Caution: This discussion and analysis may contain predictions, estimates and other forward-looking statements that involve a number of risks and uncertainties, including those discussed in Part II, Item 1A. Risk Factors. This outlook represents our current judgment on the future direction of our business. These statements include those related to our future results of operations and financial position, Captisol-related revenues and Kyprolis and other product royalty revenues and milestones under license agreements, product development, and product regulatory filings and approvals, and the timing thereof. Actual events or results may differ materially from our expectations. For example, there can be no assurance that our revenues or expenses will meet any expectations or follow any trend(s), that we will be able to retain our key employees or that we will be able to enter into any strategic partnerships or other transactions. We cannot assure you that we will receive expected Kyprolis, Captisol and other product revenues to support our ongoing business or that our internal or partnered pipeline products will progress in their development, gain marketing approval or achieve success in the market. In addition, ongoing or future arbitration, litigation or disputes with third parties may have a material adverse effect on us. Such risks and uncertainties, and others, could cause actual results to differ materially from any future performance suggested. We undertake no obligation to make any revisions to these forward-looking statements to reflect events or circumstances arising after the date of this quarterly report. This caution is made under the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We use our trademarks, trade names and services marks in this report as well as trademarks, trade names and service marks that are the property of other organizations. Solely for convenience, trademarks and trade names referred to in this report appear without the ® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or that the applicable owner will not assert its rights, to these trade marks and trade names. References to “Ligand Pharmaceuticals Incorporated,” “Ligand,” the “Company,” “we” or “our” include Ligand Pharmaceuticals Incorporated and our wholly-owned subsidiaries. Overview We are a biopharmaceutical royalty company focused on deploying capital and licensing technologies to acquire and create diversified royalty streams from high-value medicines. Our primary business is investing in and structuring royalty interests in mid- to late-stage development and commercial biopharmaceutical products, allowing us to generate long-duration, non-dilutive cash flows supported by a lean corporate cost structure. Capital deployment and technology licensing are the primary drivers of our long-term growth. We partner capital through a range of transaction structures—including royalty purchases, development-stage financing arrangements, and acquisitions of companies or assets with embedded royalty rights—designed to create cash flowing royalties and produce attractive risk-adjusted returns. Our goal is to provide investors with exposure to biopharmaceutical innovation through a diversified portfolio of royalty interests while mitigating the binary risk and capital intensity traditionally associated with drug development. In addition to our royalty investment activities, we operate two infrastructure-light, royalty-generating platform technologies, Captisol® and NITRICIL®. These technologies exemplify our platform technology investment criteria: infrastructure-light, scalable intellectual property with existing royalty streams and the potential to generate incremental royalties through partner-driven development and commercialization. Our revenue is generated primarily from royalties on sales of products commercialized by our partners, supplemented by Captisol material sales and contract revenue from license fees and milestone payments. We partner with leading biopharmaceutical companies to leverage their capabilities in late-stage development, regulatory execution, and commercialization, while we focus on disciplined capital deployment, portfolio construction, and risk management. This also allows us to leverage our partner's asset infrastructure in sales and marketing, manufacturing and R&D to avoid infrastructure ourselves. 