway, with FORTEO as the reference product.
VK2809 is currently in a Phase 2b clinical trial (the VOYAGE study) in patients with biopsy-confirmed NASH. VK0214, another novel, orally available, TR-beta 11 agonist, is in development for the potential treatment of X-linked adrenoleukodystrophy (X-ALD). VK0214 is currently being evaluated in a Phase 1b clinical trial in patients with the adrenomyeloneuropathy (AMN) form of X-ALD.
VK2809 is currently in a Phase 2b clinical trial (the VOYAGE study) in patients with biopsy-confirmed NASH. VK0214, another novel, orally available, TR-beta agonist, is in development for the potential treatment of X-linked adrenoleukodystrophy (X-ALD). VK0214 is currently being evaluated in a Phase 1b clinical trial in patients with the adrenomyeloneuropathy (AMN) form of X-ALD.
Exemptia, Vivitra, Bryxta and Zybev (Zydus Cadila) Zydus Cadila’s Exemptia (adalimumab biosimilar) is marketed in India for autoimmune diseases. Zydus Cadila uses the Selexis technology platform for Exemptia. We earn royalties on sales by Zydus Cadila for ten years following approval. 10 Zydus Cadila’s Vivitra (trastuzumab biosimilar) is marketed in India for breast cancer.
Exemptia, Vivitra, Bryxta and Zybev (Zydus Cadila) Zydus Cadila’s Exemptia (adalimumab biosimilar) is marketed in India for autoimmune diseases. Zydus Cadila uses the Selexis technology platform for Exemptia. We earn royalties on sales by Zydus Cadila for ten years following approval. Zydus Cadila’s Vivitra (trastuzumab biosimilar) is marketed in India for breast cancer.
SUREtechnology Platform (owned by Selexis) We acquired economic rights to various SURE technology Platform programs from Selexis. The SURE technology Platform, developed and owned by Selexis, is a novel technology that improves the way that cells are utilized in the development and manufacturing of recombinant proteins and drugs.
SUREtechnology Platform (owned by Selexis) 5 We acquired economic rights to various SURE technology Platform programs from Selexis. The SURE technology Platform, developed and owned by Selexis, is a novel technology that improves the way that cells are utilized in the development and manufacturing of recombinant proteins and drugs.
The BEPro technology platform is a next generation prodrug technology distinct from HepDirect and LTP prodrug technologies, expanding use to non-liver related diseases. BEPro is specifically applicable to nucleotides and nucleotide analogs for the development of compounds with improved product profiles. Ligand has demonstrated improvements in cell penetration and oral, intravenous and inhaled pharmacokinetics with BEPro-enabled nucleotide analogs.
The BEPro technology platform is a next generation prodrug technology distinct from HepDirect and LTP prodrug technologies, expanding use to non-liver related diseases. BEPro is specifically applicable to nucleotides and nucleotide analogs for the development of compounds with improved product profiles. Ligand has demonstrated benefits in cell penetration and oral, intravenous and inhaled pharmacokinetics with BEPro-enabled nucleotide analogs.
We are entitled to an annual licensing maintenance fee and royalties on potential future sales. MB07133 (Xi'an Xintong) Chinese licensee Xi'an Xintong Medicine Research is also developing MB07133, a liver specific, HepDirect prodrug of cytarabine monophosphate, for the potential treatment of hepatocellular carcinoma and intrahepatic cholangiocarcinoma. MB07133 is currently in Phase 1 in China.
MB07133 (Xi'an Xintong) Chinese licensee Xi'an Xintong Medicine Research is also developing MB07133, a liver specific, HepDirect prodrug of cytarabine monophosphate, for the potential treatment of hepatocellular carcinoma and intrahepatic cholangiocarcinoma. MB07133 is currently in Phase 2 in China. We are entitled to an annual licensing maintenance fee and royalties on potential future sales.
You may obtain copies of these documents by visiting the SEC’s website at www.sec.gov. In addition, we use Twitter (@Ligand_LGND) and our investor relations website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD.
You may obtain copies of these documents by visiting the SEC’s website at www.sec.gov. In addition, we use X (@Ligand_LGND) and our investor relations website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD.
Evomela (Acrotech and CASI) We supply Captisol to, and receive royalties from, Acrotech Biopharma for sales of Evomela in the U.S., and CASI Pharmaceuticals for sales in China. Evomela received market approval by the NMPA in August of 2019. It is the only approved and commercially available melphalan product in China.
Evomela (Acrotech and CASI) We supply Captisol to, and receive royalties from, Acrotech Biopharma for sales of Evomela in the U.S., and CASI Pharmaceuticals for sales in China. Evomela received marketing approval by the NMPA in August of 2019. It is the only approved and commercially available melphalan product in China.
In August 2020, marketing authorizationb throughout the EU was received under the trade name Livogiva and in December 2020 in Saudi Arabia under the name Bonteo. In December of 2022, we terminated a license agreement with Beijing Kangchen Biological Technology Co., Ltd.
In August 2020, marketing authorization throughout the EU was received under the trade name Livogiva and in December 2020 in Saudi Arabia under the name Bonteo. In December of 2022, we terminated a license agreement with Beijing Kangchen Biological Technology Co., Ltd.
The Federal Food, Drug and Cosmetic Act and the Public Health Service Act govern the testing, manufacture, safety, efficacy, labeling, storage, record keeping, approval, advertising and promotion of pharmaceutical products. These activities are subject to additional regulations that apply at the state level. There are similar regulations in other countries as well.
The Federal Food, Drug and Cosmetic Act and the Public Health Service Act govern the research and development, testing, manufacture, quality, safety, efficacy, labeling, storage, record keeping, approval, advertising and promotion of pharmaceutical products. These activities are subject to additional regulations that apply at the state level. There are similar regulations in other countries as well.
Corporate and Governance Highlights We are committed to policies and practices focused on environmental sustainability, positively impacting our social community and maintaining and cultivating good corporate governance. By focusing on such ESG policies and practices, we believe we can affect a meaningful and positive change in our community and maintain our open, collaborative corporate culture.
Risk Factors.” Corporate and Governance Highlights We are committed to policies and practices focused on environmental sustainability, positively impacting our social community and maintaining and cultivating good corporate governance. By focusing on such ESG policies and practices, we believe we can affect a meaningful and positive change in our community and maintain our open, collaborative corporate culture.
Risk Factors.” Environmental, Health and Safety (EHS) We are committed to providing a safe and healthy workplace, promoting environmental excellence in our communities, and complying with all relevant regulations and industry standards. We establish and monitor programs to reduce pollution, prevent injuries, and maintain compliance with applicable regulations.
Environmental, Health and Safety (EHS) We are committed to providing a safe and healthy workplace, promoting environmental excellence in our communities, and complying with all relevant regulations and industry standards. We establish and monitor programs to reduce pollution, prevent injuries, and maintain compliance with applicable regulations.
The patents covering the Captisol product with the latest expiration date is set to be in 2033 ( see, e.g ., U.S. Patent No. 9,493,582 (expires Feb. 27, 2033)). Other patent applications covering methods of making Captisol, if issued, potentially have terms to 2041. We have asserted U.S.
The patents covering the Captisol product with the latest expiration date is expected to be in 2033 ( see, e.g ., U.S. Patent No. 9,493,582 (expires Feb. 27, 2033)). Other patent applications covering methods of making Captisol, if issued, potentially have terms to 2041.
Investors should monitor our Twitter account and our website, in addition to following our press releases, SEC filings, public conference calls and webcasts.
Investors should monitor our X account and our website, in addition to following our press releases, SEC filings, public conference calls and webcasts.
We are eligible to receive over $50 million in potential milestone payments under this agreement, royalties on global net sales of the Captisol-enabled melphalan product and revenue from Captisol material sales.
We are eligible to receive over $50 million in potential milestone payments, royalties on global net sales of the Captisol-enabled melphalan product and revenue from Captisol material sales.
These website addresses and the information accessible through our Twitter account are not intended to function as hyperlinks, and the information contained in our website and in the SEC’s website is not intended to be a part of this filing.
These website addresses and the information accessible through our X account are not intended to function as hyperlinks, and the information contained in our website and in the SEC’s website is not intended to be a part of this filing. 20
Travere recently received FDA accelerated approval for FILSPARI (sparsentan) for the treatment of immunoglobulin A nephropathy (IgAN). FILSPARI is the first and only dual endothelin angiotensin receptor antagonist in development for rare kidney diseases and is the first non-immunosuppressive treatment indicated for IgAN.
Travere recently received F DA accelerated approval for FILSPARI (sparsentan) for the treatment of immunoglobulin A nephropathy (IgAN). FILSPARI is the first and only dual endothelin and angiotensin II receptor antagonist in development for rare kidney diseases and is the first non-immunosuppressive treatment indicated for IgAN.
Rylaze (Jazz Pharmaceuticals) In July 2021, Jazz announced the US launch of Rylaze (asparaginase erwinia chrysanthemi (recombinant)-rywn), previously referred to as JZP458.
Rylaze (Jazz Pharmaceuticals) In July 2021, Jazz announced the U.S. launch of RYLAZE (asparaginase erwinia chrysanthemi (recombinant)-rywn), previously referred to as JZP458.
Pradefovir (Xi'an Xintong) Our Chinese licensee, Xi'an Xintong Medicine Research (following its acquisition of Chiva Pharmaceuticals), is developing pradefovir, an oral liver-targeting prodrug of the HBV DNA polymerase/reverse transcriptase inhibitor adefovir, for the potential treatment of HBV infection. Pradefovir was developed using Ligand’s HepDirect technology. Xi'an Xintong recently completed a Phase 3 HBV trial.
Pradefovir (Xi'an Xintong) Our Chinese licensee, Xi'an Xintong Medicine Research (following its acquisition of Chiva Pharmaceuticals), is developing pradefovir, an oral liver-targeting prodrug of the HBV DNA polymerase/reverse transcriptase inhibitor adefovir, for the potential treatment of HBV infection. Pradefovir was developed using Ligand’s HepDirect technology.
Noxafil-IV (Merck) We have a supply agreement with Merck related to Merck’s NOXAFIL-IV, a Captisol-enabled formulation of posaconazole for IV use. NOXAFIL-IV is marketed in the United States, EU, Japan and Canada. We receive our commercial compensation for this program through the sale of Captisol.
Under the terms of the agreement, we receive royalties and revenue from Captisol material sales. Noxafil-IV (Merck) We have a supply agreement with Merck related to Merck’s NOXAFIL-IV, a Captisol-enabled formulation of posaconazole for IV use. NOXAFIL-IV is marketed in the United States, EU, Japan and Canada. We receive our commercial compensation for this program through the sale of Captisol.
We have established multiple alliances, licenses and other business relationships with the world’s leading pharmaceutical companies including Amgen, Merck, Pfizer, Jazz, Takeda, Gilead Sciences and Baxter International. Our revenue consists of three primary elements: royalties from commercialized products, sales of Captisol material, and contract revenue from license, milestone and other service payments.
We have established multiple alliances, licenses and other business relationships with the world’s leading biopharmaceutical companies including Amgen, Merck, Pfizer, Jazz, Takeda, Gilead Sciences and Baxter International. Our revenue consists of three primary elements: royalties from commercialized products, sales of our Captisol material to partners, and contract revenue from license fees and milestones payments.
In addition, either party may terminate the agreement for the uncured material breach or bankruptcy of the other party or an extended force majeure event. We may terminate the agreement for extended supply interruption, regulatory action related to Captisol or other specified events.
In addition, either party may terminate the agreement for the uncured material breach or bankruptcy of the other party or an extended force majeure event. We may terminate the agreement for extended supply interruption, regulatory action related to Captisol or other specified events. We have ongoing minimum purchase commitments under the agreement.
Evomela is a Captisol-enabled melphalan IV formulation which is approved by the FDA for use in two indications: • a high-dose conditioning treatment prior to autologous stem cell transplantation (ASCT) in patients with multiple myeloma; and • for the palliative treatment of patients with multiple myeloma for whom oral therapy is not appropriate.
Evomela is a Captisol-enabled melphalan IV formulation which is approved by the FDA for use in two indications: • a high-dose conditioning treatment prior to autologous stem cell transplantation (ASCT) in patients with multiple myeloma; and • for the palliative treatment of patients with multiple myeloma for whom oral therapy is not appropriate. 8 Evomela has been granted Orphan Designation by the FDA for use as a high-dose conditioning regimen for patients with multiple myeloma undergoing ASCT.
Veklury (Gilead) We supply Captisol to Gilead for sales of Veklury (remdesivir). Gilead received marketing approval from the FDA in October 2020. Veklury is an antiviral treatment of COVID-19 that is FDA approved. The product has regulatory approvals for the treatment of moderate or severe COVID-19 in over 70 countries.
Veklury (Gilead) 9 We supply Captisol to Gilead for sales of Veklury (remdesivir). Gilead received marketing approval from the FDA in October 2020. Veklury is an antiviral treatment for COVID-19. The product has regulatory approvals for the treatment of moderate or severe COVID-19 in over 70 countries. We are supplying Captisol to Gilead under a 10-year supply agreement.
Under this agreement, we are entitled to receive revenue from clinical and commercial Captisol material sales and royalties on annual net sales of Kyprolis based on our patents and applications relating to the Captisol component of Kyprolis which are not expected to expire until 2033. 8 Teriparatide Injection Product (PF708) (Alvogen/Adalvo) We acquired the Teriparatide Injection product with the acquisition of Pfenex in October 2020.
Under this agreement, we are entitled to receive revenue from clinical and commercial Captisol material sales and royalties on annual net sales of Kyprolis based on our patents and applications relating to the Captisol component of Kyprolis which are not expected to expire until 2033.
The following table provides an overview of our current portfolio of royalties: Product Partner Therapeutic Area Royalty Rate 2022 Royalty Revenue (in millions) Estimated 2022 Product Revenue (in millions) Kyprolis Amgen/Ono/Beigene Cancer 1.5% - 3.0% $30.1 $1,275.6 Teriparatide Alvogen Women's Health 25%-40%¹ $15.8 N/A Evomela Acrotech/CASI Cancer 20% $10.2 $51.0 Rylaze Jazz Cancer Low single digit $8.8 $278.7 Nexterone Baxter Cardiovascular Low single digit $3.6 $56.8 Pneumosil Serum Institute Infectious Disease Low single digit $2.6 $114.7 Vaxneuvance Merck Infectious Disease Low single digit $1.1 $159.0 Other Various Various Various $0.3 $18.0 (¹) We receive tiered profit sharing of 25% on quarterly profits less than $3.75 million, 35% on quarterly profits greater than $3.75 million but less than $7.5 million and 40% on quarterly profits greater than $7.5million.
Royalties on Commercial Products The following table provides an overview of our current portfolio of royalties: Product Partner Therapeutic Area Royalty Rate 2023 Royalty Revenue (in millions) Estimated 2023 Product Revenue (in millions) Kyprolis Amgen/Ono/Beigene Cancer 1.5% - 3.0% $35.6 $1,503.1 Rylaze Jazz Cancer Low single digit $13.5 $397.5 Teriparatide Alvogen Women's Health 25%-40%¹ $11.1 $37.2 Evomela Acrotech/CASI Cancer 20% $10.2 $51.0 Vaxneuvance Merck Infectious Disease Low single digit $4.1 $653.9 Pneumosil Serum Institute Infectious Disease Low single digit $4.5 $198.5 Filspari Travere IgA Nephropathy 9% $2.7 $29.5 Nexterone Baxter Cardiovascular Low single digit $1.5 $50.9 Other Various Various Various $0.7 $23.6 (1) We receive tiered profit sharing of 25% on quarterly profits less than $3.75 million, 35% on quarterly profits greater than $3.75 million but less than $7.5 million and 40% on quarterly profits greater than $7.5 million.
Our employees have multiple avenues available through which inappropriate behavior can be reported, including a confidential hotline. All reports of inappropriate behavior are promptly investigated with appropriate action taken to stop such behavior. Investor Information Financial and other information about us is available on our website at www.ligand.com.
All reports of inappropriate behavior are promptly investigated with appropriate action taken to stop such behavior. Investor Information Financial and other information about us is available on our website at www.ligand.com.
The following table represents the maximum value of our milestone payment pipeline by technology, development stage and partner (in thousands): Technology* Stage* Partner* Pelican >$215,000 Preclinical > $1,000 Viking $1,500,000 Captisol > $170,000 Clinical > $120,000 Jazz $150,000 LTP/Hep Direct/BEPro > $310,000 Regulatory > $1,200,000 Seelos $100,000 NCE/Other > $1,850,000 Commercial > $1,250,000 Travere $70,000 Total >$2,500,000 Total >$2,500,000 Other >$750,000 Total >$2,500,000 *All tables exclude any annual access fees and collaboration revenue for development work.
The following table represents the maximum value of our milestone payment pipeline by technology, development stage and partner (in millions): Technology* Stage* Partner* Pelican >$195.0 Preclinical > $1.0 Viking $950.0 Captisol > $170.0 Clinical > $80.0 Jazz $150.0 LTP/Hep Direct/BEPro > $330.0 Regulatory > $800.0 Travere $50.0 NCE/Other > $1,200.0 Commercial > $900.0 Other >$750.0 Total >$1,900.0 Total >$1,900.0 Total >$1,900.0 *All tables exclude any annual access fees and collaboration revenue for development work.
We and our partners, depending on specific activities performed, are subject to these regulations. In the United States, pharmaceuticals are subject to regulation by both federal and various state authorities, including the FDA.
