Ligand Pharmaceuticals to Buy XOMA Royalty for $39/Share, Lifts 2026 Guidance and EPS Outlook

Key Points

• Ligand will acquire XOMA Royalty for $39 per share in cash plus a contingent value right tied to TREMFYA litigation (Ligand would receive 25% of any net proceeds after legal costs), with the deal expected to close in Q3 2026 and be "immediately accretive" to earnings.
• The transaction will more than double Ligand's royalty portfolio—adding seven commercial royalties and over 100 partnered development-stage programs—with near-term catalysts including VABYSMO, OJEMDA and osavampator.
• Ligand raised its 2026 guidance to royalty revenue of $225M–$250M, total revenue of $270M–$310M and adjusted EPS of $8.50–$9.50, and expects the acquisition to add about $0.50 to adjusted EPS in 2026 (assuming a Q3 close) and $1.50 in 2027.

Ligand Pharmaceuticals NASDAQ: LGND detailed plans to acquire XOMA Royalty Corporation in an investor call, outlining what executives described as a “highly complementary” transaction intended to expand Ligand’s royalty portfolio and accelerate growth. Under the definitive agreement, Ligand will pay $39 per share in cash to XOMA Royalty shareholders, with a contingent value right (CVR) tied to potential litigation proceeds related to XOMA’s dispute with Johnson & Johnson Innovative Medicine over TREMFYA.

Chief Executive Officer Todd Davis said the companies expect the deal to close in the third quarter of 2026, subject to shareholder and regulatory approvals, and to be “immediately accretive to earnings.” Davis added that, upon closing, Ligand expects to add seven commercial royalties to its portfolio and more than 100 partnered development-stage programs.

Strategic rationale and portfolio expansion

Davis said Ligand has followed XOMA for years and views its royalty portfolio as nearing an “inflection point,” citing XOMA’s mix of commercial assets and development-stage programs. “This is an exciting acquisition of a highly complementary business that meaningfully expands Ligand’s royalty portfolio and accelerates near-term and long-term growth,” Davis said.

Management highlighted that the acquisition would “more than double the size” of Ligand’s portfolio and broaden its exposure across development stages. Davis also pointed to the long duration of certain rights within XOMA’s portfolio, saying some extend past 2040.

In the question-and-answer session, Davis said XOMA’s portfolio includes “7 commercial assets, 14 assets in late-stage development… over 120 assets overall,” and described the combination as complementary to Ligand’s portfolio. He also characterized the cost structure synergies as substantial, telling analysts the synergies are “almost 100%.”

Deal terms and the TREMFYA litigation CVR

Ligand will pay $39 per share in cash and issue a CVR connected to litigation outcomes related to TREMFYA. Asked about potential value from the CVR, Davis said he could not comment on the litigation itself, but noted that Ligand would receive “25% of any potential net proceeds after legal costs.” He added that proceeds could “effectively lower our effective purchase price by $2-$3,” while cautioning that the outcome is highly variable and “on the lower end of the spectrum” in terms of predictability.

Updated 2026 guidance and expected accretion

Chief Financial Officer Tavo Espinoza outlined revised 2026 guidance, which he said assumes the transaction closes in the third quarter of 2026. Espinoza said the company is raising full-year royalty revenue guidance to $225 million to $250 million, up from $200 million to $225 million previously. Total revenue guidance was increased to $270 million to $310 million from $245 million to $285 million.

Ligand also increased adjusted core earnings per share (EPS) guidance to $8.50 to $9.50, up from $8.00 to $9.00. Espinoza said Captisol revenue guidance of $35 million to $40 million and contract revenue guidance of $10 million to $20 million were unchanged.

Management described the earnings impact as meaningful even with a partial year contribution. Davis said Ligand expects the acquisition to add about $0.50 to adjusted earnings in 2026, assuming a Q3 close, and $1.50 in 2027. In response to an analyst question, Espinoza said the updated guidance was “purely as a result of today’s news,” and not related to other recent developments.

