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Presentation

Operator: Hello, everyone. Thank you for joining us, and welcome to Ligand’s First Quarter 2026 Earnings Call. [Operator Instructions] I will now hand the conference over to Melanie Herman, head of [Technical Difficulty]. Please go ahead.

Melanie Herman: Good morning, everyone, and welcome to Ligand’s First Quarter 2026 Earnings Call. With me on the call today are CEO, Todd Davis; Chief Financial Officer, Octavio Espinoza, Vice President of Portfolio Strategy and Investments, Lauren Hay; and Vice President of Investments and Business Development, Michael Vigilante. During the call today, we will review the financial results released earlier today and provide commentary on our partner portfolio and business development activities, followed by a question-and-answer session. Before we get started, I would like to point out that we will be discussing non-GAAP results, which exclude certain items such as stock-based compensation, amortization of intangible assets, amortization or impairment of financial assets and gains or losses from derivative assets, amongst others.

I encourage you to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP measures, which can be found in today’s release available on our website. We believe these adjusted measures provide valuable insight into our core operating performance, both historically and moving forward. Our earnings release and a link to today’s webcast can be found in the Investor Relations section of our website at ligand.com. This call is being recorded, and the audio portion will be archived in the Investors section of our website. On today’s call, we will make forward-looking statements regarding our financial results and other matters related to the company’s business. Please refer to the safe harbor statement related to these forward-looking statements, which are subject to risks and uncertainties.

We remind you that actual events or results may differ materially from those projected or discussed and that all forward-looking statements are based upon current available information. Ligand assumes no obligation to update these statements. To better understand the risks and uncertainties that could cause actual results to differ, we refer you to the documents that Ligand files with the Securities and Exchange Commission, or SEC, that can be found on Ligand’s website at ligand.com or on the SEC’s website at sec.gov. With that, I will now turn the call over to Todd.

Todd Davis: Thank you, Melanie, and good morning, everyone. We appreciate you joining us today. 2026 is off to an exciting start for Ligand with transformative milestones within our existing portfolio and through the anticipated acquisition of XOMA Royalty Corporation that we announced last week. Though it is still early in 2026, we are showing significant financial performance already with 56% royalty revenue growth over the first quarter of 2025 and 23% EPS growth over the same period in 2025. This is in the context of a broad portfolio. So it is not just serendipity or the result of a single fortunate product approval. This is the result of an intentional strategy change that we executed on in 2022. At that point, we shifted into a pure royalty aggregation model and away from the development of infrastructure-heavy technology platforms.

In 2022 to 2023, we divested two platform businesses and went from almost 200 employees down to approximately 40. This took operating expenses from the $90 million range down to about the $40 million range. The profitability of the company and the operating leverage of our model improved dramatically. We subsequently added a very experienced investment deal team and began executing on royalty aggregation through three main deal approaches: royalty monetizations of existing licenses, project finance and special situations where we engage operationally and rescue good assets trapped in challenging situations. Since then, we have a deal organization of 18 people executing on these various tactics as we pursue assets that address serious unmet needs for patients.

We have gone from seven commercial assets to 15 commercial assets and have closed on 18 deals in the last 3 years, adding high potential assets into our late-stage clinical pipeline as well. This bodes well for our future growth and for the development of high-value medicines for patients. Pursuing medicines that are impactful for patients is also good for business. Our EPS in that time frame has gone from $2.44 a share in 2022 to our guidance for 2026 of $8.50 to $9.50 per share. For the first quarter of the year, Tavo and Lauren will show significant value opportunity in our commercial portfolio, including growth drivers such as Filspari, Ohtuvayre and Qarziba. We also saw exciting progress in Palvella’s QTORIN rapamycin for MLMs, which achieved positive top line Phase III results and has the potential to become the first FDA-approved therapy and first-line standard of care treatment for an estimate of more than 30,000 diagnosed patients.

In April, we announced our largest deal to date, the acquisition of XOMA Royalty, which will add more than 120 commercial, clinical and preclinical stage assets into our royalty portfolio. Upon closing, XOMA is expected to be immediately accretive and further accelerate our long-term growth and earnings potential as reflected in our updated financial guidance. XOMA will add seven marketed products and nearly double our portfolio of Phase II and Phase III assets, which we believe will create significant value for our stockholders, all through a single transaction. Also in April, we were pleased to see Travere’s announcement of the full FDA approval of Filspari in FSGS, making it the first and only approved medicine for FSGS and marketing its expansion beyond IgA nephropathy into a second rare kidney disease.

