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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________________________________________________________
FORM 10-Q
________________________________________________________________________________________
Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2022
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Transition Period From ______ to ______ .
Commission File Number: 001-33093

lgnd-20220930_g1.jpg

LIGAND PHARMACEUTICALS INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware
77-0160744
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
3911 Sorrento Valley Boulevard, Suite 110
San Diego
CA92121
(Address of principal executive offices)(Zip Code)
(858) 550-7500
(Registrant's Telephone Number, Including Area Code)

5980 Horton Street, Suite 405
Emeryville, CA 94608
(Former Name or Former Address, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class:
Trading symbol:
Name of each exchange on which registered:
Common Stock, par value $0.001 per share
LGND
The Nasdaq Global Market

________________________________________________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”




and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one)
Large Accelerated Filer
Accelerated Filer
Non-Accelerated FilerSmaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒
As of November 4, 2022, the registrant had 16,893,579 shares of common stock outstanding.





LIGAND PHARMACEUTICALS INCORPORATED
QUARTERLY REPORT

FORM 10-Q

TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
PART II. OTHER INFORMATION


2



GLOSSARY OF TERMS AND ABBREVIATIONS
AbbreviationDefinition
2021 Annual ReportAnnual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 28, 2022
2023 Notes$750.0 million aggregate principal amount of convertible senior unsecured notes due 2023
APAC
Avista Public Acquisition Corp. II (after its domestication in Delaware, known as OmniAb, Inc.)
ASCAccounting Standards Codification
ASUAccounting Standards Update
CompanyLigand Pharmaceuticals Incorporated, including subsidiaries
CVRContingent value right
CrystalCrystal Bioscience, Inc.
CyDexCyDex Pharmaceuticals, Inc.
EMAEuropean Medicines Agency
ESPPEmployee Stock Purchase Plan, as amended and restated
FASBFinancial Accounting Standards Board
GAAPGenerally accepted accounting principles in the United States
IcagenIcagen, LLC
LigandLigand Pharmaceuticals Incorporated, including subsidiaries
Merger AgreementAgreement and Plan of Merger, dated as of March 23, 2022, among APAC, Ligand, OmniAb and Merger Sub
Merger SubOrwell Merger Sub, Inc., a wholly owned subsidiary of APAC
MetabasisMetabasis Therapeutics, Inc.
NDANew Drug Application
OmniAbOmniAb Operations, Inc. (formerly known as OmniAb, Inc.)
OmniAb BusinessLigand's antibody discovery business
PfenexPfenex Inc.
Q3 2021The Company's fiscal quarter ended September 30, 2021
Q3 2022The Company's fiscal quarter ended September 30, 2022
SBCShare-based compensation expense
SECSecurities and Exchange Commission
Separation AgreementSeparation and Distribution Agreement, dated as of March 23, 2022, among APAC, Ligand and OmniAb
TravereTravere Therapeutics, Inc.
VikingViking Therapeutics, Inc.
xCella
xCella Biosciences, Inc.
YTDYear-to-date

3



PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements

LIGAND PHARMACEUTICALS INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except par value)
September 30, 2022December 31, 2021
ASSETS
Current assets:
   Cash and cash equivalents$4,116 $19,522 
   Short-term investments117,291 321,586 
   Accounts receivable, net65,168 85,453 
   Inventory22,326 27,326 
   Income taxes receivable785 6,193 
   Other current assets10,746 4,671 
      Total current assets220,432 464,751 
Deferred income taxes, net35,500 34,482 
Intangible assets, net517,025 551,040 
Goodwill181,206 181,206 
Commercial license rights, net10,193 10,110 
Property and equipment, net33,418 20,511 
Operating lease right-of-use assets32,108 16,542 
Financing lease right-of-use assets14,444 16,207 
Other assets6,279 2,741 
      Total assets$1,050,605 $1,297,590 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable $15,887 $8,403 
   Accrued liabilities19,338 17,579 
   Income taxes payable9,703  
   Current contingent liabilities1,773 2,588 
   Deferred revenue9,547 10,996 
   Current operating lease liabilities2,345 2,053 
   Current financing lease liabilities48 46 
   2023 convertible senior notes, net76,600  
      Total current liabilities135,241 41,665 
2023 convertible senior notes, net 320,717 
Long-term contingent liabilities6,855 8,483 
Deferred income taxes, net29,832 59,095 
Long-term operating lease liabilities34,893 15,494 
Long-term deferred revenue5,537 9,270 
Other long-term liabilities21,949 21,707 
      Total liabilities234,307 476,431 
Commitments and contingencies
Stockholders' equity:
   Preferred stock, $0.001 par value; 5,000 shares authorized; zero issued and outstanding at September 30, 2022 and December 31, 2021
  