Government Regulation The research and development, manufacturing and marketing of pharmaceutical products are subject to regulation by numerous governmental authorities in the United States and other countries. We and our partners, depending on specific activities performed, are subject to these regulations. In the United States, pharmaceuticals are subject to regulation by both federal and various state authorities, including the FDA.
Lasofoxifene (Sermonix) Lasofoxifene is a selective estrogen receptor modulator for osteoporosis treatment and other diseases, discovered through the research collaboration between Pfizer and us. Our partner, Sermonix has a license for the development of oral lasofoxifene for the United States and additional territories and is currently developing lasofoxifene as a treatment for ESR1-mutated metastatic breast cancer.
Lasofoxifene (Sermonix) Lasofoxifene is a selective estrogen receptor modulator for osteoporosis treatment and other diseases, discovered through the research collaboration between Pfizer and Ligand. Our partner, Sermonix has a license for the development of oral lasofoxifene, its lead investigational drug, for the United States and additional territories.
We are entitled to low single digit royalties derived from net sales 9 of Vaxneuvance. Pneumosil (Serum Institute of India, SII) SII began commercialization of its 10-valent pneumococcal conjugate vaccine, Pneumosil, which is produced using CRM197 made in the Pelican Expression Technology platform, in the second quarter of 2020.
Pneumosil (Serum Institute of India, SII) SII began commercialization of its 10-valent pneumococcal conjugate vaccine, Pneumosil, which is produced using CRM197 made in the Pelican Expression Technology platform, in the second quarter of 2020.
Under the terms of our agreement with Verona, we are entitled to development and regulatory milestones, including a £5.0 million payment upon the first approval by any regulatory authority, and royalties on potential future sales. SARM - VK5211 (Viking) Viking is also developing VK5211, a novel SARM for patients recovering from hip-fracture.
Under the terms of our agreement with Verona, we are entitled to development and regulatory milestones, including a £5.0 million payment upon the first approval by any regulatory authority, and low single digit royalties on potential future sales.
Ligand obtained the rights to ensifentrine in 2018 in the acquisition of Vernalis. Our partner, Verona Pharma, recently completed the Phase 3 ENHANCE-21 and ENHANCE-12 trials evaluating nebulized ensifentrine for the maintenance treatment of chronic obstructive pulmonary disease (COPD) and plans to file a NDA with the US FDA in the first half of 2023.
Ligand obtained the rights to ensifentrine in 2018 in the acquisition of Vernalis. Our partner, Verona Pharma, recently completed the Phase 3 ENHANCE-21 and ENHANCE-12 trials evaluating nebulized ensifentrine for the maintenance treatment of chronic obstructive pulmonary disease (COPD) and the NDA was accepted by the U.S. FDA in September 2023. The PDUFA date for ensifentrine is June 26, 2024.
Under the terms of the agreement with Viking, we may be entitled to up to $270 million of development, regulatory and commercial milestones as well as tiered royalties on potential future sales. Ganaxalone IV (Marinus) Our partner, Marinus, is conducting Phase 3 clinical trials with Captisol-enabled ganaxolone IV in patients with refractory status epilepticus.
Under the terms of our agreement with Ovid, we are entitled to receive regulatory and sales-based milestones of up to $85.8 million as well as 13% of royalties received by Ovid. Ganaxalone IV (Marinus) Our partner, Marinus, is conducting Phase 3 clinical trials with Captisol-enabled ganaxolone IV in patients with refractory status epilepticus.
These programs and their IP are now owned by Ligand UK Development Limited, which has a worldwide patent portfolio of over 200 granted patents in over 70 countries. This patent portfolio is mature, with expected expiry dates between 2022 and 2033. Pelican Expression Technology Platform We acquired the Pelican Expression Technology platform through acquisition of Pfenex Inc. in October 2020.
These programs and their IP are now owned by Ligand UK Development Limited, which has a worldwide patent portfolio of over 180 granted patents in over 50 countries. This patent portfolio is mature, with expected expiry dates between 2024 and 2033.
We are supplying Captisol to Gilead under a 10-year supply agreement. We are also supplying Captisol to Gilead’s voluntary licensing generic partners who are manufacturing remdesivir for 127 low- and middle-income countries. We receive our commercial compensation for this program through the sale of Captisol.
We are also supplying Captisol to Gilead’s voluntary licensing generic partners who are manufacturing remdesivir for 127 low- and middle-income countries. We receive our commercial compensation for this program through the sale of Captisol. Zulresso (Sage) We have a license agreement with Sage, related to Sage's Zulresso, a Captisol-enabled formulation of brexanolone for the treatment of postpartum depression (PPD).
The following table represents development stage assets with disclosed royalties: Development stage assets with disclosed royalties Program Licensee Royalty Rate CE-Fosphenytoin Sedor 11% CE-Meloxicam Sedor 8.0% - 10.0% Ciforadenant Corvus Mid-single digit to low-teen royalty DGAT-1 Viking 3.0% - 7.0% Ensifentrine (RPL554) Verona Low to mid-single digit royalty FBPase Inhibitor (VK0612) Viking 7.5% - 9.5% Lasofoxifene Sermonix 6.0% - 10.0% MB07133 Xi'an Xintong 6% ME-344 MEI Pharma Low single digit royalty Oral EPO Viking 4.5% - 8.5% Pradefovir Xi'an Xintong 9% PTX-022 Palvella 5.0% - 9.8% SARM (VK5211) Viking 7.25% - 9.25% SB206 Novan 7.0% - 10.0% Sparsentan Travere 9% TR Beta (VK2809 and VK0214) Viking 3.5% - 7.5% Various Nucorion 4.0% - 9.0% Various Seelos 4.0% - 10.0% Sparsentan (Travere) In early 2012, Ligand licensed the world-wide rights to sparsentan to Travere Therapeutics.
The following table represents development-stage assets with disclosed royalty rates: 10 Development stage assets with disclosed royalties Program Licensee Royalty Rate Ciforadenant Corvus Mid-single digit to low-teen royalty DGAT-1 Viking 3.0% - 7.0% Ensifentrine (RPL554) Verona Low single digit royalty FBPase Inhibitor (VK0612) Viking 7.5% - 9.5% Lasofoxifene Sermonix 6.0% - 10.0% MB07133 Xi'an Xintong 6% ME-344 MEI Pharma Low single digit royalty Oral EPO Viking 4.5% - 8.5% Pradefovir Xi'an Xintong 9% PTX-022 Palvella 8.0% - 9.8% SARM (VK5211) Viking 7.25% - 9.25% TR Beta (VK2809 and VK0214) Viking 3.5% - 7.5% Various Nucorion 4.0% - 9.0% Various Seelos 4.0% - 10.0% TR-Beta - VK2809 and VK0214 (Viking) Our partner, Viking, is developing VK2809, a novel selective thyroid hormone receptor beta (TR-beta) agonist with potential in multiple indications, including hypercholesterolemia, dyslipidemia and non-alcoholic steatohepatitis (NASH).
Given pharmaceutical industry trends toward large molecules with increased structural complexities, the Pelican Expression Technology platform is well positioned to meet these growing needs as one of the most comprehensive and broadly available, commercially validated protein production platform in the industry. We acquired the Pelican Expression Technology through our acquisition of Pfenex in October 2020.
Given pharmaceutical industry trends toward large molecules with increased structural complexities, the Pelican Expression Technology platform is well positioned to meet these growing needs as one of the most comprehensive and broadly available, commercially validated protein production platforms in the industry. 2023 Investment Highlights In September 2023, we announced the sale of our Pelican business, inclusive of the Pelican Expression Technology platform, and a merger of Pelican with Primordial Genetics to form a new company, Primrose Bio.
These patents are listed in the table below, and each patent family containing these patents has pending and/or granted counterparts in Europe, China and Japan. Orange Book-listed Captisol Patents Country Patent No.
These Captisol-enabled drugs include Nexterone (Baxter), Kyprolis (Amgen), Noxafil (Merck), Evomela (Acrotech/CASI), Baxdela (Melinta) and Zulresso (Sage). These patents are listed in the table below, and each patent family containing these patents has pending and/or granted counterparts in Europe, China and Japan. Orange Book-listed Captisol Patents Country Patent No.
For information about the royalties owed to us for these programs, see “Royalties” later in this business section. Kyprolis (Amgen, Ono, BeiGene) We supply Captisol to Amgen for use with Kyprolis (carfilzomib), and granted Amgen an exclusive product-specific license under our patent rights with respect to Captisol.
Kyprolis (Amgen, Ono, BeiGene) We supply Captisol to Amgen for use with Kyprolis (carfilzomib) and granted Amgen an exclusive product-specific license under our patent rights with respect to Captisol.
We are entitled to earn royalties on sales of ONS-5010 by Outlook. Milestone Payments 13 Our programs under license with our partners may generate milestone payments to us if our partners reach certain development, regulatory and commercial milestones.
Milestone Payments Our programs under license with our partners may generate milestone payments to us if our partners reach certain development, regulatory and commercial milestones.
Evomela has been granted Orphan Designation by the FDA for use as a high-dose conditioning regimen for patients with multiple myeloma undergoing ASCT. The Evomela formulation avoids the use of propylene glycol, which has been reported to cause renal and cardiac side-effects that limit the ability to deliver higher quantities of therapeutic compounds.
The Evomela formulation avoids the use of propylene glycol, which has been reported to cause renal and cardiac side-effects that limit the ability to deliver higher quantities of therapeutic compounds.
Viking Therapeutics announced the completion of patient enrollment in its Phase 2b clinical trial of VK2809, a novel liver-selective thyroid hormone receptor beta agonist, in patients with biopsy-confirmed non-alcoholic steatohepatitis (NASH).
In November 2023, Viking presented new results from the ongoing Phase 2b clinical trial of VK2809, a novel liver-selective thyroid hormone receptor beta agonist, in patients with biopsy-confirmed NASH.
Our competitive position also depends upon our ability to obtain patent protection or otherwise develop proprietary products or processes. For a discussion of the risks associated with competition, see below under “Item 1A.
Our Captisol business may face competition from other suppliers of similar cyclodextrin excipients or other technologies that are aimed to increase solubility or stability of APIs. Our competitive position also depends upon our ability to obtain patent protection or otherwise develop proprietary products or processes. For a discussion of the risks associated with competition, see below under “ Item 1A.
The aggregate potential milestone payments from Corvus are approximately $220 million for all indications. FYCOMPA IV (Eisai) Our partner, Eisai, is developing an intravenous Fycompa® (perampanel), formulated with Captisol, as a substitute in Japan for oral tablets as an adjunctive therapy in patients with partial onset seizures (including secondarily generalized seizures) or primary generalized tonic-clonic seizures.
We earn royalties on sales by Zydus Cadila for ten years following approval. FYCOMPA IV (Eisai) Our partner, Eisai, is developing an intravenous Fycompa ® (perampanel), formulated with Captisol, as a substitute in Japan for oral tablets as an adjunctive therapy in patients with partial onset seizures (including secondarily generalized seizures) or primary generalized tonic-clonic seizures.
Under the terms of the agreement, we are entitled to receive over $45 million in potential regulatory and commercial milestone payments as well as royalties on potential future net sales.
Under the terms of the agreement, we are entitled to receive over $45 million in potential regulatory and commercial milestone payments as well as royalties on potential future net sales. In January 2024, Sermonix announced it entered into a strategic collaboration and exclusive license agreement with Henlius for the rights to develop, manufacture and commercialize lasofoxifene in China.
For both currently marketed products and products in development, failure to comply with applicable regulatory requirements can, among other things, result in delays, the suspension of regulatory approvals, as well as possible civil and criminal sanctions. In addition, changes in existing regulations could have a material adverse effect on us or our partners.
For both currently marketed products and products in development, failure to comply with applicable regulatory requirements at any time during the product development process, approval process or after approval, can, among other things, result in delays, the suspension of regulatory approvals, regulatory enforcement 16 actions, as well as possible civil and criminal sanctions.
Partners seek the platform as it contributes significant value to biopharmaceutical development programs by reducing timelines and costs associated with research and development through commercial manufacturing of therapeutics and vaccines.
The versatility of the platform has been demonstrated in the production of enzymes, peptides, antibody derivatives and engineered non-natural proteins. The platform contributes significant value to biopharmaceutical development programs by shortening timelines and reducing costs associated with research and development through commercial manufacturing of therapeutics and vaccines.
As of December 31, 2022, approximately 26% and 14% of our workforce are Asian and Hispanic, respectively. We believe that our business benefits from the different perspectives a diverse workforce brings. We strive to maintain an inclusive environment free from discrimination of any kind, including sexual or other discriminatory harassment.
We believe that our business benefits from the different perspectives a diverse workforce brings. We strive to maintain an inclusive environment free from discrimination of any kind, including sexual or other discriminatory harassment. Our employees have multiple avenues available through which inappropriate behavior can be reported, including a confidential hotline.
Furthermore, academic institutions, government agencies and other public and private organizations conducting research may seek patent protection with respect to potentially competing products or technologies and may establish collaborative arrangements with our competitors. Our Captisol business may face competition from other suppliers of similar cyclodextrin excipients or other technologies that are aimed to increase solubility or stability of APIs.
Competition Some of the drugs we and our licensees and partners are developing may compete with existing therapies or other drugs in development by other companies. Furthermore, academic institutions, government agencies and other public and private organizations conducting research may seek patent protection with respect to potentially competing products or technologies and may establish collaborative arrangements with our competitors.
Captisol Technology Captisol is a patent-protected, chemically modified cyclodextrin with a structure designed to optimize the solubility and stability of drugs. This unique technology has enabled several FDA-approved products, including Gilead’s Veklury, Amgen’s Kyprolis, Baxter International’s Nexterone, Acrotech Biopharma’s and CASI Pharmaceuticals’ Evomela, Melinta Therapeutics’ Baxdela and Sage Therapeutics’ Zulresso.
This unique technology has enabled several FDA-approved products, including Gilead’s Veklury, Amgen’s Kyprolis, Baxter International’s Nexterone, Acrotech Biopharma’s and CASI Pharmaceuticals’ Evomela, Melinta Therapeutics’ Baxdela and Sage Therapeutics’ Zulresso. There are many Captisol-enabled products currently in various stages of development. We maintain a broad global patent portfolio for Captisol with the latest expiration date in 2035.
We will continue our proactive shareholder and employee engagement in 2023. See www.ligand.com for information about our ESG policies and practices.
We will continue our proactive shareholder and employee engagement in 2024. See www.ligand.com for information about our ESG policies and practices. However, note that the information contained on our website is not intended to be part of this filing.
Globally, we own approximately 390 issued patents covering all of the foregoing Captisol compositions, methods and related technology. Ten Captisol patents in several families are listed in the Orange Book in connection with one or more prescription drugs currently on the market. These Captisol-enabled drugs include Nexterone (Baxter), Kyprolis (Amgen), Noxafil (Merck), 15 Evomela (Acrotech/CASI), Baxdela (Melinta) and Zulresso (Sage).
We also own several patents and pending patent applications covering drug products containing Captisol as a component. Globally, we own over 400 issued patents covering all of the foregoing Captisol compositions, methods and related technology. Ten Captisol patents in several families are listed in the Orange Book in connection with one or more prescription drugs currently on the market.
Our notable health, welfare and retirement benefits include: • equity awards through our 2002 Stock Incentive Plan; • subsidized health insurance; • 401(k) Plan with matching contributions; • tuition assistance program; and • paid time off. We value diversity at all levels and continue to focus on extending our diversity and inclusion initiatives across our workforce.
We believe that our compensation and employee benefits are competitive and allow us to attract and retain skilled labor throughout our organization. Our notable health, welfare and retirement benefits include: • equity awards through our 2002 Stock Incentive Plan; • subsidized health insurance; 19 • 401(k) Plan with matching contributions; • tuition assistance program; and • paid time off.
Travere anticipates a review decision by the EMA on the potential approval for sparsentan for the treatment of IgAN in Europe in the second half of 2023.
Travere anticipates a review opinion by the Committee for Medicinal Products for Human Use (CHMP) on the potential approval for sparsentan for the treatment of IgAN in Europe in the first quarter of 2024.
As of December 31, 2022, we have 76 employees, of whom 49 are involved directly in scientific research and development activities. We rely on skilled, experienced, and innovative employees to conduct the operations of our company. Our key human capital objectives include identifying, recruiting, retaining, incentivizing and integrating our existing and new employees.
We are proud to provide our employees the opportunity to grow and advance as we invest in their education and career development. As of December 31, 2023, we have 58 employees, of whom 24 are involved directly in scientific research and development activities. We rely on skilled, experienced, and innovative employees to conduct the operations of our company.
The information contained on our website is not intended to be part of this filing. 4 Commercial and Clinical Stage Partnered Portfolio We have a large portfolio of assets currently generating royalties and future potential revenue-generating programs, including over 100 fully-funded by our partners.
Consistent with our business model, we are engaging with potential commercial partners to maximize the value for Ligand shareholders through a strategic transaction. Commercial and Clinical Stage Partnered Portfolio We have a large portfolio of assets currently generating royalties and future potential revenue-generating programs, including over 85 fully-funded by our partners.
More information on our EHS policies and initiatives is available on our website at www.ligand.com. The information contained on our website is not intended to be part of this filing. Government Regulation The research and development, manufacturing and marketing of pharmaceutical products are subject to regulation by numerous governmental authorities in the United States and other countries.
We expect to continue our effort and to refine our EHS policies and practices in 2024. More information on our EHS policies and initiatives is available on our website at www.ligand.com. However, note that the information contained on our website is not intended to be part of this filing.
