Ligand (LGND) 2026 年第三季法說會：權利金收入成長 51%，調升 EPS 財測指引

重點總覽

• Ligand Pharmaceuticals (NASDAQ: LGND) 公布 2026 年第三季權利金收入為 7,030 萬美元，年增 51%，主要受 Filspari、Ohtuvayre 以及自 XOMA Royalty 收購資產的推動。
• 調整後稀釋每股盈餘 (EPS) 為 2.67 美元，去年同期為 3.09 美元。去年同期包含 2,450 萬美元的一次性 Zelsuvmi 對外授權收入。
• 管理層將全年調整後稀釋每股盈餘指引從 9.00 美元至 9.50 美元調升至 9.50 美元至 9.75 美元，同時重申權利金收入指引為 2.25 億美元至 2.5 億美元。
• Filspari 成為 Ligand 最大的權利金資產，第三季預估貢獻 1,680 萬美元，年增 85%，超越 Kyprolis 的 1,050 萬美元。
• 7 月 14 日完成的 XOMA 收購在該季度約 11 週內貢獻了 1,230 萬美元的權利金收入。Ligand 目前擁有超過 200 項商業化、臨床及臨床前權利金資產。
• Ligand 在第三季結束時擁有約 4.5 億美元的現金、現金等價物及短期投資。管理層表示，若包含股權持股與信貸額度，公司擁有約 7.5 億美元的可部署資金。

核心財務數據

業務與營運表現

Filspari 在第三季貢獻預估 1,680 萬美元的權利金收入，年增 85%。隨著該藥物於 4 月獲准用於局灶性節段性腎小球硬化症 (FSGS)，管理層預期 IgA 腎病與 FSGS 將持續推動成長。該預估值係基於賣方共識，若 Travere 實際公布的結果有異，將於第四季進行調整。

Kyprolis 貢獻了 1,050 萬美元，而 OJEMDA 和 Ohtuvayre 各貢獻 700 萬美元。OJEMDA 亦於 9 月在日本獲批。Pelthos 報導指出，自 2025 年 7 月上市以來，已有超過 25,000 名患者獲處方開立 Zelsuvmi。

收購 XOMA 帶來了三項商業化資產——Ojemda、Vabysmo 和 Miplyffa——以及 100 多個研發管線項目。管理層表示，獲取的投資組合正在從當初核保時給予極低或零價值的資產中產生額外選擇權價值。

Ligand 還支付了 2,300 萬美元的首付款，以獲取參天製藥 (Santen) 旗下 Ryjunea 在歐洲、中東和非洲的權利金及里程碑金權利。該協議包含分級權利金率，介於 10% 出頭至接近 20%。

公司承諾向 AvenCell Therapeutics 提供高達 4,700 萬美元的資金，其中包括高達 4,100 萬美元的權利金融資，以及高達 600 萬美元的 C 輪投資。根據總融資額度，Ligand 將獲得 AvenCell 目前及未來管線資產全球淨銷售額的中個位數至低雙位數百分比權利金。

管理層預計到 2027 年，整個投資組合將有多達七項關鍵試驗結果公布。QTORIN rapamycin 的 FDA PDUFA 目標日期為 2027 年 2 月 28 日。若獲批准，Ligand 將獲得 8% 至 9.8% 的分級權利金。

管理層財務指引

管理層預期營收將更集中於第四季，因為該季度將包含整整三個月的 XOMA 權利金，且多項權利金協議設有分級費率，會隨產品全年銷售額增加而調升。

公司計劃在 12 月 8 日的投資人日更新其長期展望。管理層表示，修訂後的架構將反映 XOMA 的收購、Filspari 在 FSGS 上的獲批，以及 QTORIN rapamycin 的優先審查。

風險與關注焦點

• 當合作夥伴尚未申報銷售額時，來自金融權利金資產認列的收入可能基於公司估算。差異將於下一季度進行調整。
• Captisol 客戶下單時間點，以及臨床、監管與里程碑金的時間點，可能會使收入在不同季度間移轉。
• 管理層提醒，生物製藥研發具有成敗二元的風險，並不預期每項關鍵研究都能產生積極結果。
• 2030 年與 2031 年到期的可轉換公司債採淨股份結算，但在履約價分別超過約 294 美元及 524 美元時，可能會發生與認股權證相關的股權稀釋。
• 第四季指引保持審慎立場，因為 Ligand 正在等待其他合作夥伴的報告，且仍面臨里程碑時間點不確定的因素。

分析師問答集錦

管理層維持對 XOMA 近期盈餘貢獻的先前預期，並表示收購成本協同效應略優於預期。目前預估 XOMA 帶來的新增年度營運費用將略低於 500 萬美元，相比收購前 XOMA 的現金營運費用年化預算率超過 2,500 萬美元。

關於第四季權利金收入，財務長 Octavio Espinoza 表示管理層對達到全年指引區間的中高標充滿信心，甚至有機會超越。然而，公司仍維持指引不變，因為幾家合作夥伴尚未申報，且其他收入組成部分對時間點相當敏感。

執行長 Todd Davis 表示，每年約 2 億美元或更少的資本部署應足以支持未來三至五年乃至 2030 年代中期的成長。Ligand 在 2026 年評估了超過 180 個投資機會，簽署了 115 份保密協議，並完成了 6 項投資。

管理層表示，XOMA 交易並未改變 Ligand 的投資策略。公司仍專注於具差異化的晚期臨床資產，交易規模通常低於 1 億美元，且針對高度未被滿足的醫療需求領域。

法說會完整逐字稿

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完整財報電話會議逐字稿

管理層陳述

Operator

Hello, everyone. Thank you for joining us, and welcome to the Ligand Third Quarter Earnings Call. [Operator Instructions]

I will now hand the conference over to Melanie Herman, Head of Investor Relations. Melanie, please go ahead.