This is an important milestone for people living with FSGS who, for the first time, have an FDA-approved medicine for this rare and devastating condition. Filspari is an important program for Ligand and recently became our largest commercial royalty asset. We expect the expansion into FSGS will continue to drive significant growth for Ligand in the coming years. We continue to execute on the strategy that we set place in 2022 and have a strong belief in this business model. The acquisition of XOMA Royalty is expected to add $0.50 a share of adjusted EPS in 2026 and $1.50 in 2027. These financial results are validating evidence of this compounding strategy and our acquisition of XOMA Royalty further accelerates our ramping growth. XOMA’s significant upside potential also draws from its earlier-stage opportunities and longer-dated IP and royalty rights, some of which extend past 2040.

Over the last couple of years, Ligand has scaled the business and our portfolio management system in anticipation of absorbing new assets into our portfolio. As a result, we anticipate very significant operational and financial synergies as we integrate the XOMA portfolio. We believe this approach will continue to deliver compounding profitable growth for our shareholders. With long-dated royalty cash flow, proprietary financing capabilities and increased financial strength through this acquisition strengthens our position as a biopharma royalty aggregator. Since we put out our last 5-year outlook for royalty receipts in December of 2025, we’ve had several positive catalysts. In addition to announcing our acquisition of XOMA Royalty, we expect the FDA’s approval of Filspari and FSGS and Palvella’s most recently announced positive Phase III data in MLM for its QTORIN rapamycin will continue to add significant growth and value accretion over time.

Importantly, we continue to have significant balance sheet strength and cash flows, allowing us to opportunistically execute on additional value-creating partnerships as we have historically done. The pipeline is robust, and we will be disciplined, but we are excited about the continued growth and value creation that we can deliver. We will share more about the longer-term view and update our 5-year plan at the Investor Day that we expect to hold in December of this year. And with that, I would like to turn it over to Tavo for the financial update.

Octavio Espinoza: Thank you, Todd, and good morning, everyone. We’re in a very strong position as a business with multiple drivers contributing to both near-term performance and long-term growth. Importantly, while Filspari has become a major growth driver for Ligand, it is only one component of a much broader growth story. The continued launch trajectory in IgAN and the expected expansion into FSGS represent an important inflection point for our royalty portfolio and long-term cash flow profile. At the same time, we’re seeing encouraging early progress from Zelsuvmi following the Pelthos spinout, where we earn a 13% royalty. We’re also benefiting from continued contributions across Merck’s portfolio, including VAXNEUVANCE, Capvaxive and Ohtuvayre, which continues to gain traction following its launch.

We also continue to benefit from Qarziba, a royalty asset we acquired through our acquisition of Apeiron in 2024. Overlaying all of this is the announced acquisition of XOMA Royalty, which we expect to further diversify and scale the portfolio and serve as a meaningful long-term growth accelerator. Turning to our first quarter results. Total revenue was $52 million, up 14% year-over-year. Royalty revenue was $43 million, increasing 56% and adjusted EPS was $1.63, up 23%. These results reflect strong underlying momentum in the business, driven primarily by continued growth from Filspari, Ohtuvayre and Qarziba. We ended the quarter with approximately $780 million in cash and investments, along with $200 million of undrawn capacity under our revolving credit facility, giving us nearly $1 billion of available capital as we move toward closing the XOMA transaction.

Looking more closely at royalties, Filspari continues to perform very well with strong demand trends and growing physician adoption. Travere has built a field force of over 100 professionals with meaningful overlap between IgAN and FSGS prescribers, which we believe will support a faster launch trajectory in FSGS. Ohtuvayre also delivered strong year-over-year growth, while sales were modestly impacted sequentially by seasonal dynamics and reimbursement timing, trends improved as the quarter progressed, and Merck continues to invest in expanding awareness and adoption. On the expense side, R&D expense was $2.1 million in the quarter compared to $50.1 million in the prior year period. As a reminder, last year’s results included a onetime $44 million accounting charge related to Castle Creek’s funding of the Phase III D-Fi study.