Additionally, Jazz is utilizing our technology for the development of PF745 (JZP341), a long-acting Erwinia asparaginase for the treatment of ALL and other hematological malignancies. Jazz has worldwide rights to develop and commercialize PF745.
In September 2023, Jazz announced that the European Commission (EC) had granted marketing authorization for RYLAZE, to be marketed as Enrylaze®. Jazz began a rolling launch in the second half of 2023 . Additionally, Jazz is utilizing our technology for the development of PF745 (JZP341), a long-acting Erwinia asparaginase for the treatment of ALL and other hematological malignancies.
This product offering was established in 2017 to reduce cycle time and increase Captisol production capacity for large volume drug products. We maintain both Type IV and Type V DMFs with the FDA. These DMFs contain manufacturing and safety information relating to Captisol that our licensees can reference when developing Captisol-enabled drugs.
We maintain both Type IV and Type V drug master files (DMFs) with the FDA. These DMFs contain manufacturing and safety information relating to Captisol that our licensees can reference when developing Captisol-enabled drugs. We also have active DMFs in Japan, China and Canada. In 2023, royalties on commercial products using Captisol comprised over half of our total royalty revenue.
We earn royalties on sales by Zydus Cadila for ten years following approval. Summary of Selected Development Stage Programs We have multiple fully-funded partnered programs that are either in or nearing the regulatory approval process, or given the area of research or value of the license terms, we consider particularly noteworthy.
We are entitled to revenue from Captisol material sales and tiered royalties on potential future sales. Key Partnered Pipeline Programs We have a highly diversified partnered pipeline of development stage assets that either have or are nearing regulatory approval, or given the area of research or value of the license terms, we consider particularly noteworthy.
We frequently benchmark our compensation practices and benefits programs against those of comparable industries and in the geographic areas where our facilities are located. We believe that our compensation and employee benefits are competitive and allow us to attract and retain skilled labor throughout our organization.
Our key human capital objectives include identifying, recruiting, retaining, incentivizing and integrating our existing and new employees. We frequently benchmark our compensation practices and benefits programs against those of comparable industries and in the geographic areas where our facilities are located.
Our business model is focused on funding mid to late-stage drug development in return for economic rights and out-licensing our technology platforms to help partners discover and develop medicines. We partner with other pharmaceutical companies to leverage what they do best (late-stage development, regulatory management and commercialization) ultimately to generate our revenue.
Our business model focuses on funding programs in mid- to late-stage drug development in return for economic rights, purchasing royalty rights in development stage or commercial biopharmaceutical products and licensing our technology to help partners discover and develop medicines.
By focusing on such practices, we believe we can affect a meaningful, positive change in our community and maintain a healthy and safe environment. During 2022, we made good progress on our ESG efforts.
By focusing on such practices, we believe we can affect a meaningful, positive change in our community and maintain a healthy and safe environment. During 2023, we progressed our $2.5 million solar investment at Kansas University Innovation Park; made Environmental, Social and Governance (ESG) related charitable donations; and evolved numerous programs from our ESG-focused outreach committees.
Ligand is eligible to receive up to $155.5 million in milestone payments and tiered low to mid-single digit royalties based on worldwide net sales of any products resulting from this collaboration, including Rylaze. Nexterone (Baxter) We have a license agreement with Baxter, related to Baxter's Nexterone, a Captisol-enabled formulation of amiodarone, which is marketed in the United States and Canada.
Jazz has worldwide rights to develop and commercialize PF745. Ligand is eligible to receive up to $152 million in milestone payments and tiered low-single digit royalties based on worldwide net sales of any products resulting from this collaboration, including Rylaze. Filspari (Travere) In early 2012, Ligand licensed the world-wide rights to sparsentan to Travere Therapeutics.
There are many Captisol-enabled products currently in various stages of development. We maintain a broad global patent portfolio for Captisol with the latest expiration date in 2035. Other patent applications covering methods of making Captisol, if issued, extend to 2041. In addition to solid Captisol powder, we offer our partners access to cGMP manufactured aqueous Captisol concentrate.
Other patent applications covering methods of making Captisol, if issued, extend to 2041. In addition to solid Captisol powder, we offer our partners access to cGMP manufactured aqueous Captisol concentrate. This product offering was established in 2017 to reduce cycle time and increase Captisol production capacity for large-volume drug products.
Human Capital Management We recognize and take care of our employees by offering a wide range of competitive pay, recognition, and benefit programs. We are proud to provide our employees the opportunity to grow and advance as we invest in their education and career development.
There are 14 issued U.S. patents covering ZELSUVMI which are expected to be listed in the Orange Book and which are expected to expire during the time period beginning in 2026 and ending in 2035. Human Capital Management We recognize and take care of our employees by offering a wide range of competitive pay, recognition, and benefit programs.
Under a development funding and royalties agreement with Novan for berdazimer gel, Ligand is entitled to receive up to $20 million of milestone payments and tiered royalties of 7% to 10% on future worldwide sales of berdazimer gel. PTX-022 (Palvella) We acquired the economic rights to QTORIN™ 3.9% rapamycin anhydrous gel (QTORIN™ rapamycin, formerly PTX-022) from Palvella in December 2018.
The aggregate potential milestone payments from Corvus are approximately $220 million for all indications. QTORIN (Palvella) We acquired the economic rights to QTORIN™ 3.9% rapamycin anhydrous gel (QTORIN™ rapamycin, formerly PTX-022) from Palvella in December 2018. QTORIN™ rapamycin is a novel, topical formulation of high-strength rapamycin currently in development for the treatment of Microcystic Lymphatic Malformations (Microcystic LM).
Technologies Through a combination of research and acquisitions, we have created a partnered portfolio with a wide variety of underlying technologies. This diversification provides the added benefits of exposure to a wider variety of science, more licensing opportunities and lower impact of individual patent expiry.
This diversification provides the added benefits of exposure to a wider breadth of scientific innovation, more licensing opportunities and lower impact of individual patent expiry. Captisol Technology Captisol is a patent-protected, chemically modified cyclodextrin with a structure designed to optimize the solubility and stability of drugs.
Our portfolio consists of assets which currently generate revenue through royalties on commercial products as well as Captisol sales on commercial products.
Full Portfolio Details We have assembled one of the largest portfolios of biopharmaceutical assets in the industry which provides investors the opportunity to participate in the biotech industry while mitigating the industry’s usual inherent clinical binary risks. Our portfolio consists of assets which currently generate revenue through royalties on commercial products as well as Captisol sales on commercial products.
Item 1. Business Overview Our business is focused on acquiring or funding programs and technologies that pharmaceutical companies use to discover and develop medicines. Our business model provides a diversified portfolio of biotech and pharmaceutical product revenue streams that are supported by an efficient and low corporate cost structure.
Our business model seeks to generate value for stockholders by creating a diversified portfolio of biopharmaceutical product revenue streams that are supported by an efficient and low corporate cost structure. Our goal is to offer investors an opportunity to participate in the promise of the biotech industry in a profitable and diversified manner.
Our Captisol platform technology is a chemically modified cyclodextrin with a structure designed to optimize the solubility and stability of drugs. Our Pelican Expression Technology is a robust, validated, cost-effective and scalable platform for recombinant protein production that is especially well-suited for complex, large-scale protein production where traditional systems are not.
Pelican Expression Technology (owned by Primrose Bio, of which Ligand owns 49.9%) The Pelican Expression Technology platform is a robust, validated, cost-effective and scalable platform for recombinant protein production, and is especially well suited for complex, large-scale proteins. Global manufacturers have demonstrated consistent success with the platform and the technology is currently outlicensed for multiple commercial and development-stage programs.
Under our license agreement with Travere, we are entitled to receive over $66 million in potential milestone payments, as well as 9% in royalties on any future worldwide sales. TR-Beta - VK2809 and VK0214 (Viking) Our partner, Viking, is developing VK2809, a novel selective thyroid hormone receptor beta (TR-beta) agonist with potential in multiple indications, including hypercholesterolemia, dyslipidemia and NASH.
Under our lic ense agreement with Travere, we are entitled to receive over $50 million in potential milestone payments, as well as a 9% royalty on any future worldwide sales. Teriparatide Injection Product (PF708) (Alvogen/Adalvo) We acquired the teriparatide injection product with the acquisition of Pfenex in October 2020.
CRM-197 made in the Pelican Expression Technology platform is also used by Merck in its investigational vaccine candidates, including V116, a 21-valent pneumococcal conjugate vaccine currently in Phase 3 clinical trials. Ensifentrine – RPL554 (Verona) Ensifentrine is a first-in-class, selective dual inhibitor of phosphodiesterase 3 and 4 enzymes combining bronchodilator and non-steroidal anti-inflammatory activities in one compound.
The newly reported findings demonstrated robust and comparable liver fat reductions in patients with or without Type 2 diabetes, as well as patients with either F2 or F3 fibrosis. Ensifentrine – RPL554 (Verona) Ensifentrine is a first-in-class, selective, dual inhibitor of phosphodiesterase 3 and 4 enzymes combining bronchodilator and non-steroidal anti-inflammatory activities in one compound.
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The biotechnology industry is characterized by a binary clinical risk, in that, either a drug candidate is successfully developed and receives regulatory marketing approval, or the drug candidate fails in clinical trials.
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Item 1. Business Overview We are a biopharmaceutical company enabling scientific advancement through supporting the clinical development of high-value medicines. Ligand does this by providing financing, licensing our technologies or both.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe principal risks and uncertainties affecting our business include, but are not limited to the following: 17 • Future revenue based on Kyprolis, Evomela, Teriparatide and Rylaze as well as royalties from our other partnered products, may be lower than expected; • Future revenue from sales of Captisol material to our license partners may be lower than expected; • We rely heavily on collaboration relationships to generate milestone and royalty payments and our collaboration partners have significant discretion when deciding whether to pursue any development program, and any failure by our partners to successfully develop a product candidate or a termination or breach of any of the related agreements, or a change in their strategy or the focus of their development and commercialization efforts with respect to our partnered programs, could reduce our milestone and license fee revenue, and potentially reduce future royalties; • Our product candidates, and the product candidates of our partners, face significant development and regulatory hurdles prior to partnering and/or marketing which could delay or prevent licensing, sales-based royalties and/or milestone revenue; • Third party intellectual property may prevent us or our partners from developing our potential products; our and our partners’ intellectual property may not prevent competition; and any intellectual property issues may be expensive and time consuming to resolve; • Market acceptance and sales of any approved product will depend significantly on the availability and adequacy of coverage and reimbursement from third-party payors and may be affected by existing and future healthcare reform measures; and • Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or any guidance we may provide.
Biggest changeThe principal risks and uncertainties affecting our business include, but are not limited to the following: • Future revenue based on Kyprolis, Evomela, Teriparatide and Rylaze as well as royalties from our other partnered products, may be lower than expected; • Future revenue from sales of Captisol material to our license partners may be lower than expected; • We rely heavily on collaboration relationships to generate milestone and royalty payments and our collaboration partners have significant discretion when deciding whether to pursue any development program, and any failure by our partners to successfully develop a product candidate or a termination or breach of any of the related agreements, or a change in their strategy or the focus of their development and commercialization efforts with respect to our partnered programs, could reduce our milestone and license fee revenue, and potentially reduce future royalties; • Our product candidates, and the product candidates of our partners, face significant development and regulatory hurdles prior to partnering and/or marketing which could delay or prevent licensing, sales-based royalties and/or milestone revenue; • The royalty market may not grow at the same rate as it has in the past, or at all, and we may not be able to acquire sufficient royalties to create or sustain growth of our business; • Information available to us about the biopharmaceutical products underlying the royalties we buy may be limited and, therefore, our ability to analyze each product and its potential future cash flow may be similarly limited; • Third party intellectual property may prevent us or our partners from developing our potential products; our and our partners’ intellectual property may not prevent competition; and any intellectual property issues may be expensive and time consuming to resolve; • Market acceptance and sales of any approved product will depend significantly on the availability and adequacy of coverage and reimbursement from third-party payors and may be affected by existing and future healthcare reform measures; and • Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or any guidance we may provide.
Furthermore, under the Tax Act, although the treatment of tax losses generated in tax years beginning before December 31, 31 2017 has generally not changed, tax losses generated in tax years beginning after December 31, 2017 may only offset 80% of our taxable income.
Furthermore, under the Tax Act, although the treatment of tax losses generated in tax years beginning before December 31, 2017 has generally not changed, tax losses generated in tax years beginning after December 31, 2017 may only offset 80% of our taxable income.
Also, as noted above, Amgen has settled patent litigation related to Kyprolis on confidential terms with several parties, but it has been publicly reported that the U.S. launch date for at least Breckenridge Pharmaceuticals’ applicable generic product will be “on a date that is held as confidential in 2027 or sooner, depending on certain occurrences.” In addition, we cannot assure you that all of the potentially relevant prior art information that was or is deemed available to a person of skill in the relevant art prior to the priority date of the claimed invention-relating to our and our partners’ patents and patent applications has been found.
Also, as noted above, Amgen previously settled patent litigation related to Kyprolis on confidential terms with several parties, but it has been publicly reported that the U.S. launch date for at least Breckenridge Pharmaceuticals’ applicable generic product will be “on a date that is held as confidential in 2027 or sooner, depending on certain occurrences.” In addition, we cannot assure you that all of the potentially relevant prior art information that was or is deemed available to a person of skill in the relevant art prior to the priority date of the claimed invention-relating to our and our partners’ patents and patent applications has been found.
Even if our patent applications do successfully issue and even if such patents cover our or our partner’s products or 22 potential products, third parties may initiate litigation or opposition, interference, re-examination, post-grant review, inter partes review, nullification or derivation action in court or before patent offices, or similar proceedings challenging the validity, enforceability or scope of such patents, which may result in the patent claims being narrowed or invalidated, may allow third parties to commercialize our or our partners’ products and compete directly with us and our partners, without payment to us or our partners, or limit the duration of the patent protection of our and our partners’ technology and products.
Even if our patent applications do successfully issue and even if such patents cover our or our partner’s products or potential products, third parties may initiate litigation or opposition, interference, re-examination, post-grant review, inter partes review, nullification or derivation action in court or before patent offices, or similar proceedings challenging the validity, enforceability or scope of such patents, which may result in the patent claims being narrowed or invalidated, may allow third parties to commercialize our or our partners’ products and compete directly with us and our partners, without payment to us or our partners, or limit the duration of the patent protection of our and our partners’ technology and products.
Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware is the exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty 33 owed by our directors, officers or other employees to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the General Corporation Law of Delaware or our amended and restated certificate of incorporation or amended and restated bylaws, or (iv) any action asserting a claim governed by the internal affairs doctrine.
Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware is the exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by our directors, officers or other employees to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the General Corporation Law of Delaware or our amended and restated certificate of incorporation or amended and restated bylaws, or (iv) any action asserting a claim governed by the internal affairs doctrine.
In addition, the opinion is not binding on the IRS or the courts, and notwithstanding the opinion, the IRS could determine on audit that the Distribution or Merger does not qualify as a reorganization if it determines that any of the facts, assumptions, representations or undertakings on which the 20 opinion is based are not correct or have been violated or that the Distribution or Merger should be taxable for other reasons, including as a result of a significant change in stock or asset ownership after the Distribution.
In addition, the opinion is not binding on the IRS or the courts, and notwithstanding the opinion, the IRS could determine on audit that the Distribution or Merger does not qualify as a reorganization if it determines that any of the facts, assumptions, representations or undertakings on which the opinion is based are not correct or have been violated or that the Distribution or Merger should be taxable for other reasons, including as a result of a significant change in stock or asset ownership after the Distribution.
Defense of infringement and other claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of management and employee resources from our business. Parties making claims against us may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources.
Defense of infringement and other claims, regardless of their merit, would involve 26 substantial litigation expense and would be a substantial diversion of management and employee resources from our business. Parties making claims against us may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources.
If a prolonged government shutdown occurs, or if global health concerns continue to hinder or prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business.
If a prolonged government shutdown occurs, or if global health concerns continue to hinder or prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our or our partners’ regulatory submissions, which could have a material adverse effect on our business.
We cannot assure you what standard a court would apply to determine insolvency or that a court would determine that New OmniAb or Ligand or any of their subsidiaries were solvent at the time of or after giving effect to the Distribution. The Distribution of OmniAb common stock is also subject to review under state corporate distribution statutes.
We cannot assure you what standard a court would apply to determine insolvency or that a court would determine that New OmniAb or Ligand or any of their subsidiaries were solvent at the time of or after giving effect to the Distribution. 25 The Distribution of OmniAb common stock is also subject to review under state corporate distribution statutes.
This would result in increased competition for our or our partners' programs. If product candidates are approved for marketing under our collaboration programs, revenues we receive will depend on the manufacturing, marketing and sales efforts of our collaboration partners, who generally retain commercialization rights under the collaboration agreements.
This would result in increased competition for our or our partners' programs. If product candidates are approved for marketing under our collaboration programs, revenues we receive 22 will depend on the manufacturing, marketing and sales efforts of our collaboration partners, who generally retain commercialization rights under the collaboration agreements.
We require our employees, consultants, licensees and others to sign confidentiality agreements when they begin their relationship with us. These 23 agreements may be breached, and we may not have adequate remedies for any breach. In addition, our competitors may independently discover our trade secrets.
We require our employees, consultants, licensees and others to sign confidentiality agreements when they begin their relationship with us. These agreements may be breached, and we may not have adequate remedies for any breach. In addition, our competitors may independently discover our trade secrets.