2031 Convertible Debt Financing On June 25, 2026, we completed the offering of $700.0 million aggregate principal amount of 0.00% convertible senior notes due 2031 (the “2031 Notes”). The aggregate principal amount of the 2031 Notes includes the full exercise of the option to purchase an additional $75.0 million aggregate principal amount of 2031 Notes by the initial purchasers. Net proceeds from the offering were $679.0 million, after deducting fees and expenses. Of that amount, we used $81.7 million of the proceeds to enter into a call spread overlay consisting of convertible note hedge and warrant transactions, and approximately $60 million to repurchase 228,859 shares of our common stock at a price of $262.17 per share. The convertible note hedge transactions intended to reduce the potential for dilution from the 2031 Notes upon conversion. As a result of the 34 warrants transactions, there will be no dilution to our stock until the share price exceeds $524.34 per share. We expect to use the remaining net proceeds from the offering of the 2031 Notes for general corporate purposes, including investing in complementary businesses, companies, products and technologies, although we have no present commitments or agreements to do so beyond the XOMA Acquisition. See Note 6, Debt, for additional information regarding the 2031 Notes. XOMA Acquisition On July 14, 2026, we announced completion of the acquisition of XOMA Royalty, a biotechnology royalty aggregator. Details of the transaction are as follows: •Each outstanding share of XOMA Royalty common stock was converted into the right to receive (i) $39.00 in cash and (ii) one contingent value right (CVR) representing the holder’s right to receive potential future payments derived from the CVR trust’s interest in XOMA Royalty LLC in connection with the Holding Company Reorganization (as defined in the merger agreement); •The closing of the transaction met our original timeline expectations. Management believes that the transaction is expected to be immediately accretive; and •We funded the transaction through cash on hand and expects to retain sufficient capital capacity to continue executing our capital deployment strategy of investing approximately $150 million to $250 million annually in high-value royalty assets. We believe that the XOMA Acquisition strengthens our royalty portfolio by adding seven commercial products, including Roche’s VABYSMO® (faricimab-svoa), Servier’s OJEMDA™ (tovorafenib), and Zevra Therapeutics’ MIPLYFFA® (arimoclomol). Additionally, the acquisition adds 14 late-stage development programs, featuring Takeda’s mezagitamab and certain assets from Takeda’s externalized asset portfolio, such as osavampator, volixibat, and OHB-607, along with more than 100 assets in various stages of development to Ligand’s portfolio. As a result, our portfolio has more than doubled in size, now comprising over 200 commercial, clinical, and preclinical stage royalty assets. Concurrently with the closing of the XOMA Acquisition, we entered into the Amended Credit Agreement, which amends and restates in its entirety the Credit Agreement. The Amended Credit Agreement provides for a $125.0 million revolving credit facility maturing on September 12, 2028. The Amended Revolving Credit Facility is secured by certain collateral of Ligand and the guarantors and is guaranteed by all of our material domestic subsidiaries, each of whom will derive substantial benefit from the Amended Revolving Credit Facility. Key Portfolio Development Filspari •On April 13, 2026, Travere announced the FDA approved Filspari to reduce proteinuria in adult and pediatric patients aged 8 years and older with focal segmental glomerulosclerosis (FSGS), in patients without nephrotic syndrome. Filspari is currently the first and only medicine approved by the FDA for the treatment of FSGS, marking its expansion beyond IgA nephropathy (IgAN) into a second rare kidney disease.•On June 19, 2026, Chugai announced that it filed a new drug application in Japan for sparsentan for the treatment of IgA Nephropathy.•On August 4, 2026, Travere reported U.S. net product sales of Filspari of $141 million, representing 96% year-over-year growth driven by the strong FSGS launch and continued IgAN growth. Ohtuvayre •On August 4, 2026, Merck reported net sales of Ohtuvayre of $204 million with net product sales including a benefit from the timing of specialty pharmacy purchases in the U.S. 35 Qtorin rapamycin •On May 4, 2026, Palvella announced the first patients have been dosed in LOTU, a Phase 2 clinical trial designed to evaluate the safety and efficacy of Qtorin rapamycin for the treatment of clinically significant angiokeratomas. Clinically significant angiokeratomas represent a rare, chronic and debilitating lymphatic malformation with no FDA approved therapies and an estimated more than 50,000 diagnosed patients in the U.S. Topline results from the Phase 2 trial are expected in the second half of 2027.