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Financial Royalty Assets, net (formerly known as Commercial License Rights) | 3 Months Ended
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Mar. 31, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Financial Royalty Assets, net (formerly known as Commercial License Rights) | Financial Royalty Assets, net (formerly known as Commercial License Rights) Financial royalty assets consist of the following (in thousands):
|  | March 31, 2024 |  | December 31, 2023
|  | Gross carrying value(2) |  | Allowance (1) |  | Net carrying value (2) |  | Gross carrying value |  | Allowance (1) |  | Net carrying value
Elutia (CorMatrix) |  | $ | 12,680 |  |  | $ | (4,458) |  |  | $ | 8,222 |  |  | $ | 13,304 |  |  | $ | (7,490) |  |  | $ | 5,814 |
Selexis |  | 736 |  |  | (64) |  |  | 672 |  |  | 940 |  |  | (179) |  |  | 761 |
Ovid (Soticlestat) |  | 30,310 |  |  | (303) |  |  | 30,007 |  |  | 30,310 |  |  | (303) |  |  | 30,007 |
Tolerance Therapeutics (TZIELD) |  | 25,810 |  |  | (101) |  |  | 25,709 |  |  | 25,810 |  |  | (101) |  |  | 25,709 |
Ensifentrine inventors |  | 3,827 |  |  | (127) |  |  | 3,700 |  |  | — |  |  | — |  |  | — |
Total financial royalty assets, net |  | $ | 73,363 |  |  | $ | (5,053) |  |  | $ | 68,310 |  |  | $ | 70,364 |  |  | $ | (8,073) |  |  | $ | 62,291 |
(1) The amounts of allowance include cumulated allowance for changes in expected cash flows and cumulated allowance for current expected credit losses. (2) The amounts include $2.6 million current portion of Elutia financial royalty assets which represents an estimation for current quarter royalty receipts that are collected during the subsequent quarter. This portion is presented in other current assets on our condensed consolidated balance sheet as of March 31, 2024. Financial royalty assets represent a portfolio of future milestone and royalty payment rights acquired from Selexis, S.A. (“Selexis”) in April 2013 and April 2015, CorMatrix Cardiovascular, Inc. (“CorMatrix”) in May 2016, which was later acquired by Aziyo (Aziyo changed its corporate name to Elutia Inc. (“Elutia”) in September 2023) in 2017, Ovid Therapeutics Inc. (“Ovid”) in October 2023, Tolerance Therapeutics, Inc. (“Tolerance Therapeutics”) in November 2023, and from certain ensifentrine inventors in March 2024. There was no impairment loss for the three months ended March 31, 2024 and 2023. Elutia Agreement In 2016, Ligand entered into a purchase agreement to acquire certain financial royalty assets from CorMatrix. In 2017, CorMatrix sold its marketed products to Elutia where Elutia assumed the Ligand royalty obligation. In 2017, we amended the terms of the royalty agreement with Elutia where we received $10 million to buydown the royalty rates on the products CorMatrix sold to Elutia (the “CorMatrix Asset Sale”). Per the amended agreement with Elutia, we will receive a 5% royalty, with certain annual minimum payments, on the products Elutia acquired in the CorMatrix Asset Sale and up to $10 million of milestones tied to cumulative net sales of these products. The royalty agreement will terminate on May 31, 2027. During 2023, due to Elutia's nonpayment of the minimum payments over several quarters, we placed the Elutia asset on the non-accrual method. During the three months ended March 31, 2024, the Company executed an amendment to our agreement with Elutia which allowed us to reliably estimate future cash flows. As such, the Elutia asset was switched from the non-accrual method to the effective interest method during the three months ended March 31, 2024. As of March 31, 2024, we further considered the current and expected future economic and market conditions, current company performance and recent payments received from Elutia, and recorded a $3.0 million reduction to Elutia allowance of expected credit loss. This credit loss adjustment was recorded as a gain in general and administrative expense in our consolidated statement of operations for the three months ended March 31, 2024. Soticlestat Agreement In October 2023, we made an investment of $30 million to acquire a 13% portion of the royalties and milestones owed to Ovid Therapeutics related to the potential approval and commercialization of soticlestat. As soticlestat is in Phase 3 clinical trials, management has placed the investment on the non-accrual method until we are able to reliably estimate future cash flows. TZIELD Agreement In November 2023, we acquired Tolerance Therapeutics for $20 million in cash. Tolerance Therapeutics is a holding company, owned by the inventors of TZIELD (teplizumab), and is owed a royalty of less than 1% on worldwide net sales. TZIELD is marketed by Sanofi in 2023. Due to the early stages of TZIELD's commercialization, management has placed the investment on the non-accrual method until we are able to reliably estimate future cash flows. Ensifentrine Inventors Agreements In March 2024, we acquired future milestone and royalty rights related to ensifentrine from certain ensifentrine inventors for a total of $3.8 million. Such future milestones and royalties will be due from Verona Pharma plc (Nasdaq: VRNA) who anticipates a PDUFA action date of June 26, 2024 for review of ensifentrine for the maintenance treatment of patients with chronic obstructive pulmonary disease (“COPD”). If approved, ensifentrine is planned for a commercial launch by Verona in the U.S. market in the second half of 2024. As FDA approval is not yet obtained, management has placed the investment on the non-accrual method until we are able to reliably estimate future cash flows.

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