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Fair Value Measurement | 12 Months Ended
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Dec. 31, 2024
Fair Value Disclosures [Abstract] |
Fair Value Measurement | Fair Value Measurement We measure certain financial assets and liabilities at fair value on a recurring basis. Fair value is a market-based measurement that should be determined using assumptions that market participants would use in pricing an asset or liability. We establish a three-level hierarchy to prioritize the inputs used in measuring fair value. The levels are described in the below with level 1 having the highest priority and level 3 having the lowest: Level 1 - Observable inputs such as quoted prices in active markets Level 2 - Inputs other than the quoted prices in active markets that are observable either directly or indirectly Level 3 - Unobservable inputs in which there is little or no market data, which require the Company to develop its own assumptions The following table provides a summary of the assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2024 and 2023 (in thousands):
Fair Value Measurements at Reporting Date Using
December 31, 2024 |  |  | Quoted Prices in Active Markets for Identical Assets |  | Significant Other Observable Inputs |  | Significant Unobservable Inputs
| Total |  | (Level 1) |  | (Level 2) |  | (Level 3)
Assets: |  |  |  |  |  |  |
Short-term investments, excluding Viking(1) | $ | 143,618 |  |  | $ | 81,807 |  |  | $ | 61,811 |  |  | $ | — |
Investment in Viking common stock | 40,240 |  |  | 40,240 |  |  | — |  |  | — |
Derivative assets(2) | 10,583 |  |  | — |  |  | — |  |  | 10,583 |
Total assets | $ | 194,441 |  |  | $ | 122,047 |  |  | $ | 61,811 |  |  | $ | 10,583 |
Liabilities: |  |  |  |  |  |  |
Contingent liabilities - CyDex | $ | 383 |  |  | $ | — |  |  | $ | — |  |  | $ | 383 |
Contingent liabilities - Metabasis(3) | 3,298 |  |  | — |  |  | 3,298 |  |  | — |
Total liabilities | $ | 3,681 |  |  | $ | — |  |  | $ | 3,298 |  |  | $ | 383 |
Fair Value Measurements at Reporting Date Using
December 31, 2023 |  |  | Quoted Prices in Active Markets for Identical Assets |  | Significant Other Observable Inputs |  | Significant Unobservable Inputs
| Total |  | (Level 1) |  | (Level 2) |  | (Level 3)
Assets: |  |  |  |  |  |  |
Short-term investments, excluding Viking (1) | $ | 115,170 |  |  | $ | 7,291 |  |  | $ | 107,879 |  |  | $ | — |
Investment in Viking common stock | 32,185 |  |  | 32,185 |  |  | — |  |  | — |
Derivative assets(2) | 3,531 |  |  | — |  |  | — |  |  | 3,531 |
Total assets | $ | 150,886 |  |  | $ | 39,476 |  |  | $ | 107,879 |  |  | $ | 3,531 |
Liabilities: |  |  |  |  |  |  |
Contingent liabilities - CyDex | $ | 320 |  |  | $ | — |  |  | $ | — |  |  | $ | 320 |
Contingent liabilities - Metabasis(3) | 2,878 |  |  | — |  |  | 2,878 |  |  | — |
Total liabilities | $ | 3,198 |  |  | $ | — |  |  | $ | 2,878 |  |  | $ | 320 |
(1) Excluding our investment in Viking, corporate equity securities, and US government securities, our short-term investments in marketable debt and equity securities are classified as available-for-sale securities based on management's intentions and are at level 2 of the fair value hierarchy, as these investment securities are valued based upon quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. Short-term investments in bond funds are valued at their net asset value (NAV) on the last day of the period. We have classified marketable securities with original maturities of greater than one year as short-term investments based upon our ability and intent to use any and all of those marketable securities to satisfy the liquidity needs of our current operations. In addition, we had investment in warrants resulting from Seelos Therapeutics Inc. milestone payments that were settled in shares during the first quarter of 2019 and were at level 3 of the fair value hierarchy, based on Black-Scholes value estimated by management on the last day of the period. This investment in warrants expired in January 2024. (2) Derivative assets include instruments used for risk-management purposes, and other instruments. Derivative assets which are not used for risk management purposes include: (a) acquired rights in future milestone and royalty payments from Agenus Partnered Programs, (b) Agenus Warrant, (c) Upsize Option, (d) Viking Share Collar (e) and rights to receive from Primrose Bio 50% of milestones on two contracts previously entered into by Primordial Genetics. The considerations were recognized as derivative assets included under current derivative assets and noncurrent derivative assets in our consolidated balance sheet. They are recognized as derivative assets under ASC 815, Derivatives and Hedging. The fair value of the Agenus Partnered Programs and the Primrose Bio derivative assets was determined using a discounted cash flow approach, utilizing the mostly-likely cash flows which considered the probability of success for the underlying clinical programs. The discount rate used contemplates the underlying credit and business risk of the partnered programs. At December 31, 2024, the discount rates used range between 15% and 28%. At December 31, 2023, the discount rate used was 25%. The fair value of the Agenus Warrant was determined using a Black-Scholes-Merton model. The fair value of the Upsize Option was determined using a binomial option pricing model. (3) In connection with our acquisition of Metabasis in January 2010, we issued Metabasis stockholders four tradable CVRs, one CVR from each of four respective series of CVR, for each Metabasis share. The CVRs entitle Metabasis stockholders to cash payments as frequently as every six months as cash is received by us from proceeds from the sale or partnering of any of the Metabasis drug development programs, among other triggering events. The liability for the CVRs is determined using quoted prices in a market that is not active for the underlying CVR. The carrying amount of the liability may fluctuate significantly based upon quoted market prices and actual amounts paid under the agreements may be materially different than the carrying amount of the liability. Several of the Metabasis drug development programs have been outlicensed to Viking, including VK2809. VK2809 is a novel selective TR-β agonist with potential in multiple indications, including hypercholesterolemia, dyslipidemia, NASH, and X-ALD. Under the terms of the agreement with Viking, we may be entitled to up to $375 million of development, regulatory and commercial milestones and tiered royalties on potential future sales including a $10 million payment upon initiation of a Phase 3 clinical trial. A reconciliation of the level 3 financial instruments as of December 31, 2024 is as follows (in thousands):