•On June 29, 2026, Palvella announced submission of the first module of its rolling NDA to the FDA seeking approval of Qtorin 3.9% rapamycin for the treatment of microcystic lymphatic malformations (microcystic LMs). Palvella remains on track to submit the remaining modules and complete the NDA submission in the second half of 2026.•On August 4 2026, Palvella announced the Phase 3 trial of Qtorin rapamycin for the treatment of cutaneous venous malformations is planned for the fourth quarter of 2026. Capvaxive •On June 18, 2026, Merck announced the FDA approved an expanded indication for Capvaxive to include children and adolescents aged 2 through 17 years who have completed a primary pediatric pneumococcal vaccination series and have one or more chronic medical conditions that put them at an increased risk for pneumococcal disease. With this approval, Capvaxive is the only pneumococcal conjugate vaccine (PCV) specifically indicated and studied in the U.S. for use in this patient population.•On August 4, 2026, Merck reported net sales of Capvaxive of $184 million, an increase of 42% with the increase primarily driven by launch uptake in several international markets, particularly Asia Pacific and Europe as well as in the U.S. Tzield •On June 12, 2026, Sanofi announced the FDA granted accelerated approval in children aged 8 to 17 years recently diagnosed with stage 3 type 1 diabetes (“T1D”) to delay the decline in endogenous insulin production. Tzield is the first disease-modifying therapy for patients recently diagnosed with stage 3 T1D. AVIM Therapy/VIRTUE SAB •On May 6, 2026, Ligand fulfilled the previously scheduled tranche payment of $15 million to Orchestra BioMed under the royalty-based financing agreement.•On May 12, 2026, Orchestra BioMed announced that it is targeting enrollment completion in the AVIM Therapy BACKBEAT trial in the third quarter of 2026. The updated timeline is supported by FDA approval of a reduction in sample size for the BACKBEAT trial to a target total of 284 evaluable randomized subjects, with a total enrollment target of 316 patients accounting for potential loss to follow-up. Orchestra BioMed is targeting top line data in the second quarter of 2027. BOT/BAL •On July 13, 2026, Agenus entered into a securities purchase agreement for a private placement of approximately $85 million in upfront gross proceeds, before the deduction of private placement expenses, and up to an additional $255 million upon the full exercise of purchase warrants. The financing was led by Commodore Capital, with participation from RA Capital Management, TCGX, Invus, and Ligand. •On July 13, 2026 Agenus announced the discontinuation of the BATTMAN Phase 3 trial evaluating BOT/BAL in late-line metastatic microsatellite-stable (MSS) colon cancer and has reached alignment on key elements of the new ROBBIN Phase 3 trial design with the FDA. First dosing of the ROBBIN trial for the neoadjuvant treatment of MSS colon cancer is expected in the first quarter of 2027. Lasofoxifene •On May 7, 2026, LeonaBio announced it is amending the ELAINE-3 trial protocol to increase the sample size from 500 participants to up to 600 participants. The primary goal of the amendment is to help ensure that the trial will have the appropriate number of disease progression events. The Company expects to complete enrollment of the Phase 3 ELAINE-3 clinical trial in the fourth quarter of 2026 and to have topline data in the second half of 2027. Ojemda •On April 22, 2026, Ipsen announced Ojemda was granted conditional marketing authorization in the European Union as monotherapy for the treatment of patients 6 months of age and older with pediatric low-grade-glioma harboring a BRAF fusion or rearrangement, or BRAF V600 mutation, who have progressed after one or more prior systemic therapies. 36 Volixibat •On May 4, 2026, our partner announced the primary endpoint was met in the VISTAS Phase 2b study evaluating volixibat, an investigational oral ileal bile acid transporter (IBAT) inhibitor, in patients with primary sclerosing cholangitis (PSC). Volixibat demonstrated a statistically significant and clinically meaningful 2.72 point reduction in the primary endpoint of cholestatic pruritus. •On August 5, 2026, our partner announced volixibat was granted Breakthrough Therapy Designation for cholestatic pruritus due to PSC. Additionally, a pre-NDA meeting was held for volixibat in cholestatic pruritus due to PSC and additional discussions are planned before potential NDA submission.