Espinoza added that cost of goods sold would be unchanged, while operating expenses would increase modestly due to incremental costs that he said should be “more than offset” by expected synergies. He also cited an expected 10% increase in cash operating profit, or approximately $20 million, partially offset by about a $6 million decline in other income due to capital being deployed at lower interest earnings.

Key assets and near-term catalysts highlighted

Vice President of Portfolio Strategy and Investments Lauren Hay said XOMA’s assets would enhance Ligand’s portfolio across three stages: seven commercial programs, 14 late-stage programs, and more than 100 earlier-stage programs. She said the structure is designed to provide “layered” growth, with diversification by therapeutic area, development stage, and counterparties.

Hay singled out three “key programs” as near-term growth drivers:

• VABYSMO: Hay described Roche’s VABYSMO as a bispecific antibody targeting both VEGF-A and Ang-2. She said it is “currently the third best-selling product” in Roche’s portfolio and cited analyst peak sales estimates of $7.5 billion. Hay noted XOMA is entitled to a 0.5% royalty, which she said could equate to $37.5 million annually at peak.
• OJEMDA: Hay said OJEMDA is marketed in the U.S. by Day One under accelerated approval in relapsed/refractory pediatric low-grade glioma, and recently received marketing authorization in Europe, where it is marketed by Ipsen ex-U.S. She also noted it is in Phase III development for frontline pediatric low-grade glioma. Hay highlighted Servier’s announced acquisition of Day One for $2.5 billion and said XOMA is entitled to milestones and a tiered mid-single-digit royalty on worldwide net sales. She added that Day One reported net sales of $155 million in 2025, with analysts expecting peak sales above $1 billion.
• Osavampator: As a development-stage driver, Hay said osavampator has five Phase III trials as adjunctive treatment for major depressive disorder and referenced analyst peak sales consensus of $1.8 billion. She said XOMA is entitled to a low- to mid-single-digit royalty on worldwide sales, excluding Japan.

Hay also pointed to 2026 catalysts, including a potential OJEMDA marketing decision in Japan and a MIPLYFFA marketing decision in Europe.

Separately, Espinoza and Hay referenced recent portfolio updates outside the XOMA transaction. Espinoza noted the FDA approval of FILSPARI for FSGS and said Palvella reported positive Phase III data for QTORIN rapamycin in microcystic lymphatic malformations. Hay said Ligand earns a tiered 8% to 9.8% royalty on QTORIN rapamycin sales and a 9% royalty on net sales of FILSPARI.

Funding, capital deployment, and pipeline management

Ligand plans to fund the acquisition with a mix of cash on hand and its credit facility, according to Espinoza, who said the company had not disclosed the specific split. Davis said the company pursued an all-cash structure because it believes Ligand shares are undervalued and wanted to avoid dilution so that “all of the cash flows from the XOMA portfolio will flow directly… to our existing shareholders.”

Davis said Ligand expects to have about $200 million in cash remaining after the transaction, along with equity holdings and liquid securities, and reiterated the company’s target of investing $150 million to $250 million annually in royalty assets. Espinoza said Ligand expects to maintain sufficient capacity to continue executing on that strategy.

On portfolio management, Davis said Ligand has expanded its investment team from three professionals to 18 and described the approach as a “private equity style process” with frequent business development and investment committee meetings to prioritize opportunities. He also said the company expects to update its five-year plan at an investor day it anticipates holding in December.

About Ligand Pharmaceuticals NASDAQ: LGND

Ligand Pharmaceuticals, Inc is a biopharmaceutical company that acquires, develops and out-licenses proprietary technologies designed to help pharmaceutical and biotechnology companies discover and develop novel medicines. Operating primarily through its research services and royalty-generating businesses, Ligand focuses on building a diversified portfolio of technology platforms and partnering with industry leaders to advance therapeutic candidates across multiple disease areas.

The company's product offerings center around several core platforms.

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