Continued volatility in the overall capital markets could reduce the market price of our common stock in spite of our operating performance. Further, high stock price volatility could result in higher share-based compensation expense. Our common stock has experienced significant price and volume fluctuations and may continue to experience volatility in the future.
Continued volatility in the overall capital markets could reduce the market price of our common stock in spite of our operating performance. Further, high stock price volatility could result in higher share-based compensation expense. 41 Our common stock has experienced significant price and volume fluctuations and may continue to experience volatility in the future.
Any successful third party challenge to our patents in this or any other proceeding could result in the unenforceability or invalidity of such patents or amendment to our patents in such a way that any resulting protection may lead to increased competition to our business, which could harm our business.
Any successful third party challenge to our patents in this 28 or any other proceeding could result in the unenforceability or invalidity of such patents or amendment to our patents in such a way that any resulting protection may lead to increased competition to our business, which could harm our business.
For example, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches.
For example, any of these parties may breach the agreements and disclose our 30 proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches.
Further, the FDA could require us to submit additional information for regulatory review or approval, including data from extensive safety 18 testing or clinical testing of products using Captisol.
Further, the FDA could require us to submit additional information for regulatory review or approval, including data from extensive safety testing or clinical testing of products using Captisol.
In addition, in patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are 24 commonplace. The outcome following legal assertions of invalidity and unenforceability during patent litigation is unpredictable.
In addition, in patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. The outcome following legal assertions of invalidity and unenforceability during patent litigation is unpredictable.
We believe we have experienced certain ownership changes in the past and have reduced our deferred tax assets related to NOLs and research and development tax credit carryforwards accordingly.
We believe we have experienced certain ownership changes in the past 38 and have reduced our deferred tax assets related to NOLs and research and development tax credit carryforwards accordingly.
Many factors may have a significant impact on the market price of our common stock, including, but not limited to, the following factors: results of or delays in our preclinical studies and clinical trials; the success of our collaboration agreements; publicity regarding actual or potential medical results relating to products under development by us or others; announcements of technological innovations or new commercial products by us or others; developments in patent or other proprietary rights by us or others; market perception of the OmniAb spin-off; comments or opinions by securities analysts or major stockholders or changed securities analysts' reports or recommendations; future sales or shorting of our common stock by existing stockholders; regulatory developments or changes in regulatory guidance; litigation or threats of litigation; economic and other external factors or other disaster or crises; the departure of any of our officers, directors or key employees; period-to-period fluctuations in financial results; and price and volume fluctuations in the overall stock market.
Many factors may have a significant impact on the market price of our common stock, including, but not limited to, the following factors: results of or delays in our preclinical studies and clinical trials; the success of our collaboration agreements; publicity regarding actual or potential medical results relating to products under development by us or others; announcements of technological innovations or new commercial products by us or others; developments in patent or other proprietary rights by us or others; comments or opinions by securities analysts or major stockholders or changed securities analysts’ reports or recommendations; future sales or shorting of our common stock by existing stockholders; regulatory developments or changes in regulatory guidance; litigation or threats of litigation; economic and other external factors or other disaster or crises; the departure of any of our officers, directors or key employees; period-to-period fluctuations in financial results; and price and volume fluctuations in the overall stock market.
If we lose these rights, our business may be materially and adversely affected, our ability to develop improvements to our technology platform and antibody discovery platform may be negatively and substantially impacted, and if disputes arise, we may be subjected to future litigation, as well as the potential loss of or limitations on our ability to incorporate the technology covered by these license agreements.
If we lose these rights, our business may be materially and adversely affected, our ability to develop improvements to our technology platform may be negatively and substantially impacted, and if disputes arise, we may be subjected to future litigation, as well as the potential loss of or limitations on our ability to incorporate the technology covered by these license agreements.
In the United States, numerous federal and state laws and regulations govern the collection, use, disclosure, and protection of personal information, including state data breach notification laws, federal and state health information privacy laws, and federal and state consumer protection laws. Each of these laws is subject to varying 27 interpretations by courts and government agencies, creating complex compliance issues.
In the United States, numerous federal and state laws and regulations govern the collection, use, disclosure, and protection of personal information, including state data breach notification laws, federal and state health 32 information privacy laws, and federal and state consumer protection laws. Each of these laws is subject to varying interpretations by courts and government agencies, creating complex compliance issues.
If we or our licensors fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, intellectual property that is important to our systems, including our software, workflows, consumables, reagents, and transgenic animals.
If we or our licensors fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, intellectual property that is important to our systems, including our software, workflows, consumables and reagents.
If the Distribution, together with certain related transactions, fails to qualify as a reorganization under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the “Code”), or the Merger fails to qualify as a reorganization under Section 368(a) of the Code, we could incur significant tax liabilities.
If the Distribution, together with certain related transactions, failed to qualify as a reorganization under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the “Code”), or the Merger failed to qualify as a reorganization under Section 368(a) of the Code, we could incur significant tax liabilities.
Although we believe that we and our partners have adjusted our business practices to the impacts of the COVID-19 pandemic, we may experience disruptions that could severely impact our business, drug manufacturing and supply chain, nonclinical activities and clinical trials and our partners’ business may be impacted in similar ways, including due to delays or difficulties in enrolling patients in clinical trials, diversion of healthcare resources away from the conduct of clinical trials, interruption of, or delays in receiving, supplies of Captisol or other product or product candidates from contract manufacturing organizations due to staffing shortages, production slowdowns or stoppages and disruptions in delivery systems, which may result in cancellations of Captisol orders or refunds if we fail to deliver Captisol timely, interruption or delays to discovery and development pipelines and difficulties launching or commercializing products, including due to reduced access to doctors as a result of social distancing protocols.
Although we believe that we and our partners have adjusted our business practices to the impacts of the COVID-19 pandemic, in the future, we may experience similar pandemics or epidemic diseases that could severely impact our business, drug manufacturing and supply chain, nonclinical activities and clinical trials and our partners’ business may be impacted in similar ways, including due to delays or difficulties in enrolling patients in clinical trials, diversion of healthcare resources away from the conduct of clinical trials, interruption of, or delays in receiving, supplies of 37 Captisol or other product or product candidates from contract manufacturing organizations due to staffing shortages, production slowdowns or stoppages and disruptions in delivery systems, which may result in cancellations of Captisol orders or refunds if we fail to deliver Captisol timely, interruption or delays to discovery and development pipelines and difficulties launching or commercializing products, including due to reduced access to doctors as a result of social distancing protocols.
The Distribution and the Merger were conditioned upon receipt of a tax opinion from outside counsel to the effect that the Distribution would qualify as a reorganization under Sections 355 and 368(a)(1)(D) of the Code, that the Merger would not cause Section 355(e) of the Code to apply to the Distribution and that the Merger would be treated as a reorganization under Section 368(a) of the Code.
The Distribution and the Merger were conditioned upon receipt of a tax opinion from outside counsel to the effect that the Distribution qualified as a reorganization under Sections 355 and 368(a)(1)(D) of the Code, that the Merger would not cause Section 355(e) of the Code to apply to the Distribution and that the Merger would be treated as a reorganization under Section 368(a) of the Code.
We have product liability insurance that covers our clinical trials up to a $10.0 million annual limit. Our insurance coverage may not be sufficient to cover all of our product liability related expenses or losses and may not cover us for any expenses or losses we may suffer.
We have product liability insurance that covers our clinical trials up to a $15.0 million annual limit. Our insurance coverage may not be sufficient to cover all of our product liability related expenses or losses and may not cover us for any expenses or losses we may suffer.
Also, Amgen has settled patent litigation related to Kyprolis on confidential terms with several parties, but it has been publicly reported that the U.S. launch date for at least Breckenridge Pharmaceuticals’ applicable generic product will be “on a date that is held as confidential in 2027 or sooner, depending on certain occurrences.” Future revenue from sales of Captisol material to our license partners may be lower than expected.
Also, Amgen previously settled patent litigation related to Kyprolis on confidential terms with several parties, but it was publicly reported that the U.S. launch date for at least Breckenridge Pharmaceuticals’ applicable generic product will be “on a date that is held as confidential in 2027 or sooner, depending on certain occurrences.” 21 Future revenue from sales of Captisol material to our license partners may be lower than expected.
Revenues from sales of Captisol material to our collaborative partners, including Amgen and Gilead, represent a significant portion of our current revenues. Any setback that may occur with respect to Captisol could significantly impair our operating results and/or reduce the market price of our stock.
Revenues from sales of Captisol material to our collaboration partners, including Amgen, represent a significant portion of our current revenues. Any setback that may occur with respect to Captisol could significantly impair our operating results and/or reduce the market price of our stock.
Concerns over inflation, energy costs, geopolitical issues, military conflicts, including the war between Russia and Ukraine, terrorism, public health emergencies or pandemics, the availability and cost of credit, and the U.S. financial markets have in the past contributed to, and may continue in the future to contribute to, increased volatility and diminished expectations for the economy and the markets.
Concerns over inflation, energy costs, geopolitical issues, military conflicts, including the wars between Russia and Ukraine and Israel and Hamas, terrorism, public health emergencies or pandemics, the availability and cost of credit, and the U.S. financial markets have in the past contributed to, and may continue in the future to contribute to, increased volatility and diminished expectations for the economy and the markets.
Under the Tax Act, any federal NOLs arising in taxable years ending after December 31, 2017 will carry forward indefinitely. As of December 31, 2022, we had federal and California research and development tax credit carryforwards of approximately $8.5 million and $29.0 million, respectively.
Under the Tax Act, any federal NOLs arising in taxable years ending after December 31, 2017 will carry forward indefinitely. As of December 31, 2023, we had federal and California research and development tax credit carryforwards of approximately $8.5 million and $29.4 million, respectively.
Sanctions imposed by the United States and other countries in response to military conflicts, including the war between Russia and Ukraine, may also adversely impact the financial markets and the global economy, and any economic countermeasures by the affected countries or others could exacerbate market and economic instability.
Sanctions imposed by the United States and other countries in response to military conflicts, including the wars between Russia and Ukraine and Israel and Hamas, may also adversely impact the financial markets and the global economy, and any economic countermeasures by the affected countries or others could exacerbate market and economic instability.
It will impose additional data protection obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data. It will also create a new California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement.
It imposes additional data protection obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data. It also created a new California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement.
The extent to which the 30 COVID-19 pandemic, or any other outbreak of an epidemic disease, impacts our results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact.
The extent to which the emergence of new variants of COVID-19, or any other outbreak of a pandemic or epidemic disease, impacts our results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact.
Further, to the extent the COVID-19 pandemic or any other outbreak of an epidemic disease adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this section.
Further, to the extent any pandemic or epidemic disease adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this section.
Although we have lifted most of the restrictions we previously imposed on in-person access to our facilities and currently do not believe the COVID-19 pandemic is having a material impact on our business, we cannot guarantee that the COVID-19 pandemic, including the emergence of variants, or a similar event, will not impact our operations in the future.
Although we have lifted the restrictions we previously imposed on in-person access to our facilities and currently do not believe the COVID-19 pandemic is having a material impact on our business, we cannot guarantee that pandemics, such as COVID-19 or the emergence of variants thereof, or a similar event, will not impact our operations in the future.
In addition, revenue from Captisol sales related to remdesivir may continue to decrease due to a number of factors, including alternative treatments for COVID-19 that have been or will be developed by other companies and the decrease in COVID-19 infections, in which case the commercial opportunity could be materially and adversely affected.
In addition, we may continue to generate no revenue from Captisol sales related to remdesivir due to a number of factors, including alternative treatments for COVID-19 that have been or will be developed by other companies and the decrease in COVID-19 infections, in which case the commercial opportunity could be continue to be limited.
Healthcare payors, including Medicare, are challenging the prices charged for medical products and services. Government and other healthcare payors are increasingly attempting to contain healthcare costs by limiting both coverage and the level of reimbursement for medical products.
Significant uncertainty exists as to the reimbursement status of healthcare products. Healthcare payors, including Medicare, are challenging the prices charged for medical products and services. Government and other healthcare payors are increasingly attempting to contain healthcare costs by limiting both coverage and the level of reimbursement for medical products.
Since its enactment, there have been judicial, executive and Congressional challenges to certain aspects of the ACA. On June 17, 2021, the U.S. Supreme Court dismissed the most recent judicial challenge to the ACA brought by several states without specifically ruling on the constitutionality of the ACA.
Since its enactment, there have been judicial, executive and Congressional challenges to certain aspects of the ACA. On June 17, 2021, the U.S. Supreme Court dismissed the most recent judicial challenge to the ACA brought by several states without specifically ruling on the constitutionality of the ACA. Thus, the ACA will remain in effect in its current form.
By way of example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the ACA, was enacted, which included a number of provisions affecting the pharmaceutical industry, including, among other things, annual, non-deductible fees on any entity that manufactures or imports some types of branded prescription drugs and increases in Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program.
By way of example, the Affordable Care Act (ACA) was enacted in 2010 and included a number of provisions affecting the pharmaceutical industry, including, among other things, annual, non-deductible fees on any entity that manufactures or imports some types of branded prescription drugs and increases in Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program.
A pandemic, including COVID-19 or other public health epidemic, poses the risk that we or our employees, contractors, including our CROs, suppliers, and other partners may be prevented from conducting business activities for an indefinite period of time, including due to spread of the disease within these groups or due to shutdowns that may be requested or mandated by governmental authorities.
Future pandemics, including the residual effects of the COVID-19 pandemic, or other public health epidemics, pose the risk that we or our employees, contractors, including our CROs, suppliers, and other partners may be prevented from conducting business activities for an indefinite period of time, including due to spread of the disease within these groups or due to shutdowns that may be requested or mandated by governmental authorities.
We may not be able to integrate any acquired business successfully or operate any acquired business profitably. Integrating any newly acquired business could be expensive and time-consuming. Integration efforts often take a significant amount of time, place a significant strain on managerial, operational and financial resources and could prove to be more difficult or expensive than we predict.
Integrating any newly acquired business could be expensive and time-consuming. Integration efforts often take a significant amount of time, place a significant strain on managerial, operational and financial resources and could prove to be more difficult or expensive than we predict.
Our results of operations and liquidity needs could be materially negatively affected by market fluctuations and economic downturn. Our results of operations could be materially negatively affected by economic conditions generally, both in the United States and elsewhere around the world.
Our results of operations could be materially negatively affected by economic conditions generally, both in the United States and elsewhere around the world.
Sales of the products we license to our collaboration partners and the royalties we receive will depend in large part on the extent to which coverage and reimbursement is available from government and health administration authorities, private health 26 maintenance organizations and health insurers, and other healthcare payors. Significant uncertainty exists as to the reimbursement status of healthcare products.
Sales of the products we may market or license to our collaboration partners and the royalties we receive will depend in large part on the extent to which coverage and reimbursement is available from government and health administration authorities, private health maintenance organizations and health insurers, and other healthcare payors.
ITEM 1A. RISK FACTORS The following is a summary description of some of the many risks we face in our business. You should carefully review these risks in evaluating our business, including the businesses of our subsidiaries. You should also consider the other information described in this report.
ITEM 1A. RISK FACTORS The following is a summary description of some of the many risks we face in our business. You should carefully review these risks in evaluating our business, including the businesses of our subsidiaries.
The enactment of such laws could have potentially conflicting requirements that would make compliance challenging. In the event that we are subject to or affected by HIPAA, the CCPA, the CPRA or other domestic privacy and data protection laws, any liability from failure to comply with the requirements of these laws could adversely affect our financial condition.
In the event that we are subject to or affected by HIPAA, the CCPA, the CPRA or other domestic privacy and data protection laws, any liability from failure to comply with the requirements of these laws could adversely affect our financial condition.
Our investments are subject to market and credit risks that could diminish their value and these risks could be greater during periods of extreme volatility or disruption in the financial and credit markets, which could adversely impact our business, financial condition, results of operations, liquidity and cash flows.
Any impairment charges could have a material adverse impact on our results of operations and the market value of our common stock. 40 Our investments are subject to market and credit risks that could diminish their value and these risks could be greater during periods of extreme volatility or disruption in the financial and credit markets, which could adversely impact our business, financial condition, results of operations, liquidity and cash flows.
Several of our partners reported that their operations were impacted, including delays in research and development programs and deprioritizing clinical trials in favor of treating patients who have contracted the virus or to prevent the spread of the virus.
Several of our partners reported that their operations were impacted by the COVID-19 pandemic, with such impacts including delays in research and development programs and deprioritizing clinical trials in favor of treating patients who had contracted the virus or to prevent the spread of the virus.
As a result of the COVID-19 pandemic, or any future epidemic diseases, we may also face increased cybersecurity risks due to our reliance on internet technology and the number of our and our service providers’ employees who are (and may continue to be) working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities.
We may also face increased cybersecurity risks due to our reliance on internet technology and the number of our and our service providers’ employees who are (and may continue to be) working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities.
The IRA permits the Secretary of the Department of Health and Human Services (HHS) to implement many of these provisions through guidance, as opposed to regulation, for the initial years.
The IRA permits the Secretary of the Department of Health and Human Services (HHS) to implement many of these provisions through guidance, as opposed to regulation, for the initial years. HHS has and will continue to issue and update guidance as these programs are implemented.
Any such dispute or litigation could delay, interrupt or terminate the collaboration research, development and commercialization of certain potential products, create uncertainty as to ownership rights of intellectual property, or could result in litigation or arbitration.
