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Sale of Pelican Business and Investment in Primrose Bio | 12 Months Ended
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Dec. 31, 2024
Discontinued Operations and Disposal Groups [Abstract] |
Sale of Pelican Business and Investment in Primrose Bio | Sale of Pelican Business and Investment in Primrose Bio On September 18, 2023, we entered into a merger agreement, pursuant to which our subsidiary, Pelican Technology Holdings, Inc. (“Pelican”) became a wholly owned subsidiary of Primrose Bio. Primrose Bio is a private company focused on synthetic biology. Pelican has developed technology related to PET (protein expression technology) and PelicCRM197 (vaccine material), and has property and equipment, as well as leased property in San Diego, CA. As part of the transaction, we received 2,146,957 common shares, 4,278,293 preferred shares and 474,746 restricted shares of Primrose Bio. Simultaneous with the merger, we entered into a Purchase and Sale Agreement with Primrose Bio and contributed $15 million in exchange for 50% of potential development milestones and certain commercial milestones from two contracts previously entered into by Primordial Genetics. In addition, starting January 1, 2025, we will receive 25% of sales revenue of PeliCRM197 above $3 million and 35% of all PeliCRM197 licensing revenue in perpetuity. We retained contractual relationships utilizing the Pelican Expression Technology, including the commercial royalty rights to Jazz’s Rylaze, Merck’s Vaxneuvance and V116 vaccines, Alvogen’s Teriparatide, Serum Institute of India’s vaccine programs, including Pneumosil and MenFive vaccines, among others. We determined that the sale of Pelican meets the definition of a deconsolidation of a business. Net assets sold together with allocated goodwill and cash consideration paid were as follows (in thousands):
Property and equipment, net | $ | 8,250 |
Intangible assets | 19,895 |
Other assets | 717 |
Operating lease right-of-use assets | 8,693 |
Finance lease right-of-use assets | 20 |
Accrued liabilities | (630) |
Deferred revenue | (495) |
Long-term operating lease liabilities | (8,445) |
Other liabilities | (74) |
Net assets sold | 27,931 |
Allocated goodwill | 4,132 |
Cash consideration paid | 15,000 |
| $ | 47,063 |
Fair value of the consideration received includes the following (in thousands):
Equity method investment | $ | 13,706 |
Equity securities | 32,278 |
Derivative assets | 3,200 |
| $ | 49,184 |
Goodwill allocated to the selling business based on the relative fair value of the Pelican business and Ligand that was written off was $4.1 million, resulting in a $2.1 million gain on sale of Pelican recorded to income (loss) from operations for the year ended December 31, 2023. Transaction costs of $1.2 million were allocated to the equity method investment and equity securities based on the relative fair value. As described above, we will receive 25% of sales revenue of PeliCRM197 above $3.0 million and 35% of all PeliCRM197 licensing revenue in perpetuity. The considerations were recognized as contingent consideration under the loss recovery model and they will be measured based on the gain contingency model under ASC 450, Contingencies, and thus, will be recognized as the underlying contingencies are resolved. In addition, we will receive 50% of potential development milestones and certain commercial milestones from two contracts previously entered into by Primordial Genetics. The considerations were recognized as derivative assets with a fair value of $3.2 million, at the disposition date, which was included in noncurrent derivative assets in our consolidated balance sheets. They are recognized as derivative assets under ASC 815, Derivatives and Hedging, as they have two underlyings (development and commercial milestones) and (i) the commercial milestones are dependent on the development milestones and (ii) the commercial milestone underlying is not determined to be predominate. The derivative assets are recorded at fair value as of September 18, 2023, and will be marketed to fair value at each reporting period going forward. During the year ended December 31, 2024, an adjustment of $(0.1) million was recorded to market the derivative assets to fair value and was included in fair value adjustments to partner program derivatives in our consolidated statement of operations. During the year ended December 31, 2023, an adjustment of $0.3 million was recorded to market the derivative assets to fair value and was included in other non-operating (expense) income, net in our consolidated statement of operations. For additional information, see “Note (8), Fair Value Measurement” and “Note (7), Balance Sheet Account Details”. Investments in Primrose Bio We apply the equity method to investments in common stock and to other investments in entities that have risk and reward characteristics that are substantially similar to an investment in the investee’s common stock. Since the preferred stock and restricted share investment in Primrose Bio has a substantive liquidation preference, it is not substantially similar to the common stock investment and is therefore recorded as an equity security under ASC 321, Investments - Equity Securities. We account for our common stock investment in Primrose Bio under the equity method as we have the ability to exercise significant influence over Primrose Bio's operating and financial results. In applying the equity method, we record the investment at fair value. Our proportionate share of net loss of Primrose Bio is recorded in our consolidated statements of operations. Our equity method investment is reviewed for indicators of impairment at each reporting period and is written down to fair value if there is evidence of a loss in value that is other-than-temporary. In June 2024, Primrose Bio received an equity investment