•On August 5, 2026, our partner announced enrollment was completed in the VANTAGE Phase 2b study of volixibat in cholestatic pruritus due to primary biliary cholangitis (PBC) with topline results expected in Q1 2027. Ersodetug •On June 2, 2026, Rezolute announced positive interim data for its Phase 3 Uplift study in Tumor hyperinsulinism. The company expects to announce topline results for the fully enrolled open-label study in the second half of 2026. Results of Operations Revenue and Income (Dollars in thousands) Q2 2026 Q2 2025 Change % Change YTD 2026 YTD 2025 Change % Change Revenue from intangible royalty assets $ 37,362 $ 30,084 $ 7,278 24 % $ 70,293 $ 51,671 $ 18,622 36 % Income from financial royalty assets 10,670 6,313 4,357 69 % 20,697 12,215 8,482 69 % Royalties 48,032 36,397 11,635 32 % 90,990 63,886 27,104 42 % Captisol 7,978 8,287 (309) (4) % 16,632 21,747 (5,115) (24) % Contract revenue and income 7,683 2,943 4,740 161 % 7,793 7,327 466 6 % Total revenue and income $ 63,693 $ 47,627 $ 16,066 34 % $ 115,415 $ 92,960 $ 22,455 24 % Q2 2026 vs. Q2 2025 Total revenue and income increased by $16.1 million, or 34%, to $63.7 million in Q2 2026 compared to $47.6 million in Q2 2025. Royalties increased by $11.6 million, or 32%, to $48.0 million in Q2 2026 compared to $36.4 million in Q2 2025, primarily attributable to royalties earned on Filspari, Zelsuvmi, and Ohtuvayre. Captisol sales decreased by $0.3 million, or 4%, to $8.0 million in Q2 2026 compared to $8.3 million in Q2 2025, primarily attributable to the timing of customer orders. Contract revenue and income increased by $4.7 million, or 161%, to $7.7 million in Q2 2026 compared to $2.9 million in Q2 2025, primarily attributable to the timing of milestone events under partner agreements. YTD 2026 vs. YTD 2025 Total revenue and income increased by $22.5 million, or 24%, to $115.4 million in YTD 2026 compared to $93.0 million in YTD 2025. Royalties increased by $27.1 million, or 42%, to $91.0 million in YTD 2026 compared to $63.9 million in YTD 2025, primarily attributable to royalties earned on Filspari, Zelsuvmi, Ohtuvayre, Capvaxive and Kyprolis. Captisol sales decreased by $5.1 million, or 24%, to $16.6 million in YTD 2026 compared to $21.7 million in YTD 2025, primarily attributable to the timing of customer orders. Contract revenue and income remained steady at $7.8 million in YTD 2026 compared to $7.3 million in YTD 2025. Revenue from intangible royalty assets is based on our partners’ product sales and the applicable royalty rates. The following table presents revenue from intangible royalty assets by program (in millions): 37 (in millions) Q2 2026 Estimated Partner Product Sales Effective Royalty Rate Q2 2026 Royalty Revenue Q2 2025 Estimated Partner Product Sales Effective Royalty Rate Q2 2025 Royalty Revenue Filspari $ 151.1 9.0 % $ 13.6 $ 73.3 9.0 % $ 6.6 Kyprolis 339.0 2.1 % 7.0 398.0 2.2 % 8.8 Ohtuvayre(1) 204.0 2.0 % 4.1 102.9 2.0 % 2.1 Rylaze 99.5 3.2 % 3.2 103.2 2.8 % 2.9 Capvaxive 184.0 1.3 % 2.3 129.0 1.8 % 2.3 Teriparatide injection(2) 6.0 25.0 % 1.5 7.4 31.1 % 2.3 Vaxneuvance 148.0 0.9 % 1.4 229.0 1.1 % 2.6 Other 95.9 4.5 % 4.3 86.5 2.9 % 2.5 Total $ 1,227.5 $ 37.4 $ 1,129.3 $ 30.1 (in millions) YTD 2026 Estimated Partner Product Sales Effective Royalty Rate YTD 2026 Royalty Revenue YTD 2025 Estimated Partner Product Sales Effective Royalty Rate YTD 2025 Royalty Revenue Filspari $ 276.7 9.0 % $ 24.9 $ 132.2 9.0 % $ 11.9 Kyprolis 694.2 2.0 % 13.8 751.8 1.8 % 13.5 Ohtuvayre(1) 338.2 2.1 % 7.1 174.2 2.0 % 3.5 Rylaze 203.2 3.1 % 6.4 197.5 3.0 % 6.0 Capvaxive 323.9 1.3 % 4.3 233.7 1.3 % 3.1 Vaxneuvance 343.1 0.9 % 3.0 452.6 0.9 % 3.9 Teriparatide injection(2) 12.1 23.1 % 2.8 12.1 28.9 % 3.5 Other 201.3 4.0 % 8.0 194.2 3.2 % 6.3 Total $ 2,392.7 $ 70.3 $ 2,148.3 $ 51.7 (1) Our royalty rate on Ohtuvayre is 3%, of which 2% is recognized in revenue from intangible royalty assets and the remaining 1% is accounted for as financial royalty asset. (2) 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. Operating Costs and Expenses (Dollars in thousands) Q2 2026 Q2 2025 Change % Change YTD 2026 YTD 2025 Change % Change Cost of Captisol $ 3,214 $ 2,907 $ 307 11 % $ 6,487 $ 7,756 $ (1,269) (16) % Amortization of intangibles 8,097 8,258 (161) (2) % 16,194 16,515 (321) (2) % Research and development 14,668 6,567 8,101 123 % 16,816 56,652 (39,836) (70) % General and administrative 29,123 20,175 8,948 44 % 49,959 38,976 10,983 28 % Fair value adjustments to partner program derivatives — 1,276 (1,276) (100) % — 833 (833) (100) % Total operating costs and expenses $ 55,102 $ 39,183 $ 15,919 41 % $ 89,456 $ 120,732 $ (31,276) (26) % % of Revenue 87% 82% 78% 130% Q2 2026 vs. Q2 2025 Total operating costs and expenses increased by $15.9 million, or 41%, to $55.1 million in Q2 2026 compared to $39.2 million in Q2 2025. Cost of Captisol increased by $0.3 million, or 11%, to $3.2 million in Q2 2026 compared to $2.9 million in Q2 2025, primarily due to lower gross margins resulting from changes in the mix of customers served during the period. Amortization of intangibles decreased by $0.2 million, or 2%, to $8.1 million in Q2 2026 compared to $8.3 million in Q2 2025, primarily attributable to the deconsolidation of LNHC, Inc. on July 1, 2025 in connection with the Pelthos Transaction. See Note 2, Pelthos Transaction, for additional information. 