Any such dispute or litigation could delay, interrupt or terminate the collaboration research, development and commercialization of certain potential products, create uncertainty as to ownership rights of intellectual property, or could result in litigation or arbitration. The occurrence of any of these problems could be time-consuming and expensive and could adversely affect our business.
The occurrence of any of these problems could be time-consuming and expensive and could adversely affect our business. 19 Our collaboration partners may change their strategy or the focus of their development and commercialization efforts with respect to our partnered programs, and the success of our partnered programs could be adversely affected.
Our collaboration partners may change their strategy or the focus of their development and commercialization efforts with respect to our partnered programs, and the success of our partnered programs could be adversely affected.
As of December 31, 2022, we had U.S. federal and state net operating loss carryforwards (NOLs) of approximately $81.1 million and $168.3 million, respectively. Our federal NOLs expire through 2037 a nd our state NOLs begin to expire in 2029, if not utilized.
As of December 31, 2023, we had U.S. federal and state net operating loss carryforwards (NOLs) of approximately $48.0 million and $165.1 million, respectively. Our federal NOLs expire through 2037 and our state NOLs begin to expire in 2028, if not utilized.
If our investments experience adverse changes in market value, we may have less capital to fund our operations.
We cannot provide assurance that our investments are not subject to adverse changes in market value. If our investments experience adverse changes in market value, we may have less capital to fund our operations.
To determine the priority of these inventions, we may have to participate in interference proceedings, derivation proceedings or other post-grant proceedings declared by the USPTO that could result in substantial cost to us. The outcome of such proceedings is uncertain. No assurance can be given that other patent applications will not have priority over our patent applications.
To determine the priority of these inventions, we may have to participate in interference proceedings (with respect to patent applications filed prior to March 2013), derivation proceedings or other post-grant proceedings declared by the USPTO that could result in substantial cost to us. The outcome of such proceedings is uncertain.
The validity, scope and enforceability of any patents that cover our partners’ biologic product candidate can be challenged by third parties. For biologics, the Biologics Price Competition and Innovation Act of 2009, BPCIA, provides a mechanism for one or more third parties to seek FDA approval to manufacture or sell biosimilar or interchangeable versions of brand name biological products.
For biologics, the Biologics Price Competition and Innovation Act of 2009, BPCIA, provides a mechanism for one or more third parties to seek FDA approval to manufacture or sell biosimilar or interchangeable versions of brand name biological products.
In such an event, we could be liable for any damages that result, which could adversely affect our business. 29 Risk Related to Our Strategic Transactions: Any difficulties from strategic acquisitions could adversely affect our stock price, operating results and results of operations. We may acquire companies, businesses and products that complement or augment our existing business.
Risk Related to Our Strategic Transactions: Any difficulties from strategic acquisitions could adversely affect our stock price, operating results and results of operations. We may acquire companies, businesses and products that complement or augment our existing business. We may not be able to integrate any acquired business successfully or operate any acquired business profitably.
If additional funds are required to support our operations and we are unable to obtain them on terms favorable to us, we may be required to cease or reduce further development or commercialization of our products, to sell some or all of our technology or assets or to merge with another entity.
If additional funds are required to support our operations and we are unable to obtain them on terms favorable to us, we may be required to cease or reduce further development or commercialization of our products, to sell some or all of our technology or assets or to merge with another entity. 23 The royalty market may not grow at the same rate as it has in the past, or at all, and we may not be able to acquire sufficient royalties to create or sustain growth of our business.
In the event of a market downturn, our results of operations could be adversely affected by those factors in many ways, including making it more difficult for us to raise funds if necessary, and our stock price may further decline. We cannot provide assurance that our investments are not subject to adverse changes in market value.
Domestic and international equity markets periodically experience heightened volatility and turmoil. These events may have an adverse effect on us. In the event of a market downturn, our results of operations could be adversely affected by those factors in many ways, including making it more difficult for us to raise funds if necessary, and our stock price may further decline.
The owners of these non-exclusively licensed technologies are therefore free to license them to third parties, including our competitors, on terms that may be superior to those offered to us, which could place us at a competitive disadvantage. 25 Moreover, our licensors may own or control intellectual property that has not been licensed to us and, as a result, we may be subject to claims, regardless of their merit, that we are infringing or otherwise violating the licensor’s rights.
The owners of these non-exclusively licensed technologies are therefore free to license them to third parties, including our competitors, on terms that may be superior to those offered to us, which could place us at a competitive disadvantage.
The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. Further, the California Privacy Rights Act (CPRA) passed in California, and it significantly amends the CCPA.
The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that has increased the likelihood of, and risks associated with data breach litigation. Further, the California Privacy Rights Act (CPRA) generally went into effect on January 1, 2023, and significantly amends the CCPA.
If we fail to comply with any such laws, rules or regulations, we may face government investigations and/or enforcement actions, fines, civil or criminal penalties, private litigation or adverse publicity that could adversely affect our business, financial condition and results of operations. 28 Changes in funding for the FDA and other government agencies could hinder their ability to hire and retain key leadership and other personnel, or otherwise prevent new products and services from being developed or commercialized in a timely manner, which could negatively impact our business or the business of our partners.
Changes in funding for the FDA and other government agencies could hinder their ability to hire and retain key leadership and other personnel, or otherwise prevent new products and services from being developed or commercialized in a timely manner, which could negatively impact our business or the business of our partners.
In addition, if any of our competitors have filed patent applications in the United States which claim technology we also have invented, the United States Patent and Trademark Office may require us to participate in expensive interference proceedings to determine who has the right to a patent for the technology.
In addition, if any of our competitors have filed patent applications in the United States prior to March 2013 which claim technology we also have invented, the United States Patent and Trademark Office may require us to participate in expensive interference proceedings to determine who has the right to a patent for the technology. 27 In addition, our agreements with some of our partners, suppliers or other entities with whom we do business require us to defend or indemnify these parties to the extent they become involved in infringement claims, including the types of claims described above.
In addition, changes to the patent laws of the United States allow for various post-grant opposition proceedings that have not been extensively tested, and their outcome is therefore uncertain. Furthermore, if third parties bring these proceedings against our patents, we could experience significant costs and management distraction.
No assurance can be given that other patent applications will not have priority over our patent applications. In addition, changes to the patent laws of the United States allow for various post-grant opposition proceedings that have not been extensively tested, and their outcome is therefore uncertain.
We and our collaboration partners are subject to federal and state healthcare laws, including fraud and abuse, anti-kickback, false claims, physician payment transparency and civil monetary penalties. These laws may impact, among other things, financial arrangements with physicians, sales, marketing and education programs and the manner in which any of those activities are implemented.
These laws may impact, among other things, financial arrangements with physicians, sales, marketing and education programs and the manner in which any of those activities are implemented.
The majority of the provisions went into effect on January 1, 2023, and additional compliance investment and potential business process changes may be required. Similar laws have passed in Virginia, Colorado, Connecticut and Utah, and have been proposed in other states and at the federal level, reflecting a trend toward more stringent privacy legislation in the United States.
Additional compliance investment and potential business process changes may be required. Similar laws have passed in other states and are continuing to be proposed at the state and federal level, reflecting a trend toward more stringent privacy legislation in the United States. The enactment of such laws could have potentially conflicting requirements that would make compliance challenging.
Moreover, there has recently been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed bills designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products.
There have been several Congressional inquiries, as well as legislative and regulatory initiatives and executive orders designed to, among other things, bring more transparency to product pricing, review 31 the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products.
Additional risks not presently known to us or that we currently deem immaterial also may impair our business. Summary of Risks Related to our Business: Our business is subject to numerous risks and uncertainties, including those described below.
Summary of Risks Related to our Business: Our business is subject to numerous risks and uncertainties, including those described below.
Even though the FDA has since resumed standard inspection operations of domestic facilities where feasible, the FDA has continued to monitor and implement changes to its inspectional activities to ensure the safety of its employees and those of the firms it regulates as it adapts to the evolving COVID-19 pandemic, and any resurgence of the virus or emergence of new variants may lead to further inspectional delays.
Even though the FDA has resumed standard inspection operations of domestic facilities where feasible, any resurgence of the virus or emergence of new variants may lead to further inspectional or administrative delays. Regulatory authorities outside the United States may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic.
Among other requirements, the GDPR regulates transfers of personal data subject to the GDPR to third countries that have not been found to provide adequate protection to such personal data, including the United States; in July 2020, the Court of Justice of the European Union (CJEU) limited how organizations could lawfully transfer personal data from the European Union/EEA to the United States by invalidating the Privacy Shield for purposes of international transfers and imposing further restrictions on the use of standard contractual clauses (SCCs).
Among other requirements, the GDPR regulates transfers of personal data subject to the GDPR to third countries that have not been found to provide adequate protection to such personal data, including the United States, and the efficacy and longevity of current transfer mechanisms between the EEA and the United States remains uncertain.
Other Risks: Our business is subject to risks arising from epidemic diseases, such as the COVID-19 pandemic, which has impacted and could continue to impact our business. The COVID-19 pandemic continues to impact worldwide public health and economic activity.
Other Risks: Our business is subject to risks arising from pandemic and epidemic diseases.
Any losses, costs or liabilities may not be covered by, or may exceed the coverage limits of, any or all applicable insurance policies. Conversion of our outstanding convertible notes may result in losses, result in the dilution of existing stockholders, create downward pressure on the price of our common stock, and restrict our ability to take advantage of future opportunities.
Any losses, costs or liabilities may not be covered by, or may exceed the coverage limits of, any or all applicable insurance policies.
We cannot predict whether other legislative changes will be adopted, if any, or how such changes would affect our operations or financial condition. If we or our commercialization partners market products in a manner that violates healthcare laws, we may be subject to civil or criminal penalties.
If we or our commercialization partners market products in a manner that violates healthcare laws, we may be subject to civil or criminal penalties. We and our collaboration partners are subject to federal and state healthcare laws, including fraud and abuse, government price reporting, anti-kickback, false claims, physician payment transparency and civil monetary penalties.
In March 2022, the United States and European Union announced a new regulatory regime intended to replace the invalidated regulations; however, this new EU-US Data Privacy Framework has not been implemented beyond an executive order signed by President Biden on October 7, 2022 on Enhancing Safeguards for United States Signals Intelligence Activities.
On October 7, 2022, President Biden signed an Executive Order on ‘Enhancing Safeguards for United States Intelligence Activities’ which introduced new redress mechanisms and binding safeguards to address the concerns raised by the CJEU in relation to data transfers from the EEA to the United States and which formed the basis of the new EU-US Data Privacy Framework (DPF), as released on December 13, 2022.
Other legislative changes have been proposed and adopted since the ACA was enacted, including aggregate reductions of Medicare payments to providers, which was temporarily suspended from March 1, 2020 through March 31, 2022, and reduced payments to several types of Medicare providers.
In addition, other legislative changes have been proposed and adopted since the ACA was enacted. For example, beginning April 1, 2013, Medicare payments to providers were reduced under the sequestration required by the Budget Control Act of 2011, which will remain in effect through 2032, unless additional Congressional action is taken.
This may lead to clinical trial protocol deviations or to discontinuation of treatment for patients who are currently enrolled in the clinical trials being conducted by us or our partners. In addition, certain of our partners reported negative impacts on product sales which will impact our royalty revenues.
In addition, certain of our partners reported negative impacts on product sales which impacted our royalty revenues.
Removed
The anticipated benefits of the Separation and Merger may not be achieved.
Added
You should also consider the other information described in this report, including the information contained in our financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Additional risks not presently known to us or that we currently deem immaterial also may impair our business.
Removed
We may not be able to achieve the full strategic and financial benefits expected to result from the Separation and Merger, including the potential that the Separation and Merger will: • allow each business to pursue its own operational and strategic priorities and more quickly respond to trends, developments and opportunities in its respective markets; • create two separate and distinct management teams focused on each business’s unique strategic priorities, target markets and corporate development opportunities; • give each business opportunity and flexibility by pursuing its own investment, capital allocation and growth strategies consistent with its long-term objectives; • allow investors to separately value each business based on the unique merits, performance and future prospects of each business, providing investors with two distinct investment opportunities; • enhance the ability of each business to attract and retain qualified management and to better align incentive-based compensation with the performance of each separate business; and • give each of New OmniAb and Ligand its own equity currency for use in connection with acquisitions.
Added
The growth of our business depends on our ability to acquire royalties and we may not be able to identify and acquire a sufficient number of royalties, or royalties of sufficient scale, to invest the full amount of capital that may be available to us in the future, or at our targeted amount and rate of deployment, which could prevent us from executing our growth strategy and negatively impact our results of operations.
Removed
We may not achieve the anticipated benefits of the Separation and Merger for a variety of reasons. Further, such benefits, if ultimately achieved, may be delayed. In addition, the Separation and Merger could materially and adversely affect our business, financial condition and results of operations.
Added
Changes in the royalty market, including its structure, participants and growth rate, changes in preferred methods of financing and capital raising in the biopharmaceutical industry, or a reduction in the growth of the biopharmaceutical industry, could lead to diminished opportunities for us to acquire royalties, fewer royalties (or fewer royalties of significant scale) being available, or increased competition for royalties.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeLocation Approximate Square Feet Operation Lease Expiration Date San Diego, CA 54,000 Corporate headquarter office and laboratory August 2032 Las Vegas, NV 4,100 Office April 2028 Lawrence, KS 3,700 Office and laboratory August 2032 Item 3. Legal Proceedings See “ Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (10), Commitments and Contingencies—Legal Proceedings. ” Item 4.
Biggest changeLocation Approximate Square Feet Operation Lease Expiration Date Jupiter, FL 1,650 Corporate headquarter October 2026 San Diego, CA 6,850 Office March 2029 Boston, MA (1) 6,840 Office June 2029 Las Vegas, NV 4,100 Office April 2028 Lawrence, KS 3,700 Office and laboratory August 2032 Durham, NC 19,300 Office and laboratory January 2032 (1) Including lease executed in November 2023 with occupancy expected in approximately the second quarter of 2024.
Item 2. Properties The following table summarizes our principal facilities leased as of December 31, 2022, including the location and size of each facility, and their designated use. We believe our facilities are adequate for our current and near-term needs, and we will be able to locate additional facilities, as needed.
Item 2. Properties The following table summarizes our principal facilities leased as of December 31, 2023, including the location and size of each facility, and their designated use. We believe our facilities are adequate for our current and near-term needs, and we will be able to locate additional facilities, as needed.
Added
Item 3. Legal Proceedings See “ Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (11), Commitments and Contingencies—Legal Proceedings. ” Item 4. Mine Safety Disclosures Not applicable. PART II Item 5.
Added
Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Our common stock is traded on the Nasdaq Global Market under the symbol “LGND.” As of February 26, 2024, there were approximately 339 holders of record of the common stock.
Added
Except for 2007, during which we declared a cash dividend on our common stock of $2.50 per share, we have not paid any dividends on our common stock in the past and currently do not expect to pay cash dividends or make any other distributions on common stock in the future.
Added
We expect to retain our future earnings, if any, for use in the operation and expansion of our business, to pay down debt and potentially for share repurchases.
Added
Any future determination to pay dividends on common stock will be at the discretion of our Board of Directors and will depend upon our financial condition, results of operations, capital requirements and such other factors as the board deems relevant.
Added
During the fiscal year ended December 31, 2023, we did not repurchase any shares of our common stock under the stock repurchase program approved by our Board of Directors in April 2023, which allowed us to acquire up to $50 million of our common stock from time to time through April 2026.
Added
The information required by Item 201(d) of Regulation S-K is incorporated by reference to the 2023 Annual Meeting Proxy Statement as defined in Item 10 below. 45 Performance Graph The graph below shows the five-year cumulative total stockholder return assuming the investment of $100 and is based on the returns of the component companies weighted monthly according to their market capitalization.
Added
The graph compares total stockholder returns of our common stock, of all companies traded on the Nasdaq Stock market, as represented by the Nasdaq Composite ® Index, and of the Nasdaq Biotechnology Stock Index, as prepared by The Nasdaq Stock Market Inc.
Added
The stockholder return shown on the graph below is not necessarily indicative of future performance and we will not make or endorse any predictions as to future stockholder returns.
Added
Value of $100 Invested Over Time 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 Ligand $ 100.00 $ 76.85 $ 73.29 $ 113.82 $ 72.27 $ 77.26 NASDAQ Composite-Total Return $ 100.00 $ 136.69 $ 198.10 $ 242.03 $ 163.28 $ 236.17 NASDAQ Biotechnology Index $ 100.00 $ 125.11 $ 158.17 $ 158.20 $ 142.19 $ 148.72 46 Item 6. [RESERVED]

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

1 edited+67 added−9 removed0 unchanged
Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Our common stock is traded on the Nasdaq Global Market under the symbol “LGND.” As of February 22, 2023, there were approximately 354 holders of record of the common stock.
Biggest changeItem 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchase of Equity Securities .” On October 12, 2023, we entered into a $75 million Revolving Credit Facility with Citibank, N.A. as the Administrative Agent.
Removed
Except for 2007, during which we declared a cash dividend on our common stock of $2.50 per share, we have not paid any dividends on our common stock in the past and currently do not expect to pay cash dividends or make any other distributions on common stock in the future.
Added
We, our material domestic subsidiaries, as Guarantors (as defined in the Credit Agreement), and the Lenders (each as defined in the Credit Agreement) entered into the Credit Agreement with the Administrative Agent, under which the Lenders, the Swingline Lender and the L/C Issuer (each as defined in the Credit Agreement) agreed to make loans and other financial accommodations to us in an aggregate amount of up to $75.0 million.