from an equity firm. In July 2024, Primrose Bio raised additional funds from another equity firm. As a result, we recognized an impairment loss on our equity method investment in the amount of $5.8 million during the year ended December 31, 2024. There was no impairment to our equity method investment during the year ended December 31, 2023. Our share of the net loss of Primrose Bio for the years ended December 31, 2024 and 2023 was $7.0 million and $1.8 million, respectively, which reduced Ligand's equity method investment accordingly. Any income or loss from our equity method investment (including the impairment) is presented in other non-operating (expense) income, net in our consolidated statements of operations. We determined that the Series A preferred stock and reserve stock investments in Primrose Bio did not have a readily determinable fair value and therefore elected the measurement alternative in ASC 321 to subsequently record the investments at cost, less any impairments, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. When fair value becomes determinable, from observable price changes in orderly transactions, our investments will be marked to fair value. Our investments in Series A preferred stock and reserve stock have been reduced by $25.8 million during the year ended December 31, 2024 in connection with the above mentioned equity funding received by Primrose Bio in June and July 2024. There were no no observable price changes or impairment to our investments in Series A preferred stock and reserve stock during the year ended December 31, 2023. Any income or loss from our investments in Series A preferred stock and reserve stock (including the impairment) is presented in other non-operating (expense) income, net in our consolidated statements of operations. Former President and Chief Operating Officer Matt Korenberg served as a board member of Primrose Bio beginning in the fourth quarter of 2023. His employment with Ligand concluded in October 2024, after which Lauren Hay, Vice President of Strategic Planning & Investment Analytics, succeeded him as a board member of Primrose Bio. Spin-off of OmniAb On March 23, 2022, we entered into the OmniAb Separation and Distribution Agreement to separate our OmniAb Business and the OmniAb Merger Agreement, pursuant to which Merger Sub would merge with and into OmniAb, with OmniAb continuing as the surviving corporation and wholly owned subsidiary of New OmniAb following the effectiveness of such merger, resulting in New OmniAb’s acquisition of our OmniAb Business, in a Reverse Morris Trust transaction (collectively, the “OmniAb Transactions”). After the final closing date of the OmniAb Transactions on November 1, 2022, the historical financial results of OmniAb have been reflected in our consolidated financial statements as discontinued operations under GAAP for all periods presented through the date of the OmniAb Distribution. Pursuant to the OmniAb Separation and Distribution Agreement, Ligand contributed to OmniAb cash and certain specific assets and liabilities constituting the OmniAb Business. Pursuant to the OmniAb Distribution, Ligand distributed on a pro rata basis to its stockholders as of October 26, 2022 shares of the common stock of OmniAb representing 100% of Ligand’s interest in OmniAb. Immediately following the OmniAb Distribution, Merger Sub merged with and into OmniAb, with OmniAb continuing as the surviving company in the OmniAb Merger and as a wholly owned subsidiary of New OmniAb. The entire transaction was completed on November 1, 2022, and following the OmniAb Merger, New OmniAb is an independent, publicly traded company whose common stock trades on NASDAQ under the symbol “OABI.” After the OmniAb Distribution, we do not beneficially own any shares of common stock in OmniAb and no longer consolidate OmniAb into our financial results for periods ending after November 1, 2022. Discontinued operations In connection with the OmniAb Merger, the Company determined its OmniAb Business qualified for discontinued operations accounting treatment in accordance with ASC 205-20. We recognized a $1.7 million tax provision adjustment related to deferred taxes during the year ended December 31, 2023 that was attributable to the discontinued operations. The following table summarizes revenue and expenses of the discontinued operations for the year ended December 31, 2022 (in thousands):
| Year Ended December 31,
| 2022
Revenues: |
Royalties | $ | 1,289 |
Contract revenue | 25,275 |
Total revenues | 26,564 |
Operating costs and expenses: |
Amortization of intangibles | 10,847 |
Research and development | 38,466 |
General and administrative | 13,383 |
Total operating costs and expenses | 62,696 |
Loss from operations | (36,132) |
Other income (expense): |
Gain from short-term investments | — |
Interest expense | — |
Other income (expense), net | 554 |
Total other expense, net | 554 |
Loss before income tax | (35,578) |
Income tax benefit | 7,436 |
Net loss | $ | (28,142) |
The following table summarizes the significant non-cash items, capital expenditures of the discontinued operations, and financing activities that are included in the consolidated statements of cash flows for the year ended December 31, 2022 (in thousands):
| Year Ended December 31,
| 2022
Operating activities: |
Change in fair value of contingent consideration | $ | (554) |
Depreciation and amortization | 13,218 |
Stock-based compensation expense | 9,404 |
Investing activities: |
Cash paid for acquisition, net of cash acquired | $ | — |
Purchase of property, plant and equipment | (5,572) |
Payments to CVR Holders | (960) |
Financing activities: |
Payments to CVR Holders | $ | (1,545) |
Supplemental cash flow disclosures: |
Purchases of property, plant and equipment included in accounts payable and accrued expenses | $ | 2,310 |

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