G&A expense was $21 million compared with $19 million in the prior year, reflecting higher employee-related costs as we continue to scale our business development function. Importantly, we continue to operate with a highly efficient cost structure. And as the business scales, we expect to see continued operating leverage. Nonoperating expense was $41.6 million compared to $14 million in the prior year period, primarily driven by changes in the fair value of our investment in Pelthos and other equity holdings. These items are excluded from adjusted net income and do not impact the underlying performance of the business. From an earnings perspective, GAAP diluted earnings per share was a loss of $0.67 in the first quarter compared to a loss of $2.21 in the prior year period.

The 2026 loss was primarily driven by fair value adjustments on our equity holdings, while the prior year loss largely reflects a onetime $44 million accounting charge related to our investment in Castle Creek. On an adjusted basis, diluted earnings per share increased to $1.63, up 23% year-over-year, reflecting strong operating leverage and higher royalty contributions. Turning now to guidance. Consistent with the revised guidance we provided in connection with the XOMA announcement and assuming the acquisition closes in the third quarter, our 2026 total revenue outlook is $270 million to $310 million. Our royalty revenue outlook is $225 million to $250 million, and our adjusted EPS outlook is $8.50 to $9.50. Looking ahead to 2027, we expect approximately $1.50 per share of incremental adjusted EPS from a full year contribution of the XOMA portfolio.

We also expect combined operating cash flow of approximately $300 million, which reflects the benefit of the tax attributes acquired in the XOMA transaction, including net operating losses and Section 174 R&D tax credits and supports our capital deployment strategy of investing $150 million to $250 million annually in new royalty opportunities. We believe this creates a highly attractive model, one where strong tax-efficient cash generation funds continued portfolio expansion, driving further growth over time. Finally, I’d like to touch on the CVR associated with the XOMA acquisition. The CVR relates to potential proceeds from XOMA’s litigation with Janssen. The litigation assets will remain in a post-reorganization XOMA LLC, which will distribute 75% of any net proceeds to former XOMA’s shareholders through the CVR, while Ligand will retain rights to the remaining 25%.

Importantly, Ligand has no obligation to fund the litigation. As a result, there is no P&L impact associated with the case, only potential upside. With that, I’ll turn it over to Lauren for a portfolio update.

Lauren Hay: Thank you, Tavo, and good morning, everyone. I’d like to focus today on two very important recent positive events in our portfolio. The first is the announcement of extremely successful Phase III SELVA trial results for Palvella’s QTORIN rapamycin in microcystic lymphatic malformations. QTORIN rapamycin demonstrated a highly statistically significant outcome on the primary endpoint and all secondary endpoints. On the primary endpoint, QTORIN rapamycin demonstrated a positive 2.13 point improvement on the MLM Investigator Global Assessment scale. This is clinically transformative for patients and even more compelling considering that there are no FDA-approved treatments for this serious rare dermatological condition.

For context, Palvella had guided to a change on the mLM-IGA of positive 1 as being a decisive win with an upside case of positive 1.5 points. Palvella plans to submit an NDA in the second half of this year and is accelerating U.S. launch readiness efforts. As a reminder, QTORIN rapamycin has been granted breakthrough therapy, orphan drug and Fast Track designations from the FDA for the treatment of MLM. Palvella is also developing QTORIN rapamycin for the treatment of cutaneous venous malformations. In December, Palvella announced positive top line results from its Phase II Travere study. Palvella recently completed a very successful CVM breakthrough therapy designation meeting with the FDA and plans to submit a breakthrough application shortly.

Across the two lead indications, there are estimated to be more than 100,000 patients diagnosed with either MLM or CVM. Based on payer research and orphan analog launches, Palvella projects an annual per patient price of between $100,000 and $200,000. At peak, this positions the U.S. commercial opportunity for QTORIN rapamycin to reach an estimated $1 billion to $3 billion in U.S. annual sales across the initial two indications. This could translate into a potential $100 million to $300 million peak annual royalty revenue to Ligand if achieved. Moving on to the second major catalyst in our portfolio this year. In April, the FDA granted full approval of Filspari for the treatment of FSGS in patients without nephrotic syndrome. In our view, the approval was highly positive, given the broad label encompassing patients with primary, secondary and genetic FSGS.

