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Debt | 9 Months Ended
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Sep. 30, 2025
Debt Disclosure [Abstract] |
Debt | Debt 0.75% Convertible Senior Notes due 2030 On August 14, 2025, we issued $460 million aggregate principal amount of 0.75% convertible senior notes due 2030 (the “Notes”). The aggregate principal includes the purchase of an additional $60 million aggregate principal amount of Notes by the initial purchasers pursuant to the full exercise of the initial purchasers’ option to purchase additional Notes. The net proceeds from the offering were approximately $445.1 million, after deducting the initial purchasers’ discount, and debt issuance cost. Ligand used approximately $113.3 million of the net proceeds from the offering to pay the cost of the convertible note hedge transaction described below. In addition, Ligand used approximately $15 million of the net proceeds from the offering, together with cash on hand, to repurchase 102,034 shares of Ligand’s common stock at a price of $147.01 per share, which is equal to the last reported price per share of Ligand’s common stock as of the date of pricing of the Notes, in privately negotiated transactions effected through one of the initial purchasers concurrently with the pricing of the Notes. Ligand expects to use the remaining net proceeds from the offering for general corporate purposes. In addition, Ligand received approximately $67.4 million from the warrant transactions with the option counterparties in connection with the pricing of the notes and the initial purchasers’ exercise of their option to purchase additional notes. The Notes are general senior, unsecured obligations of Ligand and accrue interest payable semiannually in arrears on April 1 and October 1 of each year, beginning on April 1, 2026. The Notes will mature on October 1, 2030, unless earlier converted, redeemed or repurchased. Upon conversion, we will pay cash up to the aggregate principal amount of the Notes to be converted and pay or deliver, as the case may be, cash, shares of common stock, or a combination of cash and shares of common stock, at our election, in respect of the remainder, if any, of our conversion obligation in excess of the aggregate principal amount of the Notes being converted, in the manner and subject to the terms and conditions provided in the Indenture entered into in connection with the Notes issuance (the “Indenture”). Holders may convert their Notes at their option prior to July 1, 2030, under certain circumstances, and at any time on or after July 1, 2030, until the second scheduled trading day immediately preceding the maturity date. The initial conversion rate is 5.1338 shares of our common stock per $1,000 principal amount of Notes (equivalent to an initial conversion price of approximately $194.79 per share), subject to adjustment upon the occurrence of certain events. The maximum conversion rate, subject to adjustment, is 6.8022 per $1,000 principal amount of the Notes which represents a conversion price of approximately $147.01. The Notes are not redeemable by us prior to October 6, 2028. On or after that date, and prior to the 51 st scheduled trading day immediately preceding the maturity date for the Notes, we may redeem for cash all or part of the Notes if the last reported sale price of our common stock has been at least 130% of the conversion price for at least 20 trading days during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption. Holders may require us to repurchase all or a portion of their Notes for cash at 100% of the principal amount plus accrued and unpaid interest to, but excluding, the purchase date upon the occurrence of a “Fundamental Change” (as defined in the Indenture). We account for the Notes in accordance with ASC 470-20, Debt with Conversion and Other Options. At issuance, we evaluated the terms of the Notes and determined that the embedded conversion feature does not require separate accounting as a derivative. The Notes are recorded as a single liability measured at amortized cost. Interest expense include a portion recognized at the stated coupon rate, and amortization of any debt discount and issuance costs, as discussed below. In connection with the issuance of the Notes, we incurred $14.9 million of debt discount and issuance costs, which primarily consisted of underwriting, legal and other professional fees. These costs are netted with the total debt liability and are amortized to interest expense using the effective interest method over the five-year expected life of the Notes. Annual effective interest rate, including coupon portion was 1.4% as of September 30, 2025. During the three and nine months ended September 30, 2025, we recognized a total of $0.8 million in interest expense which includes $0.4 million in coupon expense and $0.4 million in amortized issuance costs. The Indenture contains customary covenants and events of default, including payment defaults, certain bankruptcy events, and failure to comply with other covenants, subject to applicable grace periods. As of September 30, 2025, there were no events of default or violation of any covenants under the Indenture. The following table summarizes information about the Notes (in thousands).