   Common stock, $0.001 par value; 60,000 shares authorized; 16,894 and 16,767 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively
17 17 
   Additional paid-in capital348,994 372,969 
   Accumulated other comprehensive loss(1,060)(917)
   Retained earnings 468,347 449,090 
      Total stockholders' equity816,298 821,159 
      Total liabilities and stockholders' equity$1,050,605 $1,297,590 
See accompanying notes to unaudited condensed consolidated financial statements.
4






LIGAND PHARMACEUTICALS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)
Three months endedNine months ended
September 30,September 30,
2022202120222021
Revenues:
   Royalties$19,837 $15,648 $51,491 $31,376 
   Captisol35,949 35,093 77,616 128,875 
   Contract revenue10,302 14,094 40,093 44,409 
Total revenues66,088 64,835 169,200 204,660 
Operating costs and expenses:
   Cost of Captisol14,153 11,446 31,213 50,192 
   Amortization of intangibles11,818 11,827 35,455 35,391 
   Research and development22,036 16,938 61,461 50,769 
   General and administrative17,445 12,718 50,210 39,747 
   Other operating income (3,800) (37,600)
Total operating costs and expenses65,452 49,129 178,339 138,499 
Income (loss) from operations636 15,706 (9,139)66,161 
Other income (expense):
   Gain (loss) from short-term investments(923)1,937 (15,709)8,135 
   Interest income591 169 1,023 698 
   Interest expense(332)(4,439)(1,559)(15,154)
   Other income (expense), net885 1,886 5,465 (5,516)
Total other expense, net221 (447)(10,780)(11,837)
Income (loss) before income taxes857 15,259 (19,919)54,324 
Income tax benefit (expense)(453)(1,536)4,043 8,230 
Net income (loss)$404 $13,723 $(15,876)$62,554 
     Basic net income (loss) per share$0.02 $0.82 $(0.94)$3.77 
     Shares used in basic per share calculations16,888 16,688 16,860 16,595 
     Diluted net income (loss) per share$0.02 $0.80 $(0.94)$3.64 
     Shares used in diluted per share calculations17,132 17,142 16,860 17,187 

See accompanying notes to unaudited condensed consolidated financial statements.
5






LIGAND PHARMACEUTICALS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(in thousands)
Three months endedNine months ended
September 30,September 30,
2022202120222021
Net income (loss)$404 $13,723 $(15,876)$62,554 
Unrealized net gain (loss) on available-for-sale securities, net of tax6 (14)(143)(74)
Comprehensive income (loss)$410 $13,709 $(16,019)$62,480 

See accompanying notes to unaudited condensed consolidated financial statements.

6




LIGAND PHARMACEUTICALS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
(in thousands)
Common StockAdditional paid in capitalAccumulated other comprehensive lossRetained earningsTotal stockholders' equity
SharesAmount
Balance at December 31, 202116,767 $17 $372,969 $(917)$449,090 $821,159 
ASU 2020-06 adoption, net of tax (Note 1)— — (51,130)— 35,133 (15,997)
Issuance of common stock under employee stock compensation plans, net of shares withheld for payroll taxes94 — (5,515)— — (5,515)
Share-based compensation— — 9,044 — — 9,044 
Unrealized net loss on available-for-sale securities, net of deferred tax— — — (114)— (114)
Net loss— — — — (15,385)(15,385)
Balance at March 31, 202216,861 $17 $325,368 $(1,031)$468,838 $793,192 
Issuance of common stock under employee stock compensation plans, net of shares withheld for payroll taxes21 — 604 — — 604 
Share-based compensation— — 9,499 — — 9,499 
Unrealized net loss on available-for-sale securities, net of deferred tax— — — (35)— (35)
Net loss— — — — (895)(895)
Balance at June 30, 202216,882 $17 $335,471 $(1,066)$467,943 $802,365 
Issuance of common stock under employee stock compensation plans, net of shares withheld for payroll taxes12 — 724 — — 724 
Share-based compensation— — 12,597 — — 12,597 
Unrealized net gain on available-for-sale securities, net of deferred tax— — — 6 — 6 
Warrant and bond hedge unwind transactions— — 202 — — 202 
Net income— — — — 404 404 
Balance at September 30, 202216,894 $17 $348,994 $(1,060)$468,347 $816,298 