From a commercial perspective, Travere estimates there are over 30,000 patients in the U.S. with FSGS who are eligible for treatment with Filspari. With no approved therapeutic alternatives and serious unmet medical need, we are optimistic about the commercial potential in FSGS. Travere has an estimated nephrology team of over 100 field professionals with high overlap between IgAN and FSGS and payer coverage is already established in IgAN, so we expect a rapid and successful launch. Additionally, Filspari continues to perform well commercially in IgAN and Filspari now represents the largest royalty in our portfolio. Travere has seen strong sales growth in IgAN, driven by the recent REMS modification as well as updated KDIGO guidelines even as new therapies have entered the market.

Physician confidence continues to build as real-world experience reinforces the long-term clinical data and its role as a foundational non-immunosuppressive therapy. Across IgAN and FSGS, we believe Filspari is well positioned for meaningful and accelerating revenue growth, and Travere has guided to a $3 billion peak opportunity across both indications, which would translate into a $270 million annual royalty to Ligand if achieved. Taking a step back, we have 12 major royalty revenue drivers across our existing portfolio. As you can see by the boxes highlighted in green, five of these 12 products have been approved or acquired since 2022 as we have implemented a strategic focus on generating predictable compounding royalty revenue growth for our shareholders.

Moving to the next slide. We have eight key pipeline programs we are currently focused on, 6 of which represent new investment activity since 2022. The growth in our commercial and clinical stage portfolio has been strategic, intentional and methodical as we are focused on adding high-value assets with the potential to address areas of high unmet medical needs such as oncology, rare disease and hypertension. Turning to our recently announced acquisition of XOMA Royalty, which is expected to close in the third quarter, I’d like to discuss XOMA’s royalty portfolio. XOMA’s assets will enhance Ligand’s portfolio in three distinct stages. First, XOMA’s seven commercial programs, including three key products, VABYSMO, OJEMDA, and Miplyffa provide near-term predictable revenue as well as significant growth potential through geographic and indication expansion.

XOMA’s 14 late-stage clinical programs represent the next wave of growth opportunities and are anticipated to further diversify the portfolio. As these programs reach approval and launch, they transition into royalty-generating assets and further expand the predictable compounding revenue base. Beyond that, XOMA has an extremely diverse array of over 100 earlier-stage programs that provide the foundation for long-term royalty portfolio longevity. Not only do these assets have the potential to generate significant long-term royalty revenue, they also have the potential to generate near-term development and regulatory milestone revenue. When we look at the full year, we’ve already seen several positive events in 2026. In addition to Palvella’s positive Phase III results in MLN, Palvella also announced the initiation of a Phase II trial in clinically significant angiokeratomas.

Turning to Filspari. Following its FDA approval, the first FSGS patients were treated within just 1 week, which is an encouraging indicator as we monitor the early stages of the launch. Looking ahead to additional potential catalysts expected this year across the Ligand portfolio, we anticipate continued geographic expansion of Filspari as Chugai advances towards regulatory submission in IgAN in Japan and Nuance awaits regulatory decisions for Ohtuvayre in China. On the clinical front, Orchestra BioMed and LeonaBio expect to complete enrollment of their pivotal trials this year, both representing important late-stage assets in Ligand’s portfolio. Turning to the XOMA royalty portfolio. One of the key pipeline partner programs, volixibat in development by Mirum Pharmaceuticals for both primary sclerosing cholangitis and primary biliary cholangitis announced positive Phase IIb data in patients with PSC earlier this week.

Mirum has a pre-NDA meeting scheduled with the FDA this summer with a planned NDA submission in the second half of this year. We’re excited to see this important milestone for the PSC community, which currently has no approved therapies. Additionally, marketing decisions are expected in Japan for OJEMDA and Europe for Miplyffa in the second half of this year, which will be growth drivers for these commercial products. With the vast size of the anticipated combined portfolio, these are just a few of the many important catalysts we expect in the coming months. In closing, with the acquisition of XOMA, we have never felt more confident about the potential of our portfolio, both in the short term and the long term. With that, I will turn the call back over to Todd for his closing remarks.

Todd Davis: Thank you, Lauren. We now have a deep and talented team at Ligand, and we are incredibly proud of our deal makers for driving our substantial growth. The acquisition of XOMA Royalty represents an exciting opportunity to significantly grow our portfolio and accelerate our long-term growth profile with the addition of a highly complementary business. Additionally, we are pleased with the progress of our incredible partners and late-stage development pipeline, specifically the strong trial results of Palvella’s Phase III MLM trial and the recent FDA approval of Filspari in FSGS. We have strong conviction around these important programs and are encouraged to see both the clinical development progress of QTORIN rapamycin in MLM and the expansion of Filspari into a second rare kidney disease.