Melanie Herman

Good morning, everyone, and welcome to Ligand's Third Quarter 2026 Earnings Call. With me on the call today are CEO, Todd Davis; Chief Financial Officer, Tavo Espinoza; Vice President of Portfolio Strategy and Investments, Lauren Hay; and Paul Hadden, Senior Vice President of Investments and Business Development.

During the call today, we will review the financial results released earlier today and provide commentary on our recent business development activity and partner portfolio, followed by a question-and-answer session.

Before we get started, I would like to point out that we will be discussing non-GAAP results, which exclude certain items such as stock-based compensation, amortization of intangible assets, amortization or impairment of financial royalty assets, transaction costs and gains or losses from derivative assets and mark-to-market changes in investments, amongst others.

I encourage you to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP measures, which can be found in today's release available on our website. Reconciliations of forward-looking non-GAAP measures are not provided because of the unreasonable effort associated with providing such reconciliations due to the variability in the occurrence of the amounts of certain components thereof.

We believe these adjusted measures provide valuable insight into our core operating performance, both historically and moving forward. Our earnings release and a link to today's webcast can be found in the Investor Relations section of our website at ligand.com. This call is being recorded, and the audio portion will be archived in the Investors section of our website.

On today's call, we will make forward-looking statements regarding our financial results and other matters related to the company's business. Please refer to the safe harbor statement related to these forward-looking statements, which are subject to risks and uncertainties. We remind you that actual events or results may differ materially from those projected or discussed and that all forward-looking statements are based upon current available information.

Ligand assumes no obligation to update these statements. To better understand the risks and uncertainties that could cause actual results to differ, we refer you to the documents that Ligand files with the Securities and Exchange Commission or SEC that can be found on Ligand's website at ligand.com or on the SEC's website at sec.gov. And with that, I'd like to turn the call over to our CEO, Todd Davis.

Todd Davis

Thank you, Melanie, and good morning, everyone. We appreciate you joining us today. The third quarter was an important one for Ligand with royalty revenue growing 51% year-over-year to approximately $70 million. Filspari, Ohtuvayre, and the addition of the XOMA commercial assets Vabysmo, Ojemda, and Miplyffa led that growth with the Filspari launch in FSGS being a primary growth driver as well.

We are also raising our adjusted diluted EPS guidance to a range of $9.50 to $9.75 per share, up from our previously stated range of $9 to $9.50 per share. We have scaled our portfolio meaningfully over the past few months, closing the XOMA acquisition on July 14, which added three key commercial assets and more than 100 pipeline programs. We also made two new investments this quarter, AvenCell, an investment in a next-generation CAR-T platform technology and Ryjunea, a commercial royalty investment in Santen's pediatric myopia product.

We have scaled our investment team, expanding our deal capacity while continuing to apply a disciplined approach to every investment. Our pipeline remains strong with more than 180 opportunities reviewed so far this year. We are entering an extremely catalyst-rich period at Ligand and anticipate up to seven pivotal readouts across the portfolio through 2027, five of which came from the XOMA acquisition.

I'll use the next few slides to cover the team we've built, what we've accomplished over the past several years, and then Tavo will walk you through the financials. Lauren will provide an update on our portfolio, and Paul will provide you an update on new investments and the origination pipeline.

Over the past few years, we have built an investment team with deep relationships across the biopharmaceutical industry and extensive investment experience in the space. Those relationships are a meaningful part of how we source opportunities and the team's technical, clinical and legal depth is what supports the rigorous diligence we apply to every investment.

The team was expanded this year to add two new deal leads, Dr. Pete Reneahan and Lee Brown. We also built out a systematic portfolio management system led by Lauren Hay to drive value into our development stage partnerships. We're now focused on more proactively communicating with our partners and doing what we do best, identifying new opportunities within the portfolio, which may offer attractive investment opportunities as well as increasing portfolio yield and the probability of success on existing portfolio assets.

Over the past three years, Ligand has committed more than $1 billion across more than 20 investments using three distinct approaches: royalty monetization, project finance and special situations. The third quarter built on that momentum with the $730 million XOMA deal, which is the largest transaction in our history as well as the Ryjunea and AvenCell investments.

This slide shows the results and growth that our strategy has delivered. In 2022, we began shifting to a pure royalty aggregation model by spinning out the OmniAb platform and then Pfenex, a recombinant protein expression platform, now referred to as Primrose Bio, which we spun out in 2023. This pivot transformed us into a capital-light business model with an efficient cost structure built around a seasoned deal team. From 2022 to the midpoint of our 2026 guidance range, we anticipate royalty revenue would grow at a compound annual growth rate of 34%.

