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Fair Value Measurements
 9 Months Ended
Sep. 30, 2025
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
Assets and Liabilities Measured on a Recurring Basis
The following table presents the hierarchy for our assets and liabilities measured at fair value (in thousands):
September 30, 2025December 31, 2024
Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Assets:
Short-term investments(1)
$169,376 $355,770 $— $525,146 $122,047 $61,811 $— $183,858 
Pelthos Series A Preferred Shares95,978 — — 95,978 — — — — 
Equity method investment in Pelthos
42,000 — — 42,000 — — — — 
Derivative assets(2)
— — 9,351 9,351 — — 10,583 10,583 
     Total assets$307,354 $355,770 $9,351 $672,475 $122,047 $61,811 $10,583 $194,441 
Liabilities:
Contingent liabilities - CyDex$— $— $390 $390 $— $— $383 $383 
Contingent liabilities - Metabasis(3)
— 3,447 — 3,447 — 3,298 — 3,298 
     Total liabilities$— $3,447 $390 $3,837 $— $3,298 $383 $3,681 
(1) Excluding our investment in 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. 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 or all of those marketable securities to satisfy the liquidity needs of our current operations.
(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) Agenus Warrant (b) Castle Creek Warrant (c) Orchestra Warrant and (d) Arecor Warrant. They are recognized as derivative assets under ASC 815, Derivatives and Hedging. Note that as of December 31,2024, the derivative assets balance included Agenus Partnered Programs and Primrose mRNA derivative, which were reclassified to financial royalty assets as of January 1, 2025 due to the adoption of ASU 2025-07. Refer to Note 1, Basis of Presentation and Summary of Significant Accounting Policies, for information related to ASU 2025-07 adoption. The fair value of the Agenus Warrant, Castle Creek Warrant, Orchestra Warrant, and Arecor Warrant was determined using a Black-Scholes 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. During the three months ended September 30, 2025 and 2024, we recorded a change in the fair value of the Metabasis CVR liability that amounted to $(0.5) million and $(0.2) million, respectively, to mark to market. During the nine months ended September 30, 2025 and 2024, we recorded a change in the fair value of the Metabasis CVR liability that amounted to $1.4 million and $0.9 million, respectively, to mark to market.
A reconciliation of the level 3 financial instruments as of September 30, 2025 is as follows (in thousands):
Assets
Fair value of level 3 financial instruments as of December 31, 2024
$10,583 
ASU 2025-07 adoption (Note 1)
(9,777)
Additions to derivative assets8,679 
Fair value adjustments to derivative assets(134)
Fair value of level 3 financial instruments as of September 30, 2025
$9,351 
Liabilities
Fair value of level 3 financial instruments as of December 31, 2024
$383 
Payments to CVR holders and other contingent payments(50)
Fair value adjustments to contingent liabilities57 
Fair value of level 3 financial instruments as of September 30, 2025
$390 
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 and long-lived assets for impairment whenever circumstances occur indicating that intangible assets or long-lived 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 intangible assets with estimated useful lives and long-lived assets are largely independent of other groups of assets and liabilities.
There was no impairment of our goodwill, intangible assets with estimated useful lives, or long-lived assets recorded during the three and nine months ended September 30, 2025 and 2024.
Fair Value of Financial Instruments
Our cash and cash equivalents, accounts receivable, other current assets, accounts payable, accrued liabilities, deferred revenue, current operating lease liabilities, and current finance lease liabilities are financial instruments and are recorded at cost in the condensed consolidated balance sheets. The estimated fair value of the financial instruments approximates their carrying value.