While we are driving growth for our shareholders, we also do not lose sight of the broader goal of creating greater access to life-saving treatments and improving the lives of patients. We are privileged to be in a business where we can do well by doing good. Thank you, everyone, for joining us for today’s earnings call. I will now pass it back to the operator and open it up for questions.

Operator: [Operator Instructions] Your first question comes from the line of Matthew Hewitt from Craig-Hallum Capital Group.

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Matthew Hewitt: Maybe first off, could you explain how the XOMA deal came to pass and why it makes sense now?

Todd Davis: Sure, Matt. For this question, I’ll hand it over to Michael Vigilante, who is our deal lead on this. Michael?

Michael Vigilante: Can you hear me?

Todd Davis: Yes. Go ahead.

Michael Vigilante: So yes, Ligand, we’ve had a long-standing relationship with the XOMA team, a lot of respect for Owen and what they’ve accomplished. We believe their business has reached an inflection point. The parties engaged fully in December. Ligand spent considerable time diligencing XOMA’s portfolio business at that time. The discussions continued into 2026, where we reached alignment on terms and structure in April. The transaction provides XOMA shareholders with liquidity and attractive returns since their pivot to a royalty aggregator model in 2017. For Ligand, the XOMA deal provides meaningful synergies via broadening our portfolio across commercial, all stages of development, accelerates our growth and immediate EPS accretion as well as long-term durable accretion.

Matthew Hewitt: Got it. And then maybe as a follow-up, Todd, I think you noted in your prepared remarks that you’ve got a robust pipeline of targets. And I’m curious, are there others in that pipeline similar to XOMA, meaning like a portfolio of assets? Or do you expect to revert back to more of the individual drug investments?

Todd Davis: Sure. Matt, the majority of our pipeline are single or double assets. I think the XOMA portfolio is unique in its breadth. There are not many like this in the market that we know of. And so it is a fairly unique transaction. There are other special opportunities that would be larger deals that involve multiple assets, but not quite with this level of breadth.

Operator: Your next question comes from the line of Annabel Samimy from Stifel.

Annabel Samimy: This is Jack on for Annabel. Congrats on the quarter. So to what extent does the earlier-stage portfolio impact your commitment to conducting those 4 deal to 5 deal targets per year? It seems like you can do a lot of shopping there already for promising assets. So do you really see yourself needing to go external for additional deals for the remainder of the year?

Todd Davis: We don’t need to do additional deals to sustain over 20% growth for the next 5 years. We have an immense amount of growth embedded in the current portfolio. but there’s so much opportunity in kind of the late-stage private to mid-cap project finance arena that we’ve been scaling the team to execute on that. And so we expect the addition of new deals and new assets in the portfolio to continue to compound the growth and drive it even higher, which is good for our investors. So we will continue to do that.

Operator: Your next question comes from the line of Yigal Nochomovitz from Citigroup.

Joohwan Kim: This is Joohwan Kim on for Yigal. Maybe just two quick ones from us. Firstly, we noticed that you had reiterated guidance for the year following Travere’s record high new PFS for Filspari. Could you elaborate on the key performance indicators or specific achievements you would be looking for that might lead to an upward revision of Filspari’s projected contribution for the remainder of the year?

Todd Davis: Yes. Tavo, go ahead.

Octavio Espinoza: Yes. We had Filspari for FSGS on a risk-adjusted basis included in our model coming into the year, and we talked about that at Investor Day. And so now that obviously, it’s approved, it’s derisked. But it did — as you’ll recall, it did move over about a quarter. It was originally scheduled for approval in early January. It subsequently got approved in April. So that’s a quarter of the year. That kind of offsets the derisking. So it’s incremental advance here in 2026, where we’ll see a significantly more impactful impact from FSGS sales as we get out into 2028 and beyond. But no impact on the $0.50 — the $0.50 increase in guidance is purely related to the XOMA acquisition.