Assets |
Fair value of level 3 financial instruments as of December 31, 2023 | $ | 3,531 |
Additions to derivative assets | 35,888 |
Fair value adjustments to derivative assets | (20,010) |
Exercise of derivative assets | (8,826) |
Fair value of level 3 financial instruments as of December 31, 2024 | $ | 10,583 |
Liabilities |
Fair value of level 3 financial instruments as of December 31, 2023 | $ | 320 |
Payments to CVR holders and other contingent payments | (200) |
Fair value adjustments to contingent liabilities | 263 |
Fair value of level 3 financial instruments as of December 31, 2024 | $ | 383 |
A reconciliation of the level 3 financial instruments as of December 31, 2023 is as follows (in thousands):
Assets |
Fair value of level 3 financial instruments as of December 31, 2022 | $ | 135 |
Fair value adjustments to equity security warrants | (135) |
Additions to derivative assets | 3,281 |
Fair value adjustments to derivative assets | 250 |
Fair value of level 3 financial instruments as of December 31, 2023 | $ | 3,531 |
Liabilities |
Fair value of level 3 financial instruments as of December 31, 2022 | $ | 84 |
Payments to CVR holders and other contingency payments | (50) |
Fair value adjustments to contingent liabilities | 286 |
Fair value of level 3 financial instruments as of December 31, 2023 | $ | 320 |
Assets Measured on a Non-Recurring Basis We apply fair value techniques on a non-recurring basis associated with valuing potential impairment losses related to our goodwill, intangible assets with estimated useful lives and long-lived assets. We evaluate goodwill annually for impairment and whenever circumstances occur indicating that goodwill might be impaired. We determine the fair value of our reporting unit based on a combination of inputs, including the market capitalization of Ligand, as well as Level 3 inputs such as discounted cash flows, which are not observable from the market, directly or indirectly. We evaluate intangible assets with estimated useful lives whenever circumstances occur indicating that intangible assets may not be recoverable. An impairment evaluation is based on an undiscounted cash flow analysis at the lowest level at which cash flows of the long-lived assets are largely independent of other groups of assets and liabilities. There was no impairment of our goodwill, intangible assets, or long-lived assets recorded during the years ended December 31, 2024 and 2023. Other than the finance lease equipment discussed in “Note (9), Leases”, there was no impairment of our goodwill, intangible assets, or long-lived assets recorded during the year ended and December 31, 2022. Fair Value of Financial Instruments Our cash and cash equivalents, accounts receivable, other current assets, financial royalty assets, accounts payable, accrued liabilities, deferred revenue, current operating lease liabilities, current finance lease liabilities and Novan (Pelthos) other long-term liabilities are financial instruments and are recorded at cost in the consolidated balance sheets. The estimated fair value of the Novan (Pelthos) other long-term liabilities is $19.1 million compared to a carrying value of $15.9 million. The estimated fair value of the remaining financial instruments approximates their carrying value. Financial Assets Not Measured at Fair Value Financial royalty assets are measured and carried on the balance sheet at amortized cost using the effective interest method or on a non-accrual basis. Management calculates the fair value of financial royalty assets using a forecasted royalty receipts. The projected future cash flows derive from royalty payments and milestones, then discounted using appropriate individual discount rates. The fair value of financial royalty assets and other economic rights assets is classified as Level 3 within the fair value hierarchy since it is determined based upon inputs that are both significant and unobservable. The estimated fair value and related carrying values of financial royalty assets as of December 31, 2024 were $196.6 million and $195.0 million, respectively. The estimated fair value and related carrying value of the financial royalty assets as of December 31, 2023 were $75.9 million and $62.3 million, respectively. To determine the fair value of long-term financial royalty assets, we estimated future underlying product sales, applied a probability of technical and regulatory success for development stage programs, estimated a timeline for any development and regulatory milestones, and applied a discount rate based on the level of partner execution and commercialization risk, in the range of 15-30% and 10-45% as of December 31, 2024, and 2023, respectively.

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- Definition The entire disclosure for financial instruments. This disclosure includes, but is not limited to, fair value measurements of short and long term marketable securities, international currencies forward contracts, and auction rate securities. Financial instruments may include hedging and non-hedging currency exchange instruments, derivatives, securitizations and securities available for sale at fair value. Also included are investment results, realized and unrealized gains and losses as well as impairments and risk management disclosures. + References No definition available. + Details
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