Over the same period, adjusted EPS would grow at a compound annual growth rate of 41%. This growth was achieved while simultaneously cutting our core OpEx from $92 million in 2022 to an expected $50 million in 2026. With that, I'll turn the call over to Tavo for the financial update. Tavo?

Octavio Espinoza

Thank you, Todd, and good morning, everyone. Before I get into the numbers, there is one change I want to share with you. Starting this quarter, we're reporting earlier than we have in the past, and we plan to keep that schedule through 2027. The reason is that many of our royalty interests are accounted for as financial royalty assets.

In fact, after the XOMA acquisition, our financial royalty asset balance has increased from approximately $200 million as of last quarter to $800 million this quarter. For those assets, the income we recognize each period is driven by our long-term forecast of the royalty cash flows over the life of each asset rather than by a single quarter of partner reported sales. So waiting for every partner to report adds little information.

There's more detail on that accounting in our Form 10-K. For partners that had not yet reported product sales when we closed the quarter, our royalty revenue and income for partners is based on our estimates, which are informed by sell-side consensus and may differ from actual results. If results differ, they will be adjusted in the following quarter.

I'll begin with our third quarter results and the drivers behind the year-over-year changes and then turn to our balance sheet, including our convertible notes and our guidance. Royalty revenue was $70.3 million in the quarter, an increase of 51% over the prior year, reflecting the contribution from XOMA and continued momentum across our legacy portfolio.

Adjusted diluted earnings per share was $2.67 compared with $3.09 in the prior year quarter, which included $24.5 million of onetime Zelsuvmi out-license income. On a GAAP basis, we reported a net loss of $1.43 per share, which I'll walk through shortly.

We ended the quarter with approximately $450 million in cash, cash equivalents and short-term investments compared with approximately $734 million at December 31, 2025. The change primarily reflects the proceeds from our $700 million 0% coupon convertible notes, net of the cash we paid to acquire XOMA.

Including our equity holdings and our credit facility, we have approximately $750 million of deployable capital available for additional royalty acquisitions and strategic investments.

Looking at royalty revenue, legacy royalties grew 25% to $58.1 million, and the XOMA acquired assets added $12.3 million in the roughly 11 weeks since the July 14 close. Filspari is now our largest royalty asset at $16.8 million estimated for the quarter, up 85% a year ago and overtaking Kyprolis at $10.5 million. The Filspari estimate is based on sell-side consensus. Travere has not provided us with a royalty amount or Q3 revenue yet as they report Monday, November 2, after market close.

Any difference from our estimate will be trued up in the fourth quarter. We expect growth to continue across IgAN and FSGS, which was approved in April. OJEMDA and Ohtuvayre followed at $7 million each.

Turning to our detailed financial results. Total core revenue was $78.7 million, down 9% from $86.9 million last year, which included $24.5 million of Zelsuvmi out-license income recorded on the sale of the Pelthos business. Excluding that, core revenue grew 26%.

Research and development expense was $2.8 million compared with $21 million in the prior year, which included a $17.8 million charge related to the R&D funding arrangement for the AVIM therapy royalty rights we acquired from Orchestra BioMed. G&A expense was $72.6 million compared with $28.4 million. Of that increase, $35 million related to onetime XOMA transaction and integration costs with the remainder reflecting our expanded business development and investment team.

Nonoperating expense was $28.3 million, primarily noncash mark-to-market adjustments on our equity investments, which are excluded from adjusted net income. As a result, GAAP net loss was $28.5 million or $1.43 per share compared with net income of $117.3 million or $5.68 per share last year, which included $53.1 million of Pelthos divestiture-related income.

Adjusted net income was $57.5 million or $2.67 per diluted share compared with $63.8 million or $3.09 in the prior year. The decline reflects the absence of last year's $24.5 million Zelsuvmi out-license income.

I'd like to highlight that while GAAP G&A rose this quarter on XOMA transaction costs, our core cash operating expenses for 2026 remain on track at approximately $50 million, including XOMA.

On our convertible notes, we have $460 million of 75 basis point notes due 2030 and $700 million of 0% notes due 2031. Both were paired with call spreads and our net share settled. So principal is repaid in cash and dilution comes only from the warrants and only above their strike prices of roughly $294 for the 2030 notes and $524 for the 2031 notes. At a $400 share price, for example, the warrants would add about 600,000 shares or approximately 3% of shares outstanding.

Turning to guidance. We are reaffirming our full year 2026 revenue guidance. Royalty revenue of $225 million to $250 million, total revenue of $270 million to $310 million, Captisol revenue of $35 million to $40 million and contract revenue of $10 million to $20 million. We are also raising our adjusted diluted earnings per share guidance to $9.50 to $9.75 per share, up from $9 to $9.50 per share.

I want to point out that we expect our 2026 revenue to be weighted more heavily towards the fourth quarter. There are two reasons. First, Q4 will include a full quarter of royalties from XOMA, whereas Q3 included only a pro rata portion following the July 14 close.