Joohwan Kim: Got it. And if I could just throw in a second one here. We noticed the 8-K filing in April regarding the TR Beta program termination of Viking. Could you help us understand the strategic thinking here specifically, if the 2809 and 0214 assets are reclaimed, would you seek to repartner these out and just to help frame the potential impact, how are these assets being carried on the books from a royalty contribution standpoint?

Todd Davis: Yes. I’ll let Tavo answer the — how it’s being carried question. But our objective with 2809 is to move it forward in development so that patients can benefit from it. We think it’s very high potential. We think as demonstrated by the current MASH product that’s in the market, there is strong demand and a need for products like 2809 and that it has very high potential to be a differentiated product in that market, which is quite large. So our objective is to get moving forward in development really. And that’s the reason for that. And with regard to the — how it’s being carried, Tavo?

Octavio Espinoza: Yes, there’s nothing — we don’t carry anything on the balance sheet that we did have intangible assets on the books related to these at some point, those are fully amortized. And financial impact as a result of this, maybe just some minor incremental legal expenses, but nothing that will impact what we’ve already guided.

Operator: Your next question comes from the line of Jason Zemansky from Bank of America.

Unknown Analyst: This is Jackie on for Jason. Congrats on the quarter. Appreciating that Tzield is a smaller part of the portfolio. But with the recent label expansion to age 1 from age 8 for the delaying progression to Stage 3 type 1 diabetes, how does this change your view on the size of the opportunity? Should we expect a meaningful shift in peak sales potential? And how might that translate into royalties for Ligand?

Todd Davis: Yes. Laura, do you want to take that?

Lauren Hay: Yes, sure. So we were certainly encouraged to see that label expansion. I think it’s great for patients and their families that are on the younger end of the spectrum in terms of the type 1 diabetes onset. I’d say that it’d probably be an incremental addition to what we’re seeing in terms of the Tzield sales. This is really a market where we’re having to identify patients before they become symptomatic. So it’s quite a bit of investment that Sanofi is undertaking to go out and screen family members who are newly diagnosed and then find patients who’d be eligible in that kind of Stage 2 of the disease. So I’d say it’d be incremental, and we’re certainly encouraged to see access available for some of the youngest patients who would be now eligible for treatment.

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

Sahil Dhingra: My first question is on the Captisol performance in the quarter, which was down year-over-year. What gives you confidence in achieving the full year Captisol guidance? And also, how should we think about the pacing of contract revenue for the remainder of the year?

Todd Davis: Tavo, do you want to take the Captisol question? And was the second part, pacing on deals?

Octavio Espinoza: Contract revenue.

Todd Davis: Go ahead on both of those, Tavo.

Octavio Espinoza: Yes. Yes, on the Captisol revenue line, we do have visibility to orders into the early part of 2027. So we’re confident we’ll be able to meet our guidance range of $35 million to $40 million. It tends to be inconsistent. It’s not linear quarter-to-quarter, largely due to the kind of the nature of the orders, the size of the orders that we get from some of our larger customers. But you can expect the amounts to normalize here over the next few quarters. And in terms of contract revenue, that’s another one that’s lumpy. It’s the nature of that line that’s obviously dependent on regulatory and commercial milestones reached by our partners. We have over 18 different milestone opportunities. Obviously, not all of those will come in at various sizes. But again, we feel very comfortable that we’ll be able to meet our guidance range.

Sahil Dhingra: Great. And then my next question is related to the XOMA acquisition. Can you comment on the ease of challenge of integrating XOMA post-closing? And how much synergies are you expecting from that transaction? And also, does integrating XOMA impact your deal activity in the near term, either in terms of deal size, capacity or time lines?

Todd Davis: Sure. Yes. I think on the — with regard to synergies on the XOMA transaction, they’re extremely high, approaching 100%. Now we are scaling our business. So we probably will pick off some of their team, which is talented, if they’re interested, obviously. And there’s a lease obligation, but the synergy is potentially approaching something close to 100%. So that’s — this business is worth quite a bit to us, plus the tax benefits are immediately beneficial to us. So we’ve kind of set up the business to absorb these types of partnerships, contractual passive partnerships, which is a very highly leverageable acquisition for us. So the operating leverage around this is very beneficial. And could you just repeat, Sahil, the second part of your question?

Sahil Dhingra: Yes. It was related to the other transactions. So does integrating XOMA impact your deal activity in the near term as it relates to size of the time line?