7



Common StockAdditional paid in capitalAccumulated other comprehensive lossRetained earnings Total stockholders' equity
SharesAmount
Balance at January 1, 202116,080 $16 $318,358 $(801)$391,952 $709,525 
Issuance of common stock under employee stock compensation plans, net of shares withheld for payroll taxes572 1 20,580 — — 20,581 
Share-based compensation— — 8,405 — — 8,405 
Unrealized net loss on available-for-sale securities, net of deferred tax— — — (55)— (55)
Warrant and bond hedge unwind transactions— — 396 — — 396 
Reacquisition of equity due to 2023 debt extinguishment, net of tax— — (11,118)— — (11,118)
Net income— — — — 18,106 18,106 
Balance at March 31, 202116,652 $17 $336,621 $(856)$410,058 $745,840 
Issuance of common stock under employee stock compensation plans, net of shares withheld for payroll taxes24 — 1,103 — — 1,103 
Share-based compensation— — 10,216 — — 10,216 
Unrealized net loss on available-for-sale securities, net of deferred tax— — — (5)— (5)
Reacquisition of equity due to 2023 debt extinguishment, net of tax— — (1,362)— — (1,362)
Net income— — — — 30,725 30,725 
Balance at June 30, 202116,676 $17 $346,578 $(861)$440,783 $786,517 
Issuance of common stock under employee stock compensation plans, net of shares withheld for payroll taxes31 — 1,898 — — 1,898 
Share-based compensation— — 9,754 — — 9,754 
Unrealized net loss on available-for-sale securities, net of deferred tax— — — (14)— (14)
Reacquisition of equity due to 2023 debt extinguishment, net of tax— — 92 — — 92 
Warrant and bond hedge unwind transactions— — 96 — — 96 
Net income— — — — 13,723 13,723 
Balance at September 30, 202116,707 $17 $358,418 $(875)$454,506 $812,066 

See accompanying notes to unaudited condensed consolidated financial statements.
8



LIGAND PHARMACEUTICALS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine months ended
September 30,
20222021
Cash flows from operating activities:
Net (loss) income$(15,876)$62,554 
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Change in estimated fair value of contingent liabilities(1,378)(39,377)
Depreciation and amortization of intangible assets40,399 37,902 
Amortization of premium on investments, net75 145 
Amortization of debt discount and issuance fees639 12,863 
Amortization of commercial license rights(163)96 
Loss (gain) on debt extinguishment(4,192)7,303 
Share-based compensation31,140 28,375 
Deferred income taxes(25,570)(8,229)
Loss (gain) from short-term investments15,709 (8,135)
Lease amortization expense4,535 3,349 
Other(45)658 
Changes in operating assets and liabilities:
     Accounts receivable, net20,550 (8,838)
     Inventory10,702 (3,103)
     Accounts payable and accrued liabilities (405)(3,635)
     Income tax receivable and payable15,111 (4,167)
     Deferred revenue(5,182)(20,696)
     Other assets and liabilities (1,671)(5,909)
                Net cash provided by operating activities84,378 51,156 
Cash flows from investing activities:
Purchase of short-term investments(39,052)(116,898)
Proceeds from sale of short-term investments202,552 152,465 
Proceeds from maturity of short-term investments24,830 37,100 
Cash paid for equity method investment(750) 
Purchase of property and equipment(15,792)(6,566)
Payments to CVR Holders(960) 
Other80 135 
               Net cash provided by investing activities170,908 66,236 
Cash flows from financing activities:
Repurchase of 2023 Notes(260,949)(155,760)
Payments under financing lease obligations(42)(9,188)
Proceeds from convertible bond hedge settlement202 18,938 
Payments to convertible bond holders for warrant purchases (18,446)
Net proceeds from stock option exercises and ESPP1,831 29,484 
Taxes paid related to net share settlement of equity awards(6,018)(5,903)
Payments to CVR Holders(1,545)(1,050)
Payments for OmniAb transaction costs (4,171) 
               Net cash used in financing activities(270,692)(141,925)
Net decrease in cash, cash equivalents and restricted cash(15,406)(24,533)
Cash, cash equivalents and restricted cash at beginning of period19,522 47,963 
Cash, cash equivalents and restricted cash at end of period$4,116 $23,430 
Supplemental disclosure of cash flow information:
Interest paid$1,139 $1,740 
Taxes paid$6,630 $3,720 
Supplemental schedule of non-cash activity:
Accrued fixed asset purchases$3,626 $557 
Accrued inventory purchases$7,676 $4,968 
Unrealized loss on AFS investments$(143)$(74)