Second, many of our royalty arrangements include tiered rates that step up as sales grow and the higher tiers are typically not reached until later in the year. I would also note that timing remains the most challenging variable in providing guidance. The timing of customer orders affects Captisol material sales, and the timing of milestones across our growing portfolio can shift revenue between quarters.

Our updated EPS range reflects our strong results through the first nine months while keeping appropriate room for that timing. With our expanded portfolio following the XOMA acquisition, there are also a growing number of clinical and regulatory events whose outcomes and timing are inherently uncertain and which we do not rely on in setting guidance because many of these events carry milestone payments, positive outcomes would represent potential upside to our guidance, and we look forward to updating you as they occur.

Finally, as we noted last quarter, the business today is materially different from the one we reflected in the five-year framework we introduced at our 2025 Investor Day, which targeted a 23% royalty receipt CAGR. We are not updating that outlook today. We'll do so at our Investor Day on December 8.

Three major developments will factor into that update.

First, the XOMA acquisition, which will shift a larger amount of future expected royalties from the future investment section of the chart to the commercial and farm team sections of the chart.

Second, the approval of Filspari in April as the first FDA-approved treatment for FSGS, which expands its opportunity beyond IgAN and is already contributing to Filspari royalties.

And third, Palvella's NDA acceptance and priority review of QTORIN rapamycin in microcystic lymphatic malformation, the FDA has assigned a PDUFA target date of February 28, 2027.

Ligand will earn a tiered 8% to 9.8% royalty if approved. With that, I'll turn the call over to Lauren for an update on our royalty portfolio and pipeline.

Lauren Hay

Thank you, Tavo, and good morning, everyone. Following the acquisition of XOMA Royalty and our September investments in Ryjunea and AvenCell, our portfolio now includes more than 200 commercial, clinical and preclinical royalty assets. I'll start with our commercial programs, then turn to the pipeline and the catalysts ahead. The Ryjunea acquisition adds our 16th key program to the commercial portfolio.

Of these 16 programs, 10 stem from royalties tied to new approvals or investments made since 2022 when we pivoted to a lean royalty aggregation model. Together, they span a wide range of therapeutic areas and partners, reflecting a diversified, durable and growing royalty revenue stream. There were several updates from our commercial partners in the quarter.

OJEMDA was approved in Japan in September as announced by Ipsen. We expect Filspari to continue its strong launch in FSGS and show sustained IgAN growth, and Ohtuvayre and Zelsuvmi continue to show significant growth in product sales as well. Pelthos reported that more than 25,000 patients have been prescribed Zelsuvmi since its launch in July 2025.

Turning to a snapshot of our key partnered pipeline programs. This slide highlights what we believe are the most significant late-stage opportunities, though it's just a subset of our broader development stage portfolio. As these assets advance through clinical development toward approval, they will further contribute to our growth and portfolio diversification. Importantly, every program on this slide represents a new or follow-on investment we have made since 2022.

We often get asked which assets are the most exciting in the XOMA development stage pipeline, so I'd like to touch on a few of those here.

Starting with the Takeda programs, mezagitamab is being developed in both ITP and IgA nephropathy with Phase III results expected between late 2027 and early 2028. Peak sales are estimated at more than $1.5 billion, which would represent a royalty of more than $30 million to Ligand. Osavampator, which is being developed by Neurocrine under license from Takeda, is in Phase III in major depressive disorder with results expected in the second half of 2027. Based on limited available analyst estimates, peak sales are estimated to be between $500 million and $1.8 billion, representing a royalty of up to $80 million to Ligand.

Volixibat, which Mirum is developing under license from Takeda, was granted breakthrough therapy designation for primary sclerosing cholangitis in August. A pre-NDA meeting has been held and additional discussions are planned before a potential NDA submission in the first half of 2027.

In primary biliary cholangitis, enrollment is complete in the pivotal Phase IIb VANTAGE study with top line results expected in the first quarter of 2027. Peak sales are estimated above $1 billion, representing a peak royalty of more than $45 million to Ligand.

And finally, OJEMDA, which is marketed by Servier and Ipsen has a Phase III trial in frontline pediatric low-grade glioma with results expected in 2027. That indication is estimated to represent peak sales of approximately $500 million or a peak royalty of approximately $25 million on top of the royalty we already earned on the marketed indication.

Next, I'd like to discuss some of the positive developments we have seen in 2026 across our portfolio.

First, Filspari's FDA approval and commercial launch in FSGS has been one of the largest growth drivers in the second and third quarters of this year, and we expect that momentum to continue. Additionally, FILSPARI's marketing partner, Chugai, announced regulatory submission in Japan.

Second, yesterday, Palvella announced NDA acceptance and priority review for QTORIN rapamycin in microcystic lymphatic malformations. The FDA assigned a PDUFA target action date of February 28, 2027. If approved, Palvella is expecting a U.S. commercial launch in the first half of 2027. We congratulate our partner, Palvella, on this important milestone, which brings this potential new treatment one step closer to patients who currently have no FDA-approved therapies.