38 Research and development expenses increased by $8.1 million, or 123%, to $14.7 million in Q2 2026 compared to $6.6 million in Q2 2025. The increase was primarily driven by the $12.3 million research and development funding arrangement with Orchestra BioMed, partially offset by the absence of research and development expenses associated with our former Pelthos business following the deconsolidation of LNHC, Inc. on July 1, 2025. See Note 3, Investment Transactions, and Note 2, Pelthos Transaction, for additional information. General and administrative expenses increased by $8.9 million, or 44%, to $29.1 million in Q2 2026 compared to $20.2 million in Q2 2025. The increase was primarily attributable to transaction costs associated with the XOMA Acquisition, as well as higher employee-related costs, including increased headcount and share-based compensation, reflecting the Company’s continued investment in its origination and portfolio management functions. Fair value adjustments to partner program derivatives were zero for Q2 2026 compared to $1.3 million for Q2 2025. YTD 2026 vs. YTD 2025 Total operating costs and expenses decreased by $31.3 million, or 26%, to $89.5 million in YTD 2026 compared to $120.7 million in YTD 2025. Cost of Captisol decreased by $1.3 million, or 16%, to $6.5 million in YTD 2026 compared to $7.8 million in YTD 2025, primarily attributable to the lower Captisol sales. Amortization of intangibles decreased by $0.3 million, or 2%, to $16.2 million in YTD 2026 compared to $16.5 million in YTD 2025, primarily attributable to the deconsolidation of LNHC, Inc. on July 1, 2025 in connection with the Pelthos Transaction. Research and development expenses decreased by $39.8 million, or 70%, to $16.8 million in YTD 2026 compared to $56.7 million in YTD 2025. The decrease was primarily driven by the absence of the $44.3 million research and development funding charge recognized in the first quarter of 2025 in connection with the D-Fi royalty rights acquired in the Castle Creek Transaction and the absence of $6.4 million research and development expenses associated with our former Pelthos business following the deconsolidation of LNHC, Inc. on July 1, 2025 in connection with the Pelthos Transaction. These decreases were partially offset by the $12.3 million research and development funding arrangement expense recognized in the second quarter of 2026 related to Orchestra BioMed. See Note 3, Investment Transactions, and Note 2, Pelthos Transaction, for additional information. General and administrative expenses increased by $11.0 million, or 28%, to $50.0 million in YTD 2026 compared to $39.0 million in YTD 2025. The increase was primarily attributable to transaction costs associated with the XOMA Acquisition, as well as higher employee-related costs, including increased headcount and share-based compensation, reflecting the Company’s continued investment in its origination and portfolio management functions. Fair value adjustments to partner program derivatives were zero for YTD 2026 compared to $0.8 million for YTD 2025. Operating income was $26.0 million in YTD 2026, compared to an operating loss of $27.8 million in YTD 2025, an improvement of $53.7 million. The improvement was primarily driven by (1) the non-recurrence in the current period of the $44.3 million research and development funding charge recognized in connection with the Castle Creek Investment in YTD 2025, and (2) continued growth of royalty revenues. These increases were partially offset by the $12.3 million research and development funding arrangement expense recognized in the second quarter of 2026 related to Orchestra BioMed. Non-operating Income and Expenses (Dollars in thousands) Q2 2026 Q2 2025 Change % Change YTD 2026 YTD 2025 Change % Change Gain (loss) from short-term investments $ 11,754 $ 939 $ 10,815 1152 % $ 15,623 $ (11,428) $ 27,051 (237) % Gain (loss) from change in fair value of equity-method investments and other investments 35,727 — 35,727 