See accompanying notes to unaudited condensed consolidated financial statements.
9



LIGAND PHARMACEUTICALS INCORPORATED
Notes to Condensed Consolidated Financial Statements
(Unaudited)


Unless the context requires otherwise, references in this report to “Ligand,” “we,” “us,” the “Company,” and “our” refer to Ligand Pharmaceuticals Incorporated and its consolidated subsidiaries.

1. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

Our condensed consolidated financial statements include the financial statements of Ligand and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. We have included all adjustments, consisting only of normal recurring adjustments, which we considered necessary for a fair presentation of our financial results. These unaudited condensed consolidated financial statements and accompanying notes should be read together with the audited consolidated financial statements included in our 2021 Annual Report. Interim financial results are not necessarily indicative of the results that may be expected for the full year.

Significant Accounting Policies

We have described our significant accounting policies in Note 1, Basis of Presentation and Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements in our 2021 Annual Report.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires the use of estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and the accompanying notes. Actual results may differ from those estimates.

Reclassifications

Certain amounts in the prior period condensed consolidated financial statements have been reclassified to conform with the current period presentation. Specifically, “long-term deferred revenue” has been added to the condensed consolidated balance sheet, separated from “other long-term liabilities” in our prior period presentation.

Accounting Standards Updates, Recently Adopted

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). The guidance simplifies the complexity associated with applying U.S. GAAP for certain financial instruments with characteristics of liabilities and equity. More specifically, the amendments focus on the guidance for convertible instruments and derivative scope exception for contracts in an entity’s own equity. Consequently, a convertible debt instrument, such as the Company’s 2023 Notes, will be accounted for as a single liability measured at its amortized cost, if no other features require bifurcation and recognition as derivatives. The new guidance also requires the if-converted method to be applied for all convertible instruments and requires additional disclosures. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

We adopted this guidance effective January 1, 2022 under the modified retrospective approach and the comparative information has not been restated and continues to be presented according to accounting standards in effect for those periods. The cumulative effect of the change was recognized as an adjustment to the opening balance of retained earnings at the date of adoption and our 2023 Notes are no longer bifurcated into separate liability and equity components. The principal amount of the 2023 Notes is classified as a single liability measured at amortized cost in the condensed consolidated balance sheet for the period ended September 30, 2022. Upon adoption of ASU 2020-06 on January 1 2022, we recorded an adjustment to the 2023 Notes liability component, deferred tax liabilities, additional paid-in-capital and retained earnings. This adjustment was calculated based on the carrying amount of the 2023 Notes as if it had always been treated as a single liability measured at amortized cost. Furthermore, we recorded an adjustment to the debt issuance costs contra liability and equity (additional paid-in-capital) components under the same premise, as if debt issuance costs had always been treated as a contra liability only. Under this transition method, the cumulative effect of the accounting change increased the carrying amount of the 2023 Notes by $20.4 million, reduced deferred tax liabilities by $4.4 million, reduced additional paid-in capital by $51.1 million and increased retained earnings by $35.1 million. The net balance of the 2023 Notes at January 1, 2022 was $341.1 million which included an unamortized discount of $2.2 million.
10




Revenue

Our revenue is generated primarily from royalties on sales of products commercialized by our partners, Captisol material sales, and contract revenue for services, license fees and development, regulatory and sales based milestone payments.

We apply the following five-step model in accordance with ASC 606, Revenue from Contracts with Customers, 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.

Royalties

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. 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. 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, which have not been material, are adjusted in the period in which they become known, typically the following quarter.

Captisol Sales

Revenue from Captisol sales is recognized when control of Captisol material is transferred or intellectual property license rights are granted to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products or rights. 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. For Captisol material or intellectual property license rights, we consider our performance obligation satisfied once we have transferred control of the product or granted the intellectual property rights, meaning the customer has the ability to use and obtain the benefit of the Captisol material or intellectual property license right. 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. 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. 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.