Additionally, in May, Palvella announced initiation of its Phase II trial of QTORIN rapamycin in clinically significant angiokeratomas and also plans to begin a Phase III trial in cutaneous venous malformations in the fourth quarter of this year. With our tiered royalty of up to 9.8% on all QTORIN rapamycin indications, we expect this pipeline in a product to be a sizable near-term growth driver.

Third, at Orchestra BioMed, the FDA granted AVIM therapy a second breakthrough device designation in patients with uncontrolled hypertension despite anti-hypertensive medication who are indicated for a pacemaker. And on October 1, Orchestra announced that the BACKBEAT global pivotal trial surpassed its full enrollment target of 316 randomized patients.

We look forward to top line results from Orchestra in the second quarter of 2027. I'd also like to highlight new additions to the portfolio this quarter.

The acquisition of XOMA, including three commercial assets Ojemda, Vabysmo, and Miplyffa and two new royalty investments, AvenCell and Santen's Ryjunea. Our interest in soticlestat was also revitalized in August. Ovid announced that Mistral Bio, a newly formed portfolio company backed by Perceptive Advisors, acquired global rights to the asset from Takeda. Soticlestat narrowly missed its primary endpoint in the Phase III Dravet syndrome trial.

Ligand is entitled to a share of royalties and milestones received by Ovid. We are excited to see this new investment in this asset by Perceptive and are reminded that one of the benefits of royalty investing is that our interest stays with the asset even as it moves from one clinical development partner to another.

We are also pleased that our partner, Immedica, announced that they will advance the development of IV ganaxolone for the treatment of refractory status epilepticus and plans to initiate a new Phase III study in 2027. RSE is a life-threatening neurological emergency in which ongoing seizure activity does not respond to at least two different antiseizure medications. There is a significant need for therapies that could rapidly control seizures and reduce the need for escalation to IV anesthesia.

Immedica acquired the global rights to ganaxolone through its acquisition of Marinus Pharmaceuticals in 2025. The decision follows an extensive review of the available clinical data and productive interactions with the FDA, which have provided a clear regulatory path forward for the program.

Immedica is now progressing the activities required to prepare and operationalize the new study, including finalization of the study design, manufacturing of clinical trial material and clinical site planning.

Looking forward to the remainder of the year and into 2027, we believe we are in the most catalyst-rich period in our company's nearly 40-year history. Through 2027, we anticipate up to seven pivotal trial readouts, including important assets from the legacy Ligand portfolio as well as programs more recently added through the XOMA acquisition. We also have the potential FDA approval of QTORIN rapamycin and microcystic LMs, which, if approved, would be a major growth driver as well as potential geographic expansion for commercial stage products already generating royalties today, including Filspari and Ohtuvayre.

Of course, biopharmaceutical development carries inherent binary risk, and we do not expect every one of these studies to be positive. The strength of Ligand's model is that we have intentionally built a diversified portfolio that is resilient to that risk so that no single readout or approval determines the outcome for our shareholders. With that, I'll now turn the call back over to Paul for an investment update.

Paul Hadden

Thank you, Lauren. Turning to our investment activity for the year. Our pipeline of investment opportunities remains robust. We have reviewed more than 180 investments so far in 2026, which puts us on track to exceed prior years. Of those, 115 moved to sign a confidentiality agreement, a 60% conversion rate and the highest number of CDAs signed in the past four years. What matters just as much is our discipline on the other end of the funnel.

We closed six investments or roughly 5% of the CDAs we signed. That selectivity is deliberate. We look at a very wide set of opportunities precisely so that we can be selective about where we commit capital. The six we closed this year are XOMA, Zerion, Agenus, Primrose, AvenCell, and Sydnexis. Some were large in size, while others were smaller follow-on or platform investments, but each fits the profile we've described before, differentiated assets, experienced management teams and structures that give us attractive economics.

We expect our review activity to continue at this pace through the fourth quarter, and we remain confident in our ability to deploy capital at the same standard. In September, we acquired a royalty and milestone interest in Santen's Ryjunea from Sydnexis for $23 million upfront.

Ryjunea is a once-nightly low-dose atrophy eye drop and is the first and only approved pharmacologic treatment to slow pediatric myopia progression in the European Union and the United Kingdom approved by the European Commission and the U.K. MHRA. Under the agreement, we acquired 100% interest in Sydnexis' payment rights under its Santen license, which includes a tiered low double-digit to high teens royalty on net sales in Europe, the Middle East and Africa, plus certain milestones.

Sydnexis retains the U.S. and all other non-Santen territories. Myopia is a large and growing condition. Santen estimates that 14 million patients in Europe were affected in 2025, and Santen has identified myopia as a key strategic growth area with a strong ophthalmology presence across Europe. That gives us confidence in the long-term commercial potential of Ryjunea, and it becomes the 16th key program in our commercial portfolio.

Also in September, we entered into a financing agreement with AvenCell Therapeutics for up to $47 million, which includes up to $41 million of royalty financing and up to $6 million in a concurrent Series C investment. The first tranche includes both royalty and equity for an initial investment of $9 million. What makes this transaction distinctive is that it is a platform royalty. In exchange for our commitment, we receive a mid-single-digit to low double-digit royalty on worldwide net sales of all current and future AvenCell pipeline assets with the applicable rate determined by the total amount ultimately funded.