N/M(1) (13,502) — (13,502) N/M(1) Interest income 7,298 1,621 5,677 350 % 13,953 3,392 10,561 311 % Interest expense (1,748) (1,153) (595) 52 % (3,495) (2,020) (1,475) 73 % Other non-operating expense, net 2,682 1,372 1,310 95 % 1,507 (1,129) 2,636 (233) % Total non-operating Income (expenses), net $ 55,713 $ 2,779 $ 52,934 1905 % $ 14,086 $ (11,185) $ 25,271 (226) % (1) N/M = Not meaningful. Percentage change is not meaningful as no corresponding amount was recognized in the prior year period. Q2 2026 vs. Q2 2025 39 The gain from short-term investments was $11.8 million in Q2 2026 compared to a gain of $0.9 million in Q2 2025. The increase was primarily driven by favorable mark-to-market adjustments on Palvella and Viking common stock. Palvella common stock resulted in an unrealized gain of $7.3 million in Q2 2026 compared to an unrealized loss of $1.3 million in Q2 2025, and Viking common stock resulted in an unrealized gain of $5.2 million in Q2 2026 compared to an unrealized gain of $2.4 million in Q2 2025. The gain from change in fair value of equity-method investments and other investments was $35.7 million in Q2 2026. This gain reflects the change in fair value of the Pelthos common stock and Pelthos Series A convertible preferred stock that we acquired in connection with the Pelthos Transaction in July 2025. For additional information, see Note 2, Pelthos Transaction. Interest income consists primarily of interest earned on our short-term investments and on the Pelthos Convertible Notes acquired in November 2025. Interest income increased by $5.7 million to $7.3 million in Q2 2026 compared to $1.6 million in Q2 2025, primarily due to higher average investment balances resulting from the issuance of our 2030 Notes as well as interest earned on the Pelthos Convertible Notes. Interest expense consists primarily of coupon interest and non-cash amortization of debt discount and issuance costs related to our 2030 Notes issued in August 2025, as well as interest accrued under a royalty and milestone payments purchase agreement entered into by Novan, Inc. in 2019, which Ligand assumed in connection with the Novan acquisition in September 2023. Interest expense increased by $0.6 million to $1.7 million in Q2 2026 compared to $1.2 million in Q2 2025. The increase was primarily attributable to interest expense on the 2030 Notes, which were not outstanding during the prior-year period, partially offset by the absence of interest expense related to the Novan-assumed obligation following the deconsolidation of LNHC, Inc. on July 1, 2025, in connection with the Pelthos Transaction. Other non-operating expense, net primarily consists of fair value adjustments on derivatives (excluding the partner program derivatives) and CVRs. Other non-operating expense, net was income of $2.7 million in Q2 2026 compared to income of $1.4 million in Q2 2025, primarily attributable to favorable changes in the fair value of CVR liabilities, which resulted in a $1.1 million gain in Q2 2026 compared to a $0.1 million loss in Q2 2025, as well as higher gains on derivatives of $1.4 million in Q2 2026 compared to $1.2 million in Q2 2025. YTD 2026 vs. YTD 2025 The gain from short-term investments was $15.6 million in YTD 2026 compared to a loss of $11.4 million in YTD 2025. The increase was primarily driven by favorable mark-to-market adjustments on Palvella and Viking common stock. Palvella common stock resulted in an unrealized gain of $12.0 million in YTD 2026 compared to an unrealized gain of $2.6 million in YTD 2025, and Viking common stock resulted in an unrealized gain of $2.5 million in YTD 2026 compared to an unrealized loss of $13.7 million in YTD 2025. The loss from change in fair value of equity-method investments and other investments was $13.5 million in YTD 2026. This loss reflects the change in fair value of the Pelthos common stock and Pelthos Series A convertible preferred stock that we acquired in connection with the Pelthos Transaction in July 2025. For additional information, see Note 2, Pelthos Transaction. Interest income consists primarily of interest earned on our short-term investments and on the Pelthos Convertible Notes acquired in November 2025. Interest income increased by $10.6 million to $14.0 million in YTD 2026 compared to $3.4 million in YTD 2025, primarily due to higher average investment balances resulting from the issuance of our 2030 Notes as well as interest earned on the Pelthos Convertible Notes. Interest expense consists primarily of coupon interest and non-cash amortization of debt discount and issuance costs related to our 2030 Notes issued in August 2025, as well as