| September 30, 2025
Principal amount of the Notes outstanding | $ | 460,000 |
Unamortized discount (including unamortized debt issuance cost) | (14,507) |
Total long-term portion of notes payable | $ | 445,493 |
Fair value of convertible senior notes outstanding (Level 2) | $ | 519,234 |
Convertible Note Hedge and Warrant Transactions In connection with the pricing of the Notes and the initial purchasers’ exercise of their option to purchase additional Notes, in August 2025, we entered into convertible note hedge transactions with certain of the initial purchasers or their affiliates and certain other financial institutions (the “option counterparties”), to reduce the potential dilution to holders of our common stock upon conversion of the Notes and/or offset any cash payments we may be required to make in excess of the principal amount upon conversion of the Notes. The convertible note hedges have an exercise price of $194.79 per share and are exercisable when and if the Notes are converted. If upon conversion of the Notes, the price of our common stock is above the exercise price of the convertible note hedges, the option counterparties will deliver shares of common stock and/or cash with an aggregate value approximately equal to the difference between the price of common stock at the conversion date and the exercise price, multiplied by the number of shares of common stock related to the convertible note hedges being exercised. The convertible note hedge transaction is classified as an equity instrument and is not accounted for as a derivative under ASC 815, as it meets the criteria for equity classification. We paid $113.3 million for these convertible note hedges, which was recorded as a reduction to additional paid-in capital in accordance with ASC 815-40. The convertible note hedge is not remeasured at fair value subsequent to initial recognition. We also entered into warrant transactions with the option counterparties in connection with the pricing of the Notes and the initial purchasers’ exercise of their option to purchase additional Notes, pursuant to which we issued warrants to purchase 2,361,548 shares of common stock (the “warrants”) to such option counterparties. The warrant transactions could separately have a dilutive effect on our common stock to the extent that the market price per share of our common stock exceeds the strike price of the warrants. The strike price of the warrants will initially be $294.02 per share, subject to certain adjustments under the terms of the warrants. We received $67.4 million for these warrants. The warrants have various expiration dates ranging from January 2, 2031 to May 27, 2031. The warrants will have a dilutive effect to the extent the market price per share of common stock exceeds the applicable exercise price of the warrants, as measured under the terms of the warrant transactions. The common stock issuable upon exercise of the warrants has not been registered under the Securities Act, and we do not have an obligation and do not intend to file any registration statement with the SEC registering the issuance of the shares under the warrants. The convertible note hedges and warrants described above are separate transactions entered into by us and are not part of the terms of the Notes. Holders of the Notes and warrants will not have any rights with respect to the convertible note hedges. Revolving Credit Facility On October 12, 2023, we entered into a $75 million revolving credit facility (the “Revolving Credit Facility”) with Citibank, N.A. as the Administrative Agent (as defined in the Credit Agreement). We, our material domestic subsidiaries, as Guarantors (as defined in the Credit Agreement), and the Lenders (as defined in the Credit Agreement) entered into a credit agreement (the “Credit Agreement”) with the Administrative Agent, under which the Lenders, the Swingline Lender and the L/C Issuer (each as defined in the Credit Agreement) agreed to make revolving loans, swingline loans and other financial accommodations to us (including the issuance of letters of credit) in an aggregate amount of up to $75 million. Borrowings under the Revolving Credit Facility accrue interest at a rate equal to either Term Secured Overnight Financing Rate (“Term SOFR”) or a specified base rate plus an applicable margin linked to our leverage ratio, ranging from 1.75% to 2.50% per annum for Term SOFR loans and 0.75% to 1.50% per annum for base rate loans. The Revolving Credit Facility is subject to a commitment fee payable on the unused Revolving Credit Facility commitments ranging from 0.30% to 0.45%, depending on our leverage ratio. During the term of the Revolving Credit Facility, we may borrow, repay and re-borrow amounts available under the Revolving Credit Facility, subject to voluntary reductions of the swing line, letter of credit and revolving credit commitments. Borrowings under the Revolving Credit Facility are secured by certain of our collateral and that of the Guarantors. In specified circumstances, additional guarantors are required to be added to the Credit Agreement. The Credit Agreement contains customary affirmative and negative covenants, including certain financial maintenance covenants, and events of default applicable to us. In the event of violation of the representations, warranties and covenants made in the Credit Agreement, we may not be able to utilize the Revolving Credit Facility or repayment of amounts owed thereunder could be accelerated. Amendments to Revolving Credit Facility On July 8, 2024, we entered into the first amendment to the Credit Agreement, which amends the Credit Agreement to, among other things, increase the aggregate revolving credit facility amount from $75 million to $125 million. In connection with the offering of the Notes, on August 11, 2025, we entered into the second amendment to the Credit Agreement, to permit, among other things, certain cash settlement payments on the Notes, subject to customary conditions set forth therein. On September 12, 2025, we entered into the third amendment to the Credit Agreement to, among other things, extend the maturity date to September 12, 2028 and modify the minimum consolidated EBITDA (as defined in the Credit Agreement) covenant to require us to maintain not less than $55 million of consolidated EBITDA (as defined in the Credit Agreement) for the trailing four-quarter period ended September 30, 2025 and each trailing four-quarter period ending thereafter. As of September 30, 2025 and December 31, 2024, we had $124.4 million in available borrowing under the Revolving Credit Facility, after utilizing $0.6 million for letter of credit. As of September 30, 2025 and December 31, 2024, there were no events of default or violation of any covenants under the Revolving Credit Facility.

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