Removed
We expect to retain our future earnings, if any, for use in the operation and expansion of our business, to pay down debt and potentially for share repurchases.
Added
At our option, borrowings under the Revolving Credit Facility accrue interest at a rate equal to either Term SOFR or a specified base rate plus an applicable margin linked to our leverage ratio, ranging from 1.75% to 2.50% per annum for Term SOFR loans and 0.75% to 1.50% per annum for base rate loans.
Removed
Any future determination to pay dividends on common stock will be at the discretion of our Board of Directors and will depend upon our financial condition, results of operations, capital requirements and such other factors as the board deems relevant.
Added
The Revolving Credit Facility is subject to a commitment fee payable on the unused Revolving Credit Facility commitments ranging from 0.30% to 0.45%, depending on our leverage ratio.
Removed
During the fiscal year ended December 31, 2022, we did not repurchase any shares of our common stock under the stock repurchase program approved by our Board of Directors in September 2019, which allowed us to acquire up to $500 million of our common stock in open market and negotiated purchases for a period of up to three years.
Added
During the term of the Revolving Credit Facility, we may borrow, repay and re-borrow amounts available under the Revolving Credit Facility, subject to voluntary reductions of the swing line, letter of credit and revolving credit commitments. Borrowings under the Credit Agreement are secured by certain of our collateral and that of the Guarantors.
Removed
This stock repurchase program expired in September 2022.
Added
In specified circumstances, additional guarantors are required to be added. The Credit Agreement contains customary affirmative and negative covenants, including certain financial maintenance covenants, and events of default applicable to us.
Removed
The information required by Item 201(d) of Regulation S-K is incorporated by reference to the 2023 Annual Meeting Proxy Statement as defined in Item 10 below. 35 Performance Graph The graph below shows the five-year cumulative total stockholder return assuming the investment of $100 and is based on the returns of the component companies weighted monthly according to their market capitalization.
Added
In the event of violation of the representations, warranties and covenants made in the Credit Agreement, we may not be able to utilize the Revolving Credit Facility or repayment of amounts owed thereunder could be accelerated.
Removed
The graph compares total stockholder returns of our common stock, of all companies traded on the Nasdaq Stock market, as represented by the Nasdaq Composite ® Index, and of the Nasdaq Biotechnology Stock Index, as prepared by The Nasdaq Stock Market Inc.
Added
As of December 31, 2023, we had $74.5 million in available borrowing under the Revolving Credit Facility, after utilizing $0.5 million for a letter of credit. The maturity date of the Revolving Credit Facility is October 12, 2026.
Removed
The stockholder return shown on the graph below is not necessarily indicative of future performance and we will not make or endorse any predictions as to future stockholder returns.
Added
We believe that existing funds, cash generated from operations and existing sources of and access to financing are adequate to satisfy our needs for working capital; capital expenditure and debt service requirements; continued advancement of research and development efforts; potential stock repurchases; and other business initiatives we plan to strategically pursue, including acquisitions and strategic investments.
Removed
Value of $100 Invested Over Time 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 Ligand $ 100.00 $ 99.10 $ 76.16 $ 72.63 $ 112.80 $ 71.62 NASDAQ Composite-Total Return $ 100.00 $ 97.12 $ 132.81 $ 192.47 $ 235.15 $ 158.65 NASDAQ Biotechnology Index $ 100.00 $ 91.14 $ 114.02 $ 144.15 $ 144.18 $ 129.59 36 Item 6. [RESERVED]
Added
As of December 31, 2023, we had $3.2 million in fair value of contingent consideration liabilities associated with the acquisitions to be settled in future periods.
Added
Cash Flow Summary (in thousands) 2023 2022 2021 Net cash provided by (used in): Operating activities $ 49,577 $ 137,850 $ 78,798 Investing activities $ (11,682) $ 163,624 $ 30,523 Financing activities $ (59,947) $ (275,990) $ (137,761) In 2023, we generated cash from operations primarily from collections on our trade receivables.
Added
We used cash for investing activities primarily for the purchases of commercial license rights, Novan acquisition and investment in Primrose Bio, partially offset by cash from the sale and maturity of short-term investments including Viking shares.
Added
During the year, we used 52 cash for financing activities, including the repayment of the remaining $76.9 million principal amount upon maturity of the 2023 Notes and $0.3 million accrued interest in cash. In 2022, we generated cash from operations primarily from collections on our trade receivables.
Added
We generated cash from investing activities primarily from the sale and maturity of short-term investments. During the year, we used cash for financing activities, including the payments related to the extinguishment of certain 2023 Notes. In 2021, we generated cash from operations primarily due to the increase in net income.
Added
We generated cash from investing activities primarily from the sale and maturity of short-term investments. During the year, we used cash for financing activities, including the payments related to the extinguishment of certain 2023 Notes, partially offset by cash received from issuance of common stock under employee stock plans and bond hedge settlement.
Added
Critical Accounting Policies and Estimates The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent liabilities in the consolidated financial statements and accompanying notes.
Added
The SEC has defined a company’s critical accounting policies as the ones that are most important to the portrayal of the company’s financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain.
Added
Based on this definition, we have identified the critical accounting policies and judgments addressed below. We also have other key accounting policies, which involve the use of estimates, judgments, and assumptions that are significant to understanding our results. For additional information, see “ Item 8.
Added
Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (1), Basis of Presentation and Summary of Significant Accounting Policies .” Although we believe that our estimates, assumptions, and judgments are reasonable, they are based upon information presently available. Actual results may differ significantly from these estimates under different assumptions, judgments, or conditions.
Added
Revenue Recognition We apply the following five-step model in accordance with ASC 606 in order to determine the revenue: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.
Added
We receive royalty revenue on sales by our partners of products covered by patents that we or our partners own under contractual agreements. We do not have future performance obligations under these license arrangements. We generally satisfy our obligation to grant intellectual property rights on the effective date of the contract.
Added
However, we apply the royalty recognition constraint required under the guidance for sales-based royalties which requires a royalty to be recorded no sooner than the underlying sale occurs. Therefore, royalties on sales of products commercialized by our partners are recognized in the quarter the product is sold. Our partners generally report sales information to us on a one quarter lag.
Added
Thus, we estimate the expected royalty proceeds based on an analysis of historical experience and interim data provided by our partners including their publicly announced sales. Differences between actual and estimated royalty revenues are adjusted in the period in which they become known, typically the following quarter.
Added
Our contracts with customers often will include variable consideration in the form of contingent milestone-based payments. We include contingent milestone based payments in the estimated transaction price when it is probable a significant reversal in the amount of cumulative revenue recognized will not occur. These estimates are based on historical experience, anticipated results and our best judgment at the time.
Added
If the contingent milestone based payment is sales-based, we apply the royalty recognition constraint and record revenue when the underlying sale has taken place. Significant judgments must be made in determining the transaction price for our sales of intellectual property.
Added
Because of the risk that products in development with our partners will not reach development based milestones or receive regulatory approval, we generally recognize any contingent payments that would be due to us upon the occurrence of the development milestone or regulatory approval.
Added
Revenue from Captisol sales is recognized when control of Captisol material or intellectual property license rights is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products.
Added
A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract.
Added
For Captisol material, we consider our performance obligation is satisfied at a point in time, once we have transferred control of the product, meaning the customer has the ability to use and obtain the benefit of the 53 Captisol material or intellectual property license right.
Added
We recognize revenue for satisfied performance obligations only when we determine there are no uncertainties regarding payment terms or transfer of control. Sales tax and other taxes we collect concurrent with revenue-producing activities are excluded from revenue.
Added
We have elected to recognize the cost of freight and shipping when control over Captisol material has transferred to the customer as an expense in Cost of Captisol.
Added
We expense incremental costs of obtaining a contract when incurred if the expected amortization period of the asset that we would have recognized is one year or less or the amount is immaterial. We did not incur any incremental costs of obtaining a contract during the periods reported.
Added
We occasionally have sub-license obligations related to arrangements for which we receive license fees, milestones and royalties. We evaluate the determination of gross as a principal versus net as an agent reporting based on each individual agreement. Goodwill and Intangible Assets — Impairment Assessments Goodwill Goodwill is evaluated annually for impairment using either a quantitative or qualitative analysis.
Added
Goodwill is tested for impairment at the reporting unit level, and is based on the net assets for each reporting unit, including goodwill and intangible assets. Goodwill is assigned to each reporting unit, as this represents the lowest level that constitutes a business and is the level at which management regularly reviews the operating results.
Added
The Company performs a quantitative analysis using a discounted cash flow model and other valuation techniques, but may elect to perform a qualitative analysis.
Added
In addition, goodwill is evaluated for impairment whenever an event occurs or circumstances change that would indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.
Added
Events or circumstances that may result in an impairment review include changes in macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, other relevant entity-specific events, specific events affecting the reporting unit or sustained decrease in share price. The annual goodwill impairment test was performed using a qualitative analysis in 2023 and 2022.
Added
A qualitative analysis is performed by assessing certain trends and factors, including projected market outlook and growth rates, forecasted and actual sales and operating profit margins, discount rates, industry data, and other relevant qualitative factors. These trends and factors are compared to, and based on, the assumptions used in the most recent quantitative analysis performed for each reporting unit.
Added
The results of the qualitative analyses did not indicate a need to perform quantitative analysis. In 2022, during an interim period we used a quantitative assessment for goodwill and the relative fair value method to reallocate goodwill for the OmniAb business and Ligand core business due to the reorganization of the Company’s business discussed in “Item 8.
Added
Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (4), Spin-off of OmniAb.” Intangible Assets We regularly perform reviews to determine if an event occurred that may indicate the carrying values of our intangible assets are impaired.
Added
If indicators of impairment exist, we assess the recoverability of the affected long-lived assets by comparing its carrying amounts to its undiscounted cash flows. If the affected assets are not recoverable, we estimate the fair value of the assets and record an impairment loss if the carrying value exceeds the fair value.
Added
Factors that may indicate potential impairment include a significant decline in our stock price and market capitalization compared to net book value, significant changes in the ability of an asset to generate positive cash flows and the pattern of utilization of a particular asset.
Added
In order to estimate the fair value of identifiable intangible assets, we estimate the present value of future cash flows from those assets.
Added
The key assumptions that we use in our discounted cash flow model are the amount and timing of estimated future cash flows to be generated by the asset over an extended period of time and a rate of return that considers the relative risk of achieving the cash flows, the time value of money, and other factors that a willing market participant would consider.
Added
Significant judgment is required to estimate the amount and timing of future cash flows and the relative risk of achieving those cash flows. Assumptions and estimates about future values and remaining useful lives are complex and often subjective.
Added
They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy and our internal forecasts.
Added
For example, if our future operating results do not meet current forecasts or if we experience a sustained decline in our market capitalization that is determined to be indicative of a reduction in fair value of our reporting unit, we may be required to record future impairment charges for purchased intangible assets.
Added
Impairment charges could materially decrease our future net income and result in lower asset values on our balance sheet. 54 Income Taxes Our provision for income taxes, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect our best assessment of estimated future taxes to be paid.
Added
Significant judgments and estimates based on interpretations of existing tax laws or regulations in the United States are required in determining our provision for income taxes.
Added
Changes in tax laws, statutory tax rates, and estimates of our future taxable income could impact the deferred tax assets and liabilities provided for in the consolidated financial statements and would require an adjustment to the provision for income taxes. Deferred tax assets are regularly assessed to determine the likelihood they will be recovered from future taxable income.
Added
A valuation allowance is established when we believe it is more likely than not the future realization of all or some of a deferred tax asset will not be achieved. In evaluating our ability to recover deferred tax assets within the jurisdiction which they arise, we consider all available positive and negative evidence.
Added
Factors reviewed include the cumulative pre-tax book income for the past three years, scheduled reversals of deferred tax liabilities, our history of earnings and reliability of our forecasts, projections of pre-tax book income over the foreseeable future, and the impact of any feasible and prudent tax planning strategies.
Added
We recognize the impact of a tax position in our financial statements only if that position is more likely than not of being sustained upon examination by taxing authorities, based on the technical merits of the position.
Added
Tax authorities regularly examine our returns in the jurisdictions in which we do business and we regularly assess the tax risk of our return filing positions. Due to the complexity of some of the uncertainties, the ultimate resolution may result in payments that are materially different from our current estimate of the tax liability.
Added
These differences, as well as any interest and penalties, will be reflected in the provision for income taxes in the period in which they are determined. Share-Based Compensation We measure and recognize compensation expense for all share-based payments, including restricted stock, ESPP and stock options, based on the estimated fair value.
Added
Restricted stock unit (RSU) and performance stock unit (PSU) are all considered restricted stock. The fair value of restricted stock is determined by the closing market price of our common stock on the date of grant.
Added
We recognize share-based compensation expense based on the fair value on a straight-line basis over the requisite service periods of the awards, taking into consideration of forfeitures as they occur.
Added
A PSU generally represents a right to receive a certain number of shares of common stock based on the achievement of corporate performance goals and continued employment during the vesting period.
Added
At each reporting period, we reassess the probability of the achievement of such corporate performance goals and any expense change resulting from an adjustment in the estimated shares to be released are treated as a cumulative catch-up in the period of adjustment.
Added
A limited amount of PSUs contain a market condition dependent upon the Company’s relative and absolute total stockholder return over a three-year period, with a range of 0% to 200% of the target amount granted to be issued under the award.
Added
Share-based compensation expense for these PSUs is measured using the Monte-Carlo simulation valuation model and is not adjusted for the achievement, or lack thereof, of the market conditions.
Added
Conversion and Modification of Equity Awards Outstanding at Separation Date In connection with the OmniAb Separation on November 1, 2022, under the provisions of the existing plans, we adjusted our outstanding equity awards in accordance with the Merger Agreement to preserve the intrinsic value of the awards immediately before and after the Distribution.
Added
Upon the Distribution, employees holding stock options, restricted stock units and performance restricted stock units denominated in pre-Distribution Ligand stock received a number of otherwise-similar awards either in post-Distribution Ligand stock or in a combination of post-Distribution Ligand stock and OmniAb stock based on conversion ratios outlined for each group of employees in the Merger Agreement that we entered into in connection with the Distribution.
Added
The equity awards that were granted prior to March 2, 2022 were converted under the shareholder method, wherein employees holding outstanding equity awards received equity awards in both Ligand and OmniAb.
Added
For equity awards granted after March 2, 2022, for Ligand employees, the number of awards that were outstanding at the Separation were proportionately adjusted into post-Distribution Ligand stock to maintain the aggregate intrinsic value of the awards at the date of the Separation; for OmniAb employees, the number of awards that were outstanding at the Separation were proportionately adjusted into post-Distribution OmniAb stock to maintain the aggregate intrinsic value of the awards at the date of the Separation.
Added
The conversion ratio was determined based on the relative values of Ligand common stock in the “regular way” and “ex-distribution” markets during the five-trading day period prior to the closing of the business combination. These modified awards otherwise retained substantially the same terms and conditions, including term and vesting provisions.
Added
Additionally, we will not incur any future compensation cost related to equity awards held by OmniAb employees and directors. We will incur future compensation cost related to OmniAb equity awards held by our employees. Recent Accounting Pronouncements 55 For the summary of recent accounting pronouncements applicable to our consolidated financial statements, see “ Item 8.
Added
Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (1), Basis of Presentation and Summary of Significant Accounting Policies. ”

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

39 edited+9 added−81 removed16 unchanged
Biggest changeThe items below also had an impact on the difference between our statutory U.S. rate. 2022 • $24.8 million (68.9%) increase from valuation allowance adjustments • $5.9 million (16.3%) increase from Section 162(m) limitation • $2.4 million (6.7%) decrease from the foreign-derived intangible income deduction • $1.3 million (3.6%) increase due to excess tax benefits from share-based compensation which are recorded as a discrete item within the provision for income tax pursuant to ASU 2016-09 2021 • $12.1 million (16.7%) decrease due to excess tax benefits from share-based compensation which are recorded as a discrete item within the provision for income tax pursuant to ASU 2016-09 • $11.2 million (15.6%) increase from valuation allowance adjustments • $8.1 million (11.1%) decrease from tax rate and law changes in the United Kingdom • $8.0 million (11.1%) decrease due to the revaluation of contingent value rights • $3.2 million (4.5%) increase from Section 162(m) limitation • $3.1 million (4.3%) decrease from net operating loss carryforwards and credit adjustments • $1.6 million (2.3%) decrease from research and development tax credits Net Loss from Discontinued Operations Net loss from discontinued operations for the years ended December 31, 2022, 2021 and 2020 was $28.1 million, $19.2 million and $9.6 million, respectively.
Biggest changeWe recorded an increase of $4.7 million to our current federal income tax expense and deferred tax assets for continuing operations during 2022 due to the capitalization of R&D under Section 174. 2023 • $7.2 million (11.3%) decrease from unrecognized tax benefits • $2.2 million (3.4%) increase from the return to provision • $1.2 million (1.9%) decrease from stock based compensaiton • $1.0 million (1.6%) decrease from the foreign-derived intangible income deduction • $0.8 million (1.3%) decrease from Section 162(m) limitation 2022 • $24.8 million (68.9%) increase from valuation allowance adjustments • $5.9 million (16.3%) increase from Section 162(m) limitation • $2.4 million (6.7%) decrease from the foreign-derived intangible income deduction • $1.3 million (3.6%) increase due to excess tax benefits from share-based compensation which are recorded as a discrete item within the provision for income tax pursuant to ASU 2016-09 Net Loss from Discontinued Operations Net loss from discontinued operations for the years ended December 31, 2023, 2022 and 2021 was $1.7 million, $28.1 million and $19.2 million, respectively.