The capital is deployed in four tranches. The first at closing and the remaining three tranches tied to clinical milestones and other conditions, which aligns our capital with the progress of the programs.

The lead asset, AVC-201, is an anti-CD123 CAR-T in a Phase Ib expansion study in relapsed/refractory AML, one of the most acute and fatal cancers and one for which there are no approved cell therapies. AvenCell is also advancing AVC-203, a Phase Ia program in B-cell malignancies. The platform combines CRISPR-engineered allogeneic CAR-T cells with a switchable feature that enables the therapy to be turned off, providing greater control over CAR-T activity.

It is an off-the-shelf approach with potential across hematologic malignancies and other diseases. We are encouraged by the data generated to date with AVC-201 and look forward to working with the AvenCell team as they advance the pipeline. For both of these profile investments, our team had long-standing preexisting relationships. And with that, I'll turn the call back over to Todd for closing remarks.

Todd Davis

Thank you, Paul. Stepping back, this quarter marks an important moment for Ligand. Our results demonstrate the strength of our business, now including the XOMA portfolio. We have achieved a 51% year-over-year growth in royalty revenue, constructed a diversified portfolio of more than 200 assets and have $750 million of deployable capital to continue building our portfolio. Put simply, we have the capital, the people, the process, all focused on a very robust market opportunity.

We believe that positions Ligand to drive growth well into the next decade. I would like to thank the Ligand team for their outstanding execution and our partners whose progress in developing treatments for patients is what ultimately drives our success and results. Thank you for joining us today. I will now turn the call back over to the operator for questions.

Operator

[Operator Instructions]

Your first question comes from the line of Matt Hewitt with Craig-Hallum Capital Group.

分析師問答

Matthew Hewitt

Congratulations on the strong quarter. Maybe first up, now that you've kind of had some time to dig through the XOMA portfolio a little bit deeper, I'm just curious if there's incremental assets. I think initially when you valued the transaction, it was just on a handful. Obviously, it's a much larger portfolio than that. So as you've dug in deeper, are you finding maybe some hidden gems? And how does that transaction feel today?

Todd Davis

Thanks, Matt. That's a great question. There is. I mean, when you are valuing a portfolio of the size that XOMA had created, you really use a triage approach to valuation around those assets that you have the most information on that carry value. And so that was really a small subset of their total asset base. As we have begun to dig through that over time, of course, there's a number of news flow on things that we had underwritten frankly, to zero that are developing quite nicely and have positive information. We believe that has come out.

There are real shots on goal. And other portfolio assets that XOMA had that we have the follow-on capital capability to support those companies, which improves their probability of success as well as represent very good investment opportunities for us. So we are kind of farming through that portfolio carefully with Lauren in the lead there and assessing each asset, and we are uncovering a lot of, I would say, option value on things like the Rezolute assets, the volixibat, et cetera.

Matthew Hewitt

That's super helpful. And then maybe just kind of sticking with the XOMA. I think initially, your guidance contributed $0.50 to XOMA to earnings this year, $1.50 to next year. As you've gotten a little bit more comfortable with the portfolio, do you still see that as being the contribution? Or has there been any changes to that initial thought?

Todd Davis

Yes. No changes to that. I'll let Tavo follow up here, but significant changes in our views on the viability of very promising assets within the portfolio. Tavo?

Octavio Espinoza

Yes, that's right, Todd. No changes to what we've said in terms of immediate accretion in '26 and then $1.50 in '27. Now that the dust is settling on the acquisition, I am pleased to say that the cost synergies are coming in a tad better than we had expected. So we're very pleased to see that come through. But no change. And we'll talk about the contribution, our updates to the contribution next year when we meet at Investor Day. We'll talk about it more specifically at that point.

Operator

Your next question comes from the line of Dave Risinger with Leerink Partners.

David Risinger

Just wanted to add my congrats on the quarterly results. So my question relates to the news flow ahead. So specifically, could you talk about the QTORIN rapamycin PDUFA and the prospects for the sales for that drug over the long term and remind us about the royalty opportunity for Ligand, please?

Todd Davis

Sure. As everybody may have seen, they yesterday got very good news with Palvella and are expecting a PDUFA date in February. That's very big news for us. The sales potential here is high several hundred millions to $1 billion in kind of when you take all territories into consideration and our royalty rate on this scales pretty quickly at lower levels of sales up to just under 10% at 9.8%.

Operator

Your next question comes from the line of Jason Zemenski with Bank of America.

Unknown Analyst

This is Jackie on for Jason. Congrats on the quarter. So as you look towards 2027, how are you thinking about the pace of capital deployment? And given the growth of the existing portfolio, how much do you need to deploy annually to sustain it?

Todd Davis

Yes. Thank you, Jackie. I think the rate of deployment here is accelerating. We think somewhere below $200 million or $200 million deployed per year sustains our growth for a significant period of time. Obviously, in the far, far outer years beyond 2040 or so. the scale of our investment activity must be significantly higher than $200 million.