Contract Revenue

Our contracts with customers often include variable consideration in the form of contingent milestone payments. We include contingent milestone 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. If the contingent milestone payment is based on sales, 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. Because of the risk that products in development with our partners will not reach development milestones or receive regulatory approval, we generally recognize any contingent payments that would be due to us upon the development milestone or regulatory approval. Depending on the terms of the arrangement, we may also defer a portion of the consideration received if we have to satisfy a future obligation, which typically occurs with our contracts for R&D services.

For R&D services we recognize revenue over time and we measure our progress using an input method. The input methods we use are based on the effort we expend or costs we incur toward the satisfaction of our performance obligation. We estimate the amount of effort we expend, including the time it will take us to complete the activities, or the costs we may incur in a given period, relative to the estimated total effort or costs to satisfy the performance obligation. This results in a percentage that we multiply by the transaction price to determine the amount of revenue we recognize each period. This approach requires us to make numerous estimates and use significant judgement. If our estimates or judgements change over the course of the collaboration, they may affect the timing and amount of revenue that we recognize in the current and future periods.

11



Some customer contracts are sublicenses which require that we make payments to an upstream licensor related to license fees, milestones and royalties which we receive from customers. In such cases, we evaluate the determination of gross revenue as a principal versus net revenue as an agent reporting based on each individual agreement.

Deferred Revenue

Depending on the terms of the arrangement, we may also defer a portion of the consideration received because we have to satisfy a future obligation.

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities) on the consolidated balance sheet. Except for royalty revenue and certain service revenue, we generally receive payment at the point we satisfy our obligation or soon after. Therefore, we do not generally carry any contract asset balance. Any fees billed in advance of being earned are recorded as deferred revenue. During the three months ended September 30, 2022 and 2021, the amount recognized as revenue that was previously deferred was $4.1 million, and $7.7 million, respectively. During the nine months ended September 30, 2022 and 2021, the amount recognized as revenue that was previously deferred was $8.8 million, and $22.8 million, respectively.

Disaggregation of Revenue

The following table represents disaggregation of royalties, Captisol and contract revenue (in thousands):
Three months endedNine months ended
September 30,September 30,
2022202120222021
Royalties
Kyprolis$9,123 $8,821 $20,872 $18,548 
Evomela3,123 2,665 8,218 7,191 
Teriparatide injection 4,071 2,567 12,484 2,831 
Rylaze 2,099 600 6,065 600 
Other1,421 995 3,852 2,206 
$19,837 $15,648 $51,491 $31,376 
Captisol
     Captisol - Core$3,582 $5,374 $13,133 $16,310 
     Captisol - COVID(1)
32,367 29,719 64,483 112,565 
$35,949 $35,093 $77,616 $128,875 
Contract revenue
Service Revenue$4,975 $4,828 $15,574 $17,650 
License Fees460 200 5,154 2,293 
Milestone3,658 7,419 14,022 19,436 
Other1,209 1,647 5,343 5,030 
$10,302 $14,094 $40,093 $44,409 
Total$66,088 $64,835 $169,200 $204,660 
(1) Captisol - COVID represents revenue on Captisol supplied for use in formulation with remdesivir, an antiviral treatment for COVID-19.
12



Short-term Investments
Our short-term investments consist of the following at September 30, 2022 and December 31, 2021 (in thousands):
Amortized costGross unrealized gainsGross unrealized lossesEstimated fair value
September 30, 2022
     Bank deposits$2,506 $ $(53)$2,453 
     Corporate bonds4,887  (107)4,780 
     Corporate equity securities5,807 312 (3,615)2,504 
     Mutual fund88,115  (1,203)86,912 
US government securities2,229  (84)2,145 
     Warrants 232  232 
$103,544 $544 $(5,062)$99,026 
      Viking common stock18,265 
Total short-term investments$117,291 
December 31, 2021
     Bank deposits$63,389 $13 $(21)$63,381 
     Corporate bonds29,308 17 (38)29,287 
     Commercial paper36,008 2 (12)35,998 
     Corporate equity securities5,807 402 (2,027)4,182 
     Mutual fund152,136  (249)151,887 
     U.S. government securities5,577  (23)5,554 
     Warrants 408  408 
$292,225 $842 $(2,370)$290,697 
     Viking common stock30,889 
Total short-term investments$321,586 


Gain (loss) from short-term investments in our condensed consolidated statements of operations includes both realized and unrealized gain (loss) from our short-term investments in public equity and warrant securities.