Uncertainties include our inability to predict the outcome 39 of research and clinical studies, regulatory requirements placed upon us by regulatory authorities such as the FDA and EMA, our inability to predict the decisions of our partners, our ability to fund research and development programs, competition from other entities of which we may become aware in future periods, predictions of market potential for products that may be derived from our work, and our ability to recruit and retain personnel or third-party contractors with the necessary knowledge and skills to perform certain research.
Uncertainties include our inability to predict the outcome of research and clinical studies, regulatory requirements placed upon us by regulatory authorities such as the FDA and EMA, our inability to predict the decisions of our partners, our ability to fund research and development programs, competition from other entities of which we may become aware in future periods, predictions of market potential for products that may be derived from our work, and our ability to recruit and retain personnel or third-party contractors with the necessary knowledge and skills to perform certain research.
As of December 31, 2022 we have not issued any shares of common stock in the ATM Offering. In May 2018, we issued the 2023 Notes with an aggregate principal amount of $750.0 million. A portion of the proceeds from such issuance totaling $49.7 million were used to repurchase 260,000 shares of our common stock.
As of December 31, 2023 we have not issued any shares of common stock in the ATM Offering. In May 2018, we issued the 2023 Notes with an aggregate principal amount of $750.0 million. A portion of the proceeds from such issuance totaling $49.7 million were used to repurchase 260,000 shares of our common stock.
The year over year increase in 2022 is primarily due to the significant interest rate increases by the federal reserve during 2022. Interest expense includes the 0.75% coupon cash interest expense in addition to the non-cash accretion of discount (including the amortization of debt issuance costs) on our 2023 Notes.
The year over year increase in 2023 is primarily due to the significant interest rate increases by the federal reserve during 2023. Interest expense includes the 0.75% coupon cash interest expense in addition to the non-cash accretion of discount (including the amortization of debt issuance costs) on our 2023 Notes.
Our short-term investments include U.S. government debt securities, investment-grade corporate debt securities, mutual funds and certificates of deposit. We have established guidelines relative to diversification and maturities of our investments in order to provide both safety and liquidity. These guidelines are periodically reviewed and modified to take advantage of trends in yields and interest rates.
Our short-term investments include U.S. government debt securities, investment-grade corporate debt securities, bond funds and certificates of deposit. We have established guidelines relative to diversification and maturities of our investments in order to provide both safety and liquidity. These guidelines are periodically reviewed and modified to take advantage of trends in yields and interest rates.
Other operating income in 2021 was due to reducing the fair value of the CVR liability associated to the acquisition of Pfenex to zero, as the CVR payment expiration date passed on December 31, 2021 without achieving the triggering event. We did not have any other operating income in 2022. FY 2021 vs.
Other operating income in 2021 was due to reducing the fair value of the CVR liability associated to the acquisition of Pfenex to zero, as the CVR payment expiration date passed on December 31, 2021 without achieving the triggering event. We did not have any other operating income in 2022.
Additionally, we own certain securities which are classified as short-term investments that we received as a result of a milestone and an upfront license payment as well as 6.7 million shares of common stock in Viking.
Additionally, we own certain securities which are classified as short-term investments that we received as a result of a milestone and an upfront license payment as well as 1.7 million shares of common stock in Viking.
Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (6), Leases.” We also have commitments under our supply agreement with Hovione for Captisol purchases.
Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (7), Leases.” We also have commitments under our supply agreement with Hovione for Captisol purchases.
See additional information in “ Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (7), Convertible Senior Notes. ” Other expense, net, increased year over year in 2022 primarily due to a $4.2 million gain on our debt extinguishments in 2022 compared to $7.3 million loss on debt extinguishments in 2021. See additional information in “ Item 8.
See additional information in “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (8), Debt.” Other income (expense), net, increased year over year in 2022 primarily due to a $4.2 million gain on our debt extinguishments in 2022 compared to $7.3 million loss on debt extinguishments in 2021. See additional information in “Item 8.
The total purchase obligation as of December 31, 2022 was $28.7 million, of which $9.6 million is expected to be paid within a year and the remaining amount is expected to be paid between 1 to 3 years.
The total purchase obligation as of December 31, 2023 was $28.8 million, of which $8.6 million is expected to be paid within a year and the remaining amount is expected to be paid between 1 to 3 years.
The fluctuation in the gain (loss) from short-term investments is primarily driven by the changes in the fair value of our ownership in Viking common stock (an unrealized gain of $32.2 million in 2022 as compared to an unrealized loss of $9.6 million in 2021). Interest income consists primarily of interest earned on our short-term investments.
In addition, 49 the fluctuation is driven by the changes in the fair value of our ownership in Viking common stock (an unrealized gain of $2.6 million in 2023 as compared to an unrealized gain of $32.2 million in 2022). Interest income consists primarily of interest earned on our short-term investments.
See additional information in “ Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (2), Spin-off Of OmniAb. ” 41 Liquidity and Capital Resources At December 31, 2022, we had approximately $211.9 million in cash, cash equivalents, and short-term investments .
See additional information in “ Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (4), Spin-off Of OmniAb. ” Liquidity and Capital Resources At December 31, 2023, we had approximately $170.3 million in cash, cash equivalents, and short-term investments .
Cash and cash equivalents and short-term investments decreased by $129.2 million from last year, due to factors described in the “ Cash Flow Summary ” below. Our primary source of liquidity, other than our holdings of cash, cash equivalents, and investments, which decreased during 2022 primarily from extinguishment of debt, has been cash flows from operations.
Cash and cash equivalents and short-term investments decreased by $41.6 million from last year, due to factors described in the “ Cash Flow Summary ” below. Our primary source of liquidity, other than our holdings of cash, cash equivalents, and investments, has been cash flows from operations.
The following table represents royalty revenue by program: (in millions) 2022 Estimated Partner Product Sales Effective Royalty Rate 2022 Royalty Revenue 2021 Estimated Partner Product Sales Effective Royalty Rate 2021 Royalty Revenue Kyprolis $ 1,275.6 2.4% $ 30.1 $ 1,148.9 2.4% $ 27.5 Evomela 51.0 20.0% 10.2 50.5 20.0% 10.1 Teriparatide injection (1) 47.2 33.5% 15.8 12.9 41.1% 5.3 Rylaze 278.7 3.2% 8.8 80.7 3.0% 2.4 Other 383.7 2.0% 7.6 195.1 1.8% 3.6 Total $ 2,036.2 $ 72.5 $ 1,488.1 $ 48.9 (1) - Teriparatide injection sales have been adjusted for certain deductible items as defined in the respective license agreement, and the royalty revenue is based on a tiered gross profit share.
The following table represents royalty revenue by program: (in millions) 2023 Estimated Partner Product Sales Effective Royalty Rate 2023 Royalty Revenue 2022 Estimated Partner Product Sales Effective Royalty Rate 2022 Royalty Revenue Kyprolis $ 1,503.1 2.4% $ 35.6 $ 1,275.6 2.4% $ 30.1 Evomela 51.0 20.0% 10.2 51.0 20.0% 10.2 Teriparatide injection (1) 37.2 29.8% 11.1 47.2 33.5% 15.8 Rylaze 397.5 3.4% 13.5 278.7 3.2% 8.8 Other 956.4 1.4% 13.5 383.7 2.0% 7.6 Total $ 2,945.2 $ 83.9 $ 2,036.2 $ 72.5 (1) - Teriparatide injection sales have been adjusted for certain deductible items as defined in the respective license agreement, and the royalty revenue is based on a tiered gross profit share.
Refer to “ Item 1A. Risk Factors ” for additional discussion of the uncertainties surrounding our research and development initiatives. Other income (expense) FY 2022 vs.
Refer to “ Item 1A. Risk Factors ” for additional discussion of the uncertainties surrounding our research and development initiatives.
Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (1), Basis of Presentation and Summary of Significant Accounting Policies. ”
Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (1), Basis of Presentation and Summary of Significant Accounting Policies .” Results of Operations Revenue FY 2023 vs.
In September 2019, our Board of Directors approved a stock repurchase program authorizing the repurchase of up to $500.0 million of our common stock from time to time over a period of up to three years. Our prior $350.0 million stock repurchase program was terminated in connection with the approval of the new stock repurchase program.
In September 2019, our Board of Directors approved a stock repurchase program authorizing the repurchase of up to $500.0 million of our common stock from time to time over a period of up to three years. Our $500.0 million stock repurchase program expired in September 2022.
Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (7), Convertible Senior Notes. ” Income tax benefit (expense) FY 2022 vs.
Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (8), Debt.” Income tax benefit (expense) FY 2023 vs.
FY 2021 38 (Dollars in thousands) 2022 2021 (a) Change % Change Cost of Captisol $ 52,827 $ 62,176 $ (9,349) (15) % Amortization of intangibles 34,237 34,222 15 — % Research and development 36,082 32,105 3,977 12 % General and administrative 70,062 46,790 23,272 50 % Other operating income — (37,600) 37,600 (100) % Total operating costs and expenses $ 193,208 $ 137,693 $ 55,515 40 % (a) Prior period amounts have been retrospectively adjusted to reflect the effects of the Separation.
FY 2021 (Dollars in thousands) 2022 2021 Change % Change Cost of Captisol $ 52,827 $ 62,176 $ (9,349) (15) % Amortization of intangibles 34,237 34,222 15 — % Research and development 36,082 32,105 3,977 12 % General and administrative 70,062 46,790 23,272 50 % Other operating income — (37,600) 37,600 (100) % Total operating costs and expenses $ 193,208 $ 137,693 $ 55,515 40 % Total operating costs and expenses from continuing operations for 2022 increased by $55.5 million, or 40% compared with 2021.
During 2021 and 2020, we repurchased $406.7 million in principal of the 2023 Notes for $378.8 million in cash, including accrued interest of $0.9 million. During 2022, we repurchased $266.4 million in principal of the 2023 Notes for $261.4 million in cash, including accrued interest of $0.5 million.
During 2021, we repurchased $152.0 million in principal of the 2023 Notes for $156.0 million in cash, including accrued interest of $0.3 million. 51 During 2022, we repurchased $266.4 million in principal of the 2023 Notes for $261.4 million in cash, including accrued interest of $0.5 million.
Total operating costs and expenses from continuing operations for 2022 increased $55.5 million or 40% compared with 2021. Cost of Captisol decreased year over year in 2022 primarily due to lower sales of Captisol during 2022, partially offset by the capacity ramp-up right of use asset impairment of $9.8 million recorded in the fourth quarter of 2022.
Cost of Captisol decreased year over year in 2022 primarily due to lower sales of Captisol during 2022, partially offset by the capacity ramp-up right of use asset impairment of $9.8 million recorded in the fourth quarter of 2022.
FY 2021 (Dollars in thousands) 2022 2021 (a) Change % Change Gain (loss) from short-term investments $ 28,540 $ (5,263) $ 33,803 642 % Interest income 2,046 886 1,160 131 % Interest expense (1,799) (19,619) 17,820 91 % Other expense, net 4,187 (7,650) 11,837 155 % Total other income (expense), net $ 32,974 $ (31,646) $ 64,620 204 % (a) Prior period amounts have been retrospectively adjusted to reflect the effects of the Separation.
FY 2021 (Dollars in thousands) 2022 2021 Change % Change Gain (loss) from short-term investments $ 28,540 $ (5,263) $ 33,803 (642) % Interest income 2,046 886 1,160 131 % Interest expense (1,799) (19,619) 17,820 91 % Other income (expense), net 4,187 (7,650) 11,837 155 % Total other income (expense), net $ 32,974 $ (31,646) $ 64,620 204 % The fluctuation in the gain (loss) from short-term investments is primarily driven by the changes in the fair value of our ownership in Viking common stock (an unrealized gain of $32.2 million in 2022 as compared to an unrealized loss of $9.6 million in 2021).
FY 2021 (Dollars in thousands) 2022 2021 (a) Change % Change Royalties $ 72,527 $ 48,927 $ 23,600 48 % Captisol - Core 16,429 23,423 (6,994) (30) % Captisol - COVID 88,066 140,827 (52,761) (37) % Contract Revenue 19,223 28,367 (9,144) (32) % Total revenue $ 196,245 $ 241,544 $ (45,299) (19) % (a) Prior period amounts have been retrospectively adjusted to reflect the effects of the Separation.
FY 2021 (Dollars in thousands) 2022 2021 Change % Change Royalties $ 72,527 $ 48,927 $ 23,600 48 % Captisol - Core 16,429 23,423 (6,994) (30) % Captisol - COVID 88,066 140,827 (52,761) (37) % Contract 19,223 28,367 (9,144) (32) % Total revenue $ 196,245 $ 241,544 $ (45,299) (19) % Total revenue from continuing operations decreased by $45.3 million, or 19%, to $196.2 million in 2022 compared to $241.5 million in 2021 primarily due to the $52.8 million decrease in sales of COVID-related Captisol.
The increase in royalty revenue is driven primarily by increases in sales of drugs using the Pelican platform - Rylaze, Pneumosil and Teriparatide, along with an increase in sales of Kyprolis. Contract revenue decreased year over year in 2022 by $9.1 million primarily due to the timing of partner milestone events. FY 2021 vs.
Royalty revenue increased by $23.6 million, or 48%, to $72.5 million in 2022 compared to $48.9 million in 2021. The increase in royalty revenue is driven primarily by increases in sales of drugs using the Pelican platform (Rylaze, Pneumosil and Teriparatide) along with an increase in sales of Kyprolis.
Our MD&A is organized as follows: • Results of Operations. Detailed discussion of our revenue and expenses from continuing operations for twelve months ended December 31, 2022, 2021 and 2020. • Liquidity and Capital Resources.
Our MD&A is organized as follows: • Results of Operations. Detailed discussion of our revenue and expenses from continuing operations for years ended December 31, 2023, 2022 and 2021. • Liquidity and Capital Resources. Discussion of key aspects of our consolidated statements of cash flows, changes in our financial position, and our financial commitments. • Critical Accounting Policies and Estimates.
The year over year decrease was primarily due to the adoption of ASU 2020-06 which significantly reduced the debt discount balance subject to amortization. See additional information in “ Item 8.
Interest expense includes the 0.75% coupon cash interest expense in addition to the non-cash accretion of discount (including the amortization of debt issuance costs) on our 2023 Notes. The year over year decrease was primarily due to the adoption of ASU 2020-06 which significantly reduced the debt discount balance subject to amortization. See additional information in “Item 8.
Discussion of key aspects of our consolidated statements of cash flows, changes in our financial position, and our financial commitments. • Critical Accounting Policies and Estimates. Discussion of significant changes we believe are important to understand the assumptions and judgments underlying our consolidated financial statements. • Recent Accounting Pronouncements.
Discussion of significant changes we believe are important to understand the assumptions and judgments underlying our consolidated financial statements. • Recent Accounting Pronouncements. For summary of recent accounting pronouncements applicable to our consolidated financial statements, see “ Item 8.
At any one time, we are working on multiple programs. As such, we generally do not track our R&D expenses on a specific program basis. Our R&D expenses decreased year over year in 2021 due to the sale of Vernalis R&D in October 2020.
Amortization of intangibles decreased by $0.6 million in 2023 compared to 2022 with the decrease primarily due to the cessation of amortization of certain Pelican intangibles resulting from the sale of the Pelican business. At any one time, we are working on multiple programs. As such, we generally do not track our R&D expenses on a specific program basis.
Kyprolis royalty rate is under a tiered royalty rate structure with the highest being 3.0%. Evomela has a contractually fixed royalty rate of 20%. Teriparatide injection has a tiered gross profit share between 25% and 40% on sales that have been adjusted for certain deductible items as defined in the respective license agreement.
Teriparatide injection has a tiered gross profit share between 25% and 40% on sales that have been adjusted for certain deductible items as defined in the respective license agreement. The Rylaze royalty rate is in the low single digits. Contract revenue includes service revenue, license fees and development, regulatory and sales based milestone payments.
It is also affected by discrete items that may occur in any given year, but are not consistent from year to year.
It is also affected by discrete items that may occur in any given year, but are not consistent from year to year. In 2023, the variance from the U.S. federal statutory rate of 21% was primarily attributable to the decrease in unrecognized tax benefits.
FY 2021 (Dollars in thousands) 2022 2021 Change % Change Income before income tax expense (benefit) from continuing operations $ 36,011 $ 72,205 $ (36,194) (50) % Income tax benefit (expense) (41,230) 4,148 (45,378) (1,094) % Net income (loss) from continuing operations $ (5,219) $ 76,353 $ (81,572) (107) % Effective Tax Rate 114 % (6) % Our effective tax rate for 2022 and 2021 was 114% and (6)%, respectively.
FY 2022 (Dollars in thousands) 2023 2022 Change % Change Income before income tax expense (benefit) from continuing operations $ 63,660 $ 36,011 $ 27,649 77 % Income tax benefit (expense) (9,841) (41,230) 31,389 (76) % Net income (loss) from continuing operations $ 53,819 $ (5,219) $ 59,038 (1,131) % Effective Tax Rate 15 % 114 % 50 Our effective tax rate for 2023 and 2022 was 15% and 114%, respectively.
Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (7), Convertible Senior Notes.” Other expense, net, increased year over year in 2021 primarily due to a $7.3 million loss on our debt extinguishments compared to $2.5 million loss on debt extinguishments in 2020. See additional information in “ Item 8.