But for the next three to five years or so, that pace will sustain our growth significantly through the mid-2030s. And we're deploying at that rate. I would say that we've added two deal leads over the last 12 months, and they've come on board very rapidly, are highly productive along with the other three folks that are leading deals. And so the pace probably does increase, and that will increase our option value. The pace could go up or the selectivity could go up. But either way, I think that works very well for us.

Operator

Your next question comes from the line of Glen Santangelo with Barclays.

Glen Santangelo

Just two quick ones for me. I just want to focus on the royalty revenue guidance. I mean you basically just maintained that guidance on what was a pretty strong quarter here. And if I look at the implied sort of royalty revenues in the fourth quarter, I think it's $64 million to sort of $89 million. And given the things, Tavo, that you sort of talked about having XOMA for the full quarter, the step-up in the royalty rates and all those reasons why revenues would be more weighted towards the fourth quarter, the bottom end of that range just feels unrealistic, particularly given what we're seeing out of Filspari. So, I was wondering if you could just sort of comment on that.

Then secondly, as we look to the Analyst Day coming in December, I'm just kind of curious how you think about this PDUFA now in Q2 and all the data readouts that we're expecting in 2027 and how that shapes your thinking in providing that updated five-year guidance at Analyst Day.

Todd Davis

Go ahead, Tavo.

Octavio Espinoza

Yes. Thanks for the question. You do raise a good point, in particular, the lower end of the implied royalty for Q4. I agree. It does imply a measured approach. We definitely have a certain amount of confidence -- a high level of confidence that we'll approach the mid- to higher end, if not even exceed it. We are being a little cautious in part, as I announced in my prepared remarks, we are still waiting for many of our partners to report, and we feel good about the range, in particular, the upper side of the range. So, we'll leave it at that.

Glen Santangelo

Any thoughts on the Analyst Day and how you formulate that five-year plan given all the data that we're expecting?

Octavio Espinoza

Yes. So we'll update our long-term outlook. Like I mentioned also in my prepared remarks, there's a number of positive events, news flow and catalysts that have happened throughout the year and in particular, the Palvella news, the XOMA acquisition, obviously, will inform that. But yes, we're very much looking forward to updating that long-term outlook when we present that on Investor Day on December 8.

Operator

Your next question comes from the line of Annabel Samimy with Stifel.

Annabel Samimy

Congratulations on the progress. I had a couple here. So thinking about XOMA and some of the capabilities that they brought, I'm curious if this changes the technological complexity, level of innovation or clinical risk that you're going to take in some of the deals that you're pursuing right now? And I guess the second question goes to the deal flow. You signed 115 CDAs, six investments were closed. So I'm curious to know what results in those other deals not closing? And if there's any level of competition that you're seeing that could be a reason for that?

Todd Davis

Okay. I think that in terms of our investment strategy and the addition of XOMA, the strategy has not really changed at all. We're focused on positioning our capital in late-stage clinical development, sub-$100 million deal sizes where we're going after very high unmet clinical need. We're therapeutically and scientifically agnostic on the approach and focused really on the risk reward of each specific situation, which we analyze typically with access to confidential information and very competent experts with deep levels of expertise in the given area of science.

Any time you're running an investment business, of course, it's 80-20 in terms of your capabilities on the inside when you're assessing opportunities and calling through your pipeline. But we always go outside of Ligand in our confirmatory diligence stage to some of the deepest expertise in the world around a given therapeutic area, around a given scientific base, et cetera.

So that's best practices. And the acquisition of XOMA hasn't really changed that. And in fact, they did a great job kind of building the company, but this is just such a highly synergistic business with us that we really brought over two employees, full time and one in a consulting arrangement. So the synergies around that acquisition are very high. And our capabilities are quite broad. And on the deal flow front, Paul, if you're on the mic, I'll let you take that one.

Paul Hadden

Yes. Thanks, Todd. Annabel. Yes, I think the deal flow is definitely upticking. I think you can see from the CDA signed, I think we signed about 69 last year. So it's up quite considerably. And I think that's reflective of the additional deal leads we brought on. So we're quite comfortable with the activity level and also just the pace of deployment, and we're anticipating having a very good year next year. So we're excited for what's to come.

Operator

Your next question comes from the line of Yigal Nochomovitz with Citi.

Yigal Nochomovitz

Just a question on the risk model and how you think about probability weighting success. Obviously, with the Palvella priority review and the PDUFA, you've passed a certain mark in terms of risk reduction. So do you embed that in your forecast now in terms of probabilities? And then how do you think about the option to acquire royalty in a different topical candidate now that you've got a little bit more confidence with respect to Palvella's path to approval?

Todd Davis

Yes. I think that the original Palvella investment was done relatively early stage for us, but there was significant third-party evidence and evidence of the potential safety and efficacy on that particular drug. What we really invested in there originally was the formulation risk and the team, which is outstanding. So that's kind of how we looked at the risk originally. It was earlier, but derisked in many ways that typically earlier-stage compounds are not. But we're constantly assessing both the probability of success, which we define as an approval and launch and then obviously discounting the commercial risk over a significant period of time. And in general, that's how we approach that. And what was the second part of your question, Yigal?