Todd Davis: Yes. Yes. So we’ll have access to a couple of hundred million dollars post transaction here. Our deal pace has been $150 million to $250 million a year. So — and we’re generating now, we’re approaching — we’re not quite there, but we’re approaching $300 million a year in cash flow generation. So we have, at this pace, essentially reached kind of a self-funding status almost. So there’s no need to do an immediate financing or anything like that. Our balance sheet will be in good shape. I will say that the opportunity in this late-stage private kind of mid-cap space for project financing, co-development funding and things like that, is really very significant for nondilutive capital. And so we have continued to scale our team and our execution capabilities are accelerating. So our pace could go up a little bit. But again, from a balance sheet and cash generation perspective, we’re in a strong position to do that.

Operator: Your next question comes from the line of Joe Pantginis from H.C. Wainwright & Co.

Joe Pantginis: So I’m going to go a little bit slightly into the weeds on XOMA, and I’m also curious whether this could apply to your broader portfolio as well at Ligand. So XOMA had acquired a few or multiple companies over the last 18 months or so with the hope of out-licensing those assets. Was curious if you will be taking on that responsibility. And also, is that a potential for Ligand’s current assets where beyond attrition because of, say, negative news, you have any assets in the future you might want to potentially offload?

Todd Davis: Yes. So I think that our — we are in the business of identifying really high-value clinical opportunities that either require funding or require partnering. And so that’s why we have kind of the three-pronged approach is sometimes it needs additional management or it needs a new home, sometimes it needs capital. And we get involved in all of the above. And so that’s why we’ve kind of scaled our portfolio management capability because it’s not just about doing new deals for us. It’s about making sure that we farm the existing portfolio that we own and making it as highly productive as possible. So we’re constantly prioritizing and reprioritizing our own set of assets. And if they stall out or if they need new partnering, we definitely will be engaged in out-licensing, finding new homes, partnering, helping to back potentially those new companies or existing companies that we help finance to move valuable assets forward.

So that’s really the business that we’re in. It’s far more than just acquiring or monetizing passive royalties. We get involved with the portfolio management. And Lauren Hay is heading that effort up, who’s on the phone. So I’ll just ask her to weigh in with any additional comments.

Lauren Hay: Yes. Joe, I think Todd summarized things really well. We have a sizable existing portfolio at Ligand that we’re always looking for opportunities to potentially repartner assets if the situation presents itself. We did have an example of that late last year with lasofoxifene and getting that over to Athira, which is now LeonaBio. And we’re really encouraged by the progress that, that team is making on completing the Phase III trial there where we expect a readout next year. And so with the expected acquisition of the XOMA portfolio, that will be certainly an opportunity for us to look across their existing programs in all stages of development and look for similar opportunities. So we’re well set up to do that and adding some resources to that effort, and we’re excited about the opportunities in the short term and long term there.

Operator: Your final question comes from the line of John Vandermosten from Zacks.

John Vandermosten: I wanted to start out with a question on the milestones. And if you look at XOMA’s revenues last year, there was a good chunk from things like that. And I’m wondering if you anticipate any milestones from XOMA in the second half of the year, 2026?

Todd Davis: Tavo, go ahead.

Octavio Espinoza: Yes, with the XOMA portfolio, along with that comes a number of milestones, some of which we do have the opportunity to realize here in the second half of 2026, obviously, assuming the acquisition happens as expected in the third quarter. But yes, that’s — we do have an opportunity to realize some of those and significantly more as we get into the ’27, ’28 and beyond years.

John Vandermosten: Okay. And just taking a look at the R&D assets and the NOLs, you did mention that, I guess there’s some benefit from that expected in 2027. How quickly will you be able to use them? And I guess what’s the amount that you’d be able to use? Are you going to lose any due to M&A restrictions or anything like that?

Octavio Espinoza: Yes. John, it is significant. We haven’t disclosed the quantum. We’re going to let the deal close and make sure we get through our entire financial diligence before we disclose the amount. You can get a sense, if you want, by looking at their financial statements, their annual report in particular. The NOLs that they’ve accumulated over time will be limited. However, the Section 174 R&D tax credits will come over 100%, and we will be able to make use of them immediately. So it’s going to put us in a very tax-efficient position.

Operator: At this time, there are no further questions. This concludes today’s call. Thank you all for attending. You may now disconnect.

Todd Davis: Thank you.

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