In addition, we recorded a $4.2 million gain on our debt extinguishments in 2022 compared to no loss on debt extinguishments in 2023. See additional information in “ Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (8), Debt. ” FY 2022 vs.
Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (7), Convertible Senior Notes.” We are obligated to make payments to operating leases, including rental commitments on leases that have not yet commenced. For information on these obligations, see detail in “Item 8.
On May 15, 2023, the 2023 Notes maturity date, we paid the remaining $76.9 million principal amount and $0.3 million accrued interest in cash. We are obligated to make payments to operating leases, including rental commitments on leases that have not yet commenced. For information on these obligations, see detail in “Item 8.
Total revenue from continuing operations decreased by $45.3 million, or 19%, to $196.2 million in 2022 compared to $241.5 million in 2021 primarily due to the $52.8 million decrease in sales of COVID-related Captisol. The lower sales were due to reduced demand for remdesivir, a treatment for moderate or severe COVID-19.
The lower sales were due to reduced demand for remdesivir, a treatment for moderate or severe COVID-19. Core Captisol sales were $16.4 million in 2022 compared to $23.4 million in 2021. The lower sales were due to the timing of customer orders.
The increase in royalty revenue was driven primarily by the royalties from the sale of drugs using the Pelican platform - Rylaze, Pneumosil and Teriparatide. Contract revenue increased year over year in 2021 by $8.6 million primarily due to the timing of partner milestone events. Royalty revenue is a function of our partners' product sales and the applicable royalty rate.
Contract revenue decreased year over year in 2022 by $9.1 million primarily due to the timing of partner milestone events. Royalty revenue is a function of our partners' product sales and the applicable royalty rate. Kyprolis royalty rate is under a tiered royalty rate structure with the highest being 3.0%. Evomela has a contractually fixed royalty rate of 20%.
The year over year decrease in 2021 was primarily due to lower average debt outstanding balance as compared to the prior year. During 2021, we repurchased $152.0 million in principal of the 2023 Notes for $156.0 million in cash, including accrued interest of $0.3 million. See “Item 8.
In May 2023, the 2023 Notes matured, and we paid the remaining $76.9 million principal amount and $0.3 million accrued interest in cash. The decrease in interest expense was primarily due to the zero debt outstanding balance after May 2023 compared to 2022. See additional information in “ Item 8.
Total revenue from continuing operations increased by $78.0 million, or 48%, to $241.5 million in 2021 compared to $163.6 million in 2020 primarily due to the $55.4 million increase in sales of COVID-related Captisol. The higher sales were due to increased demand for remdesivir, a treatment for moderate or severe COVID-19.
The lower sales were due to reduced demand for remdesivir, a treatment for moderate or severe COVID-19. Core Captisol sales were $28.4 million in 2023 compared to $16.4 million in 2022. The higher sales were due to the timing of customer orders.
The timing and amount of repurchase transactions will be determined by management based on the evaluation of market conditions, trading price of the 2023 Notes, legal requirements and other factors. The 2023 Notes were not convertible as of December 31, 2022.
We expect to acquire these shares, if at all, primarily through open-market transactions in accordance with all applicable requirements of Rule 10b-18 under the Securities Exchange Act of 1934, as amended. The timing and amount of repurchase transactions will be determined by management based on our evaluation of market conditions, share price, legal requirements and other factors. See “
Core Captisol sales were $16.4 million 37 for the year ended December 31, 2022, compared with $23.4 million for the same period in 2021. The lower sales were due to the timing of customer orders. Royalty revenue increased by $23.6 million, or 48%, to $72.5 million in 2022 as compared to $48.9 million for the same period in 2021.
Royalty revenue increased by $11.4 million, or 16%, to $83.9 million in 2023 compared to $72.5 million in 2022. The increase in royalty revenue is primarily due to the increases in sales of Kyprolis, Rylaze and Pneumosil. 47 FY 2022 vs.
Removed
For summary of recent accounting pronouncements applicable to our consolidated financial statements, see “ Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (1), Basis of Presentation and Summary of Significant Accounting Policies .” Results of Operations Revenue FY 2022 vs.
Added
FY 2022 (Dollars in thousands) 2023 2022 Change % Change Royalties $ 83,910 $ 72,527 $ 11,383 16 % Captisol - Core 28,372 16,429 11,943 73 % Captisol - COVID — 88,066 (88,066) (100) % Contract 19,032 19,223 (191) (1) % Total revenue $ 131,314 $ 196,245 $ (64,931) (33) % Total revenue decreased by $64.9 million, or 33%, to $131.3 million in 2023 compared to $196.2 million in 2022 primarily due to the $88.1 million decrease in sales of COVID-related Captisol.
Removed
FY 2020 (Dollars in thousands) 2021 (a) 2020 (a) Change % Change Royalties $ 48,927 $ 33,796 $ 15,131 45 % Captisol - Core 23,423 24,566 (1,143) (5) % Captisol - COVID 140,827 85,393 55,434 65 % Contract Revenue 28,367 19,807 8,560 43 % Total revenue $ 241,544 $ 163,562 $ 77,982 48 % (a) Prior period amounts have been retrospectively adjusted to reflect the effects of the Separation.
Added
FY 2022 (Dollars in thousands) 2023 2022 Change % Change Cost of Captisol $ 10,512 $ 52,827 $ (42,315) (80) % Amortization of intangibles 33,654 34,237 (583) (2) % Research and development 24,537 36,082 (11,545) (32) % General and administrative 52,790 70,062 (17,272) (25) % Total operating costs and expenses $ 121,493 $ 193,208 $ (71,715) (37) % Total operating costs and expenses for 2023 decreased by $71.7 million or 37% compared with 2022.
Removed
Core Captisol sales were $23.4 million for the year ended December 31, 2021, compared with $24.6 million for the same period in 2020. The lower sales were due to the timing of customer orders. Royalty revenue increased by $15.1 million, or 45%, to $48.9 million in 2021 as compared to $33.8 million for the same period in 2020.
Added
Cost of Captisol decreased year over year in 2023 primarily due to lower sales of Captisol during 2023 and by the capacity ramp-up right of use asset impairment of $9.8 million recorded in the fourth quarter of 2022.
Removed
The Rylaze royalty rate is in the low single digits. Contract revenue includes service revenue, license fees and development, regulatory and sales based milestone payments.
Added
Our R&D expenses decreased by $11.5 million in 2023 compared to 2022, with the decrease primarily due to lower share-based compensation and employee-related expenses, partially offset by an increase in R&D expenses due to the Novan acquisition. 48 General and administrative expenses decreased by $17.3 million in 2023 compared to 2022 primarily due to decreases in share-based compensation expense including a one-time charge associated with the retirement of our former CEO in the fourth quarter of 2022, and employee-related expenses, partially offset by an increase in G&A expenses due to the Novan acquisition.
Removed
FY 2020 (Dollars in thousands) 2021 (a) 2020 (a) Change % Change Cost of Captisol $ 62,176 $ 30,419 $ 31,757 104 % Amortization of intangibles 34,222 11,642 22,580 194 % Research and development 32,105 40,503 (8,398) (21) % General and administrative 46,790 60,012 (13,222) (22) % Other operating income (37,600) 600 (38,200) (6,367) % Total operating costs and expenses $ 137,693 $ 143,176 $ (5,483) (4) % (a) Prior period amounts have been retrospectively adjusted to reflect the effects of the Separation.
Added
Gain on Sale of Pelican The gain on sale of Pelican in the amount of $2.1 million for 2023 represents the excess of the fair value of 1) our investment in Primrose Bio and other economic rights; 2) the carrying amount of Pelican business assets and liabilities together with allocated goodwill as of September 18, 2023, the date of sale; and 3) $15.0 million consideration paid.
Removed
Total operating costs and expenses from continuing operations for 2021 decreased $5.5 million or 4% compared with 2020. Cost of Captisol increased year over year in 2021 primarily due to higher sales of Captisol during 2021. Amortization of intangibles increased year over year in 2021 primarily due to the acquisition of Pfenex in October 2020.
Added
FY 2022 (Dollars in thousands) 2023 2022 Change % Change Gain (loss) from short-term investments $ 46,365 $ 28,540 $ 17,825 (62) % Interest income 7,711 2,046 5,665 277 % Interest expense (656) (1,799) 1,143 64 % Gain on derivative instruments 250 — 250 N/A Other income (expense), net (1,952) 4,187 (6,139) 147 % Total other income (expense), net $ 51,718 $ 32,974 $ 18,744 (57) % The fluctuation in the gain (loss) from short-term investments is primarily driven by the realized gain of $44.4 million from the sales of 5.0 million shares of Viking common stock in 2023, compared to no Viking shares sold in 2022.
Removed
General and administrative expenses decreased by $13.2 million in 2022 compared to 2021 primarily due to $20.7 million in acquisition and integration related costs in 2021 associated with the Pfenex acquisition in 2020. The decrease was partially offset by additional headcount related expenses in 2021.
Added
Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (8), Debt. ” Other expense, net, increased year over year in 2023 primarily due to a current expected credit loss (CECL) adjustment over the Elutia commercial license right of $3.2 million and a Selexis commercial license right impairment loss of $0.9 million compared to no CECL adjustment over similar assets in 2022.
Removed
Other operating income in 2021 was due to reducing the fair value of the CVR liability associated to the acquisition of Pfenex to zero, as the CVR payment expiration date passed on December 31, 2021 without achieving the triggering event.
Added
Interest income consists primarily of interest earned on our short-term investments. The year over year increase in 2022 is primarily due to the significant interest rate increases by the federal reserve during 2022.
Removed
Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (7), Convertible Senior Notes. ” FY 2021 vs.
Added
In April 2023, our Board of Directors approved a stock repurchase program authorizing, but not requiring, the repurchase of up to $50.0 million of our common stock from time to time through April 2026.
Removed
FY 2020 (Dollars in thousands) 2021 (a) 2020 (a) Change % Change Gain (loss) from short-term investments $ (5,263) $ (16,933) $ 11,670 (69) % Interest income 886 8,078 (7,192) (89) % Interest expense (19,619) (27,415) 7,796 28 % Other expense, net (7,650) 62 (7,712) 12439 % Total other income (expense), net $ (31,646) $ (36,208) $ 4,562 13 % (a) Prior period amounts have been retrospectively adjusted to reflect the effects of the Separation.
Removed
The fluctuation in the gain (loss) from short-term investments is primarily driven by the changes in the fair value of our ownership in Viking common stock (an unrealized loss of $9.6 million in 2021 as compared to an unrealized loss of $19.0 million in 2020). Interest income consists primarily of interest earned on our short-term investments.
Removed
The year over year decrease in 2021 resulted from the decrease in our short-term investment balances due to the usage of funds for the 2023 Notes repurchases. 40 Interest expense includes the 0.75% coupon cash interest expense in addition to the non-cash accretion of discount (including the amortization of debt issuance costs) on our 2023 Notes.
Removed
We recorded an increase of $4.7 million to our current federal income tax expense and deferred tax assets for continuing operations during 2022 due to the capitalization of R&D under Section 174.
Removed
In 2021, the variance from the U.S. federal statutory rate of 21% was attributable to the mix of earnings in jurisdictions with lower statutory rates than the U.S. federal statutory tax rate, and excess benefits from shared-based compensation.
Removed
After the repurchases, $76.9 million in principal amount of the 2023 Notes remain outstanding as of December 31, 2022. We may continue to use cash on hand to repurchase additional 2023 Notes through open-market transactions, including through a Rule 10b5-1 trading plan to facilitate open-market repurchases, or otherwise, from time to time.
Removed
It is our intent and policy to settle conversions through combination settlement, which essentially involves payment in cash equal to the principal portion and delivery of shares of common stock for the excess of the conversion value over the principal portion. See detail in “Item 8.
Removed
Our $500.0 million stock repurchase program expired in September 2022, and as of December 31, 2022 we do not have a repurchase program in place. See “ Item 5.
Removed
Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchase of Equity Securities .” We believe that existing funds, cash generated from operations and existing sources of and access to financing are adequate to satisfy our needs for working capital; capital expenditure and debt service requirements; continued advancement of research and development efforts; potential stock repurchases; and other business initiatives we plan to strategically pursue, including acquisitions and strategic investments.
Removed
As of December 31, 2022, we had $3.5 million in fair value of contingent consideration liabilities associated with the acquisitions to be settled in future periods. 42 Cash Flow Summary (in thousands) 2022 2021 2020 Net cash provided by (used in): Operating activities $ 137,850 $ 78,798 $ 54,586 Investing activities $ 163,624 $ 30,523 $ 231,648 Financing activities $ (275,990) $ (137,761) $ (310,545) In 2022, we generated cash from operations primarily from collections on our trade receivables.
Removed
We generated cash from investing activities primarily from sale and maturity of short-term investments. During the year, we used cash for financing activities, including the payments related to the extinguishment of certain 2023 Notes. In 2021, we generated cash from operations primarily due to the increase in net income.
Removed
We generated cash from investing activities primarily from sale and maturity of short-term investments. During the year, we used cash for financing activities, including the payments related to the extinguishment of certain 2023 Notes, partially offset by cash received from issuance of common stock under employee stock plans and bond hedge settlement.
Removed
In 2020, we generated cash from operations primarily due to cash inflows from changes in deferred revenue.
Removed
We generated cash from investing activities primarily from sale and maturity of short-term investments as well as the sale of the Vernalis R&D business; partially offset by cash used for the acquisition of Pfenex, and three additional acquisitions that are part of our discontinued operations, Icagen, xCella and Taurus.
Removed
During the year, we used cash for financing activities, including the payments related to the extinguishment of certain 2023 Notes and stock repurchases.
Removed
Critical Accounting Policies and Estimates The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent liabilities in the consolidated financial statements and accompanying notes.
Removed
The SEC has defined a company’s critical accounting policies as the ones that are most important to the portrayal of the company’s financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain.
Removed
Based on this definition, we have identified the critical accounting policies and judgments addressed below. We also have other key accounting policies, which involve the use of estimates, judgments, and assumptions that are significant to understanding our results. For additional information, see “ Item 8.
Removed
Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (1), Basis of Presentation and Summary of Significant Accounting Policies .” Although we believe that our estimates, assumptions, and judgments are reasonable, they are based upon information presently available. Actual results may differ significantly from these estimates under different assumptions, judgments, or conditions.
Removed
Revenue Recognition We apply the following five-step model in accordance with ASC 606 in order to determine the revenue: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.
Removed
We receive royalty revenue on sales by our partners of products covered by patents that we or our partners own under contractual agreements. We do not have future performance obligations under these license arrangements. We generally satisfy our obligation to grant intellectual property rights on the effective date of the contract.
Removed
However, we apply the royalty recognition constraint required under the guidance for sales-based royalties which requires a royalty to be recorded no sooner than the underlying sale occurs. Therefore, royalties on sales of products commercialized by our partners are recognized in the quarter the product is sold. Our partners generally report sales information to us on a one quarter lag.
Removed
Thus, we estimate the expected royalty proceeds based on an analysis of historical experience and interim data provided by our partners including their publicly announced sales. Differences between actual and estimated royalty revenues are adjusted in the period in which they become known, typically the following quarter.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+0 added−2 removed4 unchanged
Biggest changeOur license partners sell our products worldwide in currencies other than the U.S. dollar. Because of this, our revenues from royalty payments are subject to risk from changes in exchange rates. We purchase Captisol from Hovione, located in Lisbon, Portugal.
Biggest changeForeign currency exposures arise from transactions denominated in a currency other than the functional currency and from foreign denominated revenues and profit translated into U.S. dollars. Our license partners sell our products worldwide in currencies other than the U.S. dollar. Because of this, our revenues from royalty payments are subject to risk from changes in exchange rates.
We have historically maintained a relatively short average maturity for our investment portfolio, and we believe a hypothetical 100 basis point adverse move in interest rates across all maturities would not materially impact the fair market value of the portfolio in either period. 46
We have historically maintained a relatively short average maturity for our investment portfolio, and we believe a hypothetical 100 basis point adverse move in interest rates across all maturities would not materially impact the fair market value of the portfolio in either period. 56
Payments to Hovione are denominated and paid in U.S. dollars; however, the unit price of Captisol contains an adjustment factor which is based on the sharing of foreign currency risk between the two parties.
We purchase Captisol from Hovione, located in Lisbon, Portugal. Payments to Hovione are denominated and paid in U.S. dollars; however, the unit price of Captisol contains an adjustment factor which is based on the sharing of foreign currency risk between the two parties.
Investment Portfolio Risk At December 31, 2022, our investment portfolio included investments in available-for-sale securities of $166.9 million, including the investment in Viking common stock of $63.1 million. These securities are subject to market risk and may decline in value based on market conditions.
Investment Portfolio Risk At December 31, 2023, our investment portfolio included investments in available-for-sale securities of $147.4 million, including the investment in Viking common stock of $32.2 million. These securities are subject to market risk and may decline in value based on market conditions. Foreign Currency Risk Through our licensing and business operations, we are exposed to foreign currency risk.
Removed
Equity Price Risk Our 2023 Notes include conversion and settlement provisions that are based on the price of our common stock at conversion or maturity of the notes, as applicable. As of December 31, 2022, the “if-converted value” did not exceed the principal amount of the 2023 Notes. See detail in “ Item 8.
Removed
Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (7), Convertible Senior Notes. ” Foreign Currency Risk Through our licensing and business operations, we are exposed to foreign currency risk. Foreign currency exposures arise from transactions denominated in a currency other than the functional currency and from foreign denominated revenues and profit translated into U.S. dollars.

Other LGND 10-K year-over-year comparisons