Yigal Nochomovitz

I was just curious about how you think about acquiring additional options on some of their other topical candidates given the royalty you have there.

Todd Davis

Yes. There's no tangible discussions ongoing right now. And Palvella has very strong, significant access to capital. But of course, we're always engaged with our partners. We work hard on the origination effort with the deal teams to meet new management teams, assess the assets and the team's ability to execute. Of course, we're doing that within our own portfolio as well.

The Palvella team is outstanding. So of course, we're always willing to engage with partners like Palvella and put follow-on capital. In fact, since the original investment, which don't quote me on this, I could be wrong. I think it was 2019 that when Ligand came into the deal, we have followed on in every single round of investment, including the equity rounds. So we're not really an equity finance strategy, but we will use equity as a tool to support our partners because that helps get round syndicated. It shows support from the inside. Of course, it makes our royalties more valuable. So there's a self-serving element to that, but that's paid off for us very nicely as well.

Operator

Your next question comes from the line of Leland Gershell with Oppenheimer.

Leland Gershell

Just wondering, in terms of the cost synergies post XOMA, just wondering, I think maybe it was on your last earnings call, you had mentioned that those may be even better than you had originally expected. So just curious if you could give us a sense of what you see to be kind of the quarterly ongoing run rate for G&A as you remove 1X costs and transaction integration costs and so forth. Where do you stand on the XOMA cost synergies?

Todd Davis

Yes. Go ahead, Tavo.

Octavio Espinoza

Thanks, Leland, for the question. So we acquired a business that had a cash operating expense run rate above $25 million. when we announced the acquisition and then reaffirmed when we closed the deal that we would bring that down to approximately a $5 million run rate post-acquisition. What we're seeing today is that that's going to perhaps be a tad better than that. So modeling out the future, I'd keep it to just under $5 million per year in additional incremental cost as a result of the acquisition. So that's been a very nice outcome in that regard.

Leland Gershell

Okay. Great. And then just wanted to ask another question with respect to Q4. It does seem you're being conservative here on the top line. Just wondering if there's any particular driver for that conservatism? Is it just estimates from the sell side that may change with the true-up? Just wondering what's driving your conservatism in Q4 revenues.

Octavio Espinoza

Yes. We have line of sight on a lot of the below-the-line items, operating expenses, share count, tax rates and things that we have more direct control in, and that's what inspired the move in the earnings per share guide. On the top line, like I mentioned in my prepared remarks, the order flow from Captisol customers, the regulatory clinical milestones, there's some uncertainty there. And so again, just taking a bit of a measured approach there and seeing -- and also seeing what we learned from our partners here over the next couple of weeks, I think, that's the primary driver behind our measured approach on the top line.

Operator

Your next question comes from the line of Sahil Dhingra with RBC Capital Markets.

Sahil Dhingra

This is Sahil for Doug. My questions are related to your two recent acquisitions. So first on Ryjunea. So we are aware there is an AdCom for the drug in the U.S. despite the clinical trial meeting both endpoints. So my question there is, does the U.S. regulatory skepticism post any read across risk to European prescriber confidence? Or any reimbursement negotiations for the drug? Or do you view that EU and U.K. approval are sufficiently independent? And also, is there any risk of unregulated compounded atropine in the regions where it is approved?

Todd Davis

Yes. Go ahead, Paul.

Paul Hadden

Yes. So Sahil, thank you for the question. To answer the first part first, no, we don't view any read across as a risk. The product has been approved in Europe for a few quarters now, independent of what's been happening in the U.S. Obviously, the AdCom will be on Friday. But we feel comfortable and have conviction that Santen will continue to roll out the product. And with respect to your second part of the question, there are compounding pharmacies that have been distributing atropine, but that dynamic is moved now that they have an approved product that's regulated and obviously being distributed by a very formidable ophthalmology company in Santen. So we feel comfortable there.

Sahil Dhingra

Okay. That's helpful. And then my second question is related to the IRR and risk profile. So could you speak to the targeted IRR on the two acquisitions? And how does the risk return compared to a preclinical stage asset and the commercial product for with Ryjunea? And I'll leave it there.

Todd Davis

Yes. So on every deal, we basically are assessing the risk and estimating what we think is an appropriate risk rate. And then we price in excess of that because our objective is to create alpha for our investors. Also, we realize their estimates. So you want to price in excess of your risk assessment to make sure you've got some buffer there and are delivering appropriate returns.

Typically, in the commercial stage royalty space, you're seeing returns on investments of between kind of 9% and 12%. There's a lot of royalty capital in that space. It's highly competitive. Usually, there are multiple bids on a given asset or a financing situation, which is why for us, I think we're typically underwriting well in excess of that. Usually, that's for structural reasons like, for example, the acquisition of Apeiron in '23. That was a commercial asset, but we needed to buy the entire company and restructure the asset. So we delivered returns in the high teens is what we underwrote that, and it's overperforming. So that will deliver kind of in the low 20s and took a similar approach here on the Santen situation. And that's why our special situations approach is quite important. We have significant operating capabilities, and that allows us to execute and differentiate our approach in more complex situations, which generate superior returns for our investors.

Operator

There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.