interest accrued under a royalty and milestone payments purchase agreement entered into by Novan, Inc. in 2019, which Ligand assumed in connection with the acquisition of our Pelthos Therapeutics Business from Novan in September 2023. Interest expense increased by $1.5 million to $3.5 million in YTD 2026 compared to $2.0 million in YTD 2025. The increase was primarily attributable to interest expense on the 2030 Notes, which were not outstanding during the prior-year period, partially offset by the absence of interest expense related to the Novan-assumed obligation following the deconsolidation of LNHC, Inc. on July 1, 2025, in connection with the Pelthos Transaction. Other non-operating expense, net primarily consists of fair value adjustments on derivatives (excluding the partner program derivatives) and CVRs. Other non-operating expense, net was income of $1.5 million in YTD 2026 compared to expense of $1.1 million in YTD 2025, primarily attributable to favorable changes in the fair value of CVR liabilities, which resulted in a $0.5 million gain in YTD 2026 compared to a $1.9 million loss in YTD 2025. 40 Income Tax Expense (Dollars in thousands) Q2 2026 Q2 2025 Change % Change YTD 2026 YTD 2025 Change % Change Income (loss) before income taxes $ 64,304 $ 11,223 $ 53,081 473 % $ 40,045 $ (38,957) $ 79,002 (203) % Income tax (expense) benefit (15,796) (6,376) (9,420) 148 % (4,882) 1,353 (6,235) (461) % Income (loss) from operations $ 48,508 $ 4,847 $ 43,661 901 % $ 35,163 $ (37,604) $ 72,767 (194) % Effective tax rate 24.6 % 56.8 % 12.2 % 3.5 % We compute our income tax provision by applying the estimated annual effective tax rate to income (loss) from operations and adjusting for the effects of any discrete income tax items recognized in the period. The effective tax rate for the three months ended June 30, 2026 and 2025 was 24.6% and 56.8%, respectively. The effective tax rate for the six months ended June 30, 2026 and 2025 was 12.2% and 3.5%, respectively. The variance from the U.S. federal statutory tax rate of 21% for the three and six months ended June 30, 2026 was primarily due to Section 162(m) limitation on deduction for officer compensation, other non-deductible items, and income from foreign operations, which were partially offset by the foreign derived intangible income deduction. The variance from the U.S. federal statutory tax rate of 21% for the three and six months ended June 30, 2025 was primarily due to Section 162(m) limitation on deduction for officer compensation, other non-deductible items and income from foreign operations, which were partially offset by the foreign derived intangible income deduction. Liquidity and Capital Resources As of June 30, 2026, we had approximately $1,357.8 million in cash, cash equivalents, and short-term investments, an increase of $624.2 million from $733.5 million as of December 31, 2025. The increase was primarily attributable to the cash flow activity described in the “Cash Flow Summary” below. In addition, as of June 30, 2026, we had $124.4 million of available borrowing capacity under our Revolving Credit Facility and $0.6 million of letters of credit outstanding. Our principal sources of liquidity are our existing cash, cash equivalents, and short-term investments; cash flows generated from operations; and available borrowing capacity under our Revolving Credit Facility. We believe these sources provide us with the financial flexibility necessary to meet our operating, investing, and financing needs. In addition to cash flows generated from operations, we have historically supplemented our liquidity by liquidating short-term investments and by issuing debt and equity securities. Our short-term investments consist of U.S. government debt securities, equity securities of publicly traded companies, investment-grade corporate debt securities, commercial paper, and certificates of deposit. We maintain investment guidelines governing the diversification and maturities of our portfolio to provide both safety of principal and liquidity. These guidelines are reviewed periodically and updated as appropriate to reflect prevailing yields and interest rate conditions. On June 25, 2026, we issued the 2031 Notes. The $700.0 million aggregate principal amount of the 2031 Notes includes the purchase of an additional $75.0 million aggregate principal amount by the initial purchasers pursuant to the full exercise of their overallotment option. The net proceeds from the 2031 Notes offering were approximately $679.0 million, after deducting fees and expenses. On February 27, 2026, we entered into an At-the-Market Equity Offering Sales Agreement (the “Sales Agreement”) with Leerink Partners LLC (the “Agent”), pursuant to which we may, from time to time, offer and sell shares of our common stock having an aggregate offering price of up to $100.0 million through the Agent (the “ATM Offering”). Sales of our common stock under the ATM Offering, if any, will be made pursuant to a prospectus supplement filed with the SEC under our existing effective shelf registration statement. As of June 30, 2026, no shares had been sold under the ATM Offering. In April 2023, our Board approved a stock repurchase program (the “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. Repurchases under the Repurchase Program may be made, if at all, primarily through open-market transactions in accordance with the requirements of Rule 10b-18 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The timing and amount of any repurchases will be determined by management based on its evaluation of market conditions, our share price, applicable legal requirements, and other factors. We did not repurchase any shares of common stock under the Repurchase Program during either of the three and six months ended June 30, 2026 or 2025. On August 14, 2025, we issued the 2030 Notes. The $460.0 million aggregate principal amount of the 2030 Notes includes the purchase of an additional $60.0 million aggregate principal amount by the initial purchasers pursuant to the full exercise of their overallotment option. The net proceeds from the 2030 Notes offering were approximately $445.1 million, after deducting the initial purchasers’ discounts and commissions and the debt issuance costs incurred by Ligand. Concurrently with the closing of the XOMA Acquisition, we entered into the Amended Credit Agreement, which amends and restates in its entirety the Credit Agreement and provides for a $125.0 million revolving credit facility maturing on 41 September 12, 2028. The Amended Revolving Credit Facility is secured by certain collateral of us and the guarantors and is guaranteed by all of our material domestic subsidiaries, each of whom will derive substantial benefit from the Amended Revolving Credit Facility. As of June 30, 2026, we had $2.6 million in contingent consideration liabilities, measured at fair value, associated with prior acquisitions to be settled in future periods. We believe that our existing cash, cash equivalents, and short-term investments, together with cash generated from operations and available borrowing capacity under our Revolving Credit Facility, will be adequate to fund our working capital needs, capital expenditures, debt service requirements, and other business initiatives we plan to strategically pursue, including acquisitions and strategic investments, over the next twelve months and into 2027. Cash Flow Summary (Dollars in thousands) YTD 2026 YTD 2025 Net cash provided by (used in): Operating activities $ 72,709 $ (9,646) Investing activities $ 226,770 $ (5,773) Financing activities $ 532,301 $ 10,248 During the six months ended June 30, 2026, we generated cash from operations primarily from revenue and other operating income. We generated cash from investing activities primarily from proceeds from the sale and maturity of short-term investments, partially offset by purchases of short-term investments. We generated cash from financing activities primarily from the issuance of our 2031 Notes. During the six months ended June 30, 2025, we used cash in operating activities primarily for the Castle Creek Investment, partially offset by cash generated from revenue and other operating income. We used cash in investing activities primarily for purchases of short-term investments, partially offset by proceeds from the sale and maturity of short-term investments. We generated cash from financing activities primarily from net proceeds from stock option exercises and ESPP purchases, as well as proceeds from Pelthos investors. Critical Accounting Policies and Estimates Certain of our policies require the application of management judgment in making estimates and assumptions that affect the amounts reported in our consolidated financial statements and the disclosures made in the accompanying notes. Those estimates and assumptions are based on historical experience and various other factors deemed applicable and reasonable under the circumstances. The use of judgment in determining such estimates and assumptions is, by nature, subject to a degree of uncertainty. Accordingly, actual results could differ materially from the estimates made. There have been no material changes in our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in our 2025 Annual Report.