Allowances are recorded for available-for-sale debt securities with unrealized losses. This limits the amount of credit losses that can be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and requires the reversal of previously recognized credit losses if fair value increases. The provisions of the credit losses standard did not have a material impact on our available-for-sale debt securities during the three and nine months ended September 30, 2022.

The following table summarizes our available-for-sale debt securities by contractual maturity (in thousands):
September 30, 2022
Amortized CostFair Value
Within one year$8,659 $8,458 
After one year through five years982 939 
Total$9,641 $9,397 

Our investment policy is capital preservation and we only invest in U.S.-dollar denominated investments. We held a total of 8 positions which were in an unrealized loss position as of September 30, 2022. We believe that we will collect the principal and interest due on our debt securities that have an amortized cost in excess of fair value. The unrealized losses are largely due to changes in interest rates and not to unfavorable changes in the credit quality associated with these securities that impacted our assessment on collectability of principal and interest. We do not intend to sell these securities and it is not more-likely-than-not that we will be required to sell these securities before the recovery of the amortized cost basis. Accordingly, no credit losses were recognized for the three and nine months ended September 30, 2022.
13




Accounts Receivable and Allowance for Credit Losses

Our accounts receivable arise primarily from sales on credit to customers. We establish an allowance for credit losses to present the net amount of accounts receivable expected to be collected. The allowance is determined by using the loss-rate method, which requires an estimation of loss rates based upon historical loss experience adjusted for factors that are relevant to determining the expected collectability of accounts receivable. Some of these factors include macroeconomic conditions that correlate with historical loss experience, delinquency trends, aging behavior of receivables and credit and liquidity quality indicators for industry groups, customer classes or individual customers. During the three and nine months ended September 30, 2022, we considered the current and expected future economic and market conditions including, but not limited to, the anticipated unfavorable impacts of the COVID-19 pandemic on our business and recorded an adjustment of $(0.1) million and $(0.3) million of allowance for credit losses, respectively, as of September 30, 2022.

Inventory

Inventory, which consists of finished goods, is stated at the lower of cost or net realizable value. We determine cost using the first-in, first-out method or the specific identification method.

We analyze our inventory levels periodically and write down inventory to net realizable value if it has become obsolete, has a cost basis in excess of its expected net realizable value or is in excess of expected requirements. There were no write-downs related to obsolete inventory recorded for the three and nine months ended September 30, 2022 and 2021. As of September 30, 2022 inventory consists of Captisol prepayments of $7.4 million, and as of December 31, 2021 inventory consists of Captisol prepayments of $24.6 million.

Goodwill and Other Identifiable Intangible Assets

Goodwill and other identifiable intangible assets consist of the following (in thousands):

September 30,December 31,
20222021
Indefinite-lived intangible assets
     Goodwill$181,206 $181,206 
Definite lived intangible assets
     Complete technology282,057 280,617 
          Less: accumulated amortization(90,611)(78,991)
     Trade name2,642 2,642 
          Less: accumulated amortization(1,544)(1,444)
     Customer relationships40,700 40,700 
          Less: accumulated amortization(20,272)(18,267)
     Contractual relationships362,000 362,000 
          Less: accumulated amortization(57,947)(36,217)
Total goodwill and other identifiable intangible assets, net$698,231 $732,246 

Prior to 2022, we only had one reporting unit and reportable segment. In connection with the announcement in March 2022 of our intention to separate the OmniAb business pursuant to a distribution to Ligand’s stockholders of Ligand’s shares in OmniAb followed by a merger with APAC, management concluded that we had two reporting units and reportable segments - the OmniAb business and the Ligand core business. See Note 2, Segment Information, for additional information. We performed a fair value analysis utilizing a combination of income approach and market approach to determine the fair value of each segment in order to appropriately allocate the goodwill between the segments as of the announcement date. The following table presents our allocation of goodwill balance by segment (in thousands):

Fair Value
Goodwill
Ligand core business$105,673 
OmniAb business75,533 
$181,206 

14



Commercial License Rights

Commercial license rights consist of the following (in thousands):
September 30, 2022December 31, 2021
Gross
Adjustments(1)
NetGross
Adjustments(2)
Net
Aziyo and CorMatrix$17,696 $(9,455)$8,241 $17,696 $(