Annual report pursuant to Section 13 and 15(d)

Stockholders' Equity

v3.22.4
Stockholders' Equity
 12 Months Ended
Dec. 31, 2022
Equity [Abstract]  
Stockholders' Equity Stockholders’ Equity
Share-based Compensation Expense
The following table summarizes share-based compensation expense from continuing operations (in thousands):
December 31,
2022
2021(a)
2020(a)
Share-based compensation expense as a component of:
Research and development expenses $ 10,970  $ 9,341  $ 8,513 
General and administrative expenses 39,911  19,985  16,612 
$ 50,881  $ 29,326  $ 25,125 
(a) Prior period amounts have been retrospectively adjusted to reflect the effects of the Separation.

Conversion and Modification of Equity Awards Outstanding at Separation Date
In connection with the OmniAb Separation on November 1, 2022, under the provisions of the existing plans, we adjusted our outstanding equity awards in accordance with the Merger Agreement to preserve the intrinsic value of the awards immediately before and after the Distribution. Upon the Distribution, employees holding stock options, restricted stock units and performance restricted stock units denominated in pre-Distribution Ligand stock received a number of otherwise-similar awards either in post-Distribution Ligand stock or in a combination of post-Distribution Ligand stock and OmniAb stock based on conversion ratios outlined for each group of employees in the Merger Agreement that we entered into in connection with the Distribution. The equity awards that were granted prior to March 2, 2022 were converted under the shareholder method, wherein employees holding outstanding equity awards received equity awards in both Ligand and OmniAb. For equity awards granted after March 2, 2022, for Ligand employees, the number of awards that were outstanding at the Separation were proportionately adjusted into post-Distribution Ligand stock to maintain the aggregate intrinsic value of the awards at the date of the Separation; for OmniAb employees, the number of awards that were outstanding at the Separation were proportionately adjusted into post-Distribution OmniAb stock to maintain the aggregate intrinsic value of the awards at the date of the Separation. The conversion ratio was determined based on the relative values of Ligand common stock in the “regular way” and “ex-distribution” markets during the five-trading day period prior to the closing of the business combination.
These modified awards otherwise retained substantially the same terms and conditions, including term and vesting provisions. Additionally, we will not incur any future compensation cost related to equity awards held by OmniAb employees and directors. We will incur future compensation cost related to OmniAb equity awards held by our employees.
Stock Plans
In June 2022, our stockholders approved the amendment and restatement of the Ligand Pharmaceuticals Incorporated 2002 Stock Incentive Plan (the “2002 Plan”). The amended and restated 2002 Plan, which is referred to herein as the “Restated Plan” was amended to increase the shares available for issuance by 1.0 million.
On July 29, 2022, our board of directors (the “Board”) approved the Ligand Pharmaceuticals Incorporated 2022 Employment Inducement Plan (the “2022 Inducement Plan”). The terms of the 2022 Inducement Plan are substantially similar to the terms of the Restated Plan with the exception that incentive stock options may not be issued under the 2022 Inducement Plan and awards under the 2022 Inducement Plan may only be issued to eligible recipients under the applicable Nasdaq Listing Rules. The 2022 Inducement Plan was adopted by the Board without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules. The Board has initially reserved 300,000 shares of the Company’s common stock for issuance pursuant to awards granted under the 2022 Inducement Plan.
As of December 31, 2022, there were 1.3 million shares available for future option grants or direct issuance under the Restated Plan and the 2022 Inducement Plan.
Following is a summary of our stock option plan activity and related information:
 
Shares
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term in
Years
Aggregate
Intrinsic
Value
(In thousands)
Balance at January 1, 2020 1,956,379  $ 77.54  5.45 $ 72,002 
Granted 806,300  $ 92.93 
Exercised (156,845) $ 21.26 
Forfeited (44,012) $ 91.30 
Balance at December 31, 2020 2,561,822  $ 85.59  6.09 $ 59,033 
Exercisable at December 31, 2020 1,611,830  $ 76.05  4.54 $ 53,286 
Options vested and expected to vest as of December 31, 2020 2,561,822  $ 85.59  6.09 $ 59,033 
Granted 393,589  $ 159.12 
Exercised (619,731) $ 54.28 
Forfeited (136,082) $ 110.83 
Balance at December 31, 2021 2,199,598  $ 106.00  6.34 $ 113,302 
Exercisable at December 31, 2021 1,391,952  $ 98.16  5.12 $ 80,849 
Options vested and expected to vest as of December 31, 2021 2,199,598  $ 106.00  6.34 $ 113,302 
Granted 863,245  $ 91.34 
Exercised (34,941) $ 38.56 
Forfeited (40,069) $ 78.46 
Balance at October 31, 2022 2,987,833  $ 102.92  0 $ 14,835 
Exercisable at October 31, 2022 1,769,629  $ 102.38  0 $ 13,722 
Options vested and expected to vest as of October 31, 2022, before Separation and Regrant 2,987,833  $ 102.92  0 $ 14,835 
Cancellation due to Separation, Before Regrant (2,987,833)
Balance at November 1, 2022, Before Regrant — 
Granted (1)
3,584,760  $ 60.10 
Exercised (50,449) $ 30.24 
Forfeited (542,838) $ 56.20 
Balance at December 31, 2022 2,991,473  $ 61.31  6.07 $ 30,477 
Exercisable at December 31, 2022 1,559,662  $ 60.83  4.51 $ 17,951 
Options vested and expected to vest as of December 31, 2022 2,991,473  $ 61.31  6.07 $ 30,477 
(1) Options granted primarily relate to the modifications in connection with the Separation which resulted in new stock option grants at the modification date fair value.

The weighted-average grant-date fair value of all stock options granted during 2022, 2021 and 2020 was $28.90, $80.08, and $41.39 per share, respectively. The total intrinsic value of all options exercised during 2022, 2021 and 2020 was approximately $4.6 million, $77.3 million, and $11.9 million, respectively.
Cash received from options exercised, net of fees paid, in 2022, 2021 and 2020 was $2.6 million, $33.0 million and $2.5 million, respectively.
Following is a further breakdown of the options outstanding as of December 31, 2022:
Range of exercise prices
Options
outstanding
Weighted
average
remaining  life
in years
Weighted average
exercise price
Options
exercisable
Weighted average
exercise price
$12.78-$43.36
 395,660  2.32 $ 35.76  366,426  $ 35.44 
$46.20-$52.78
 279,405  6.63 $ 50.24  122,734  $ 50.18 
$52.84-$52.84
 580,629  7.59 $ 52.84  88,647  $ 52.84 
$54.81-$57.22
 391,280  6.47 $ 56.24  198,283  $ 56.26 
$58.28-$67.03
 477,042  5.78 $ 64.11  274,719  $ 62.90 
$67.24-$69.70
 403,187  6.93 $ 68.98  207,981  $ 68.60 
$70.04-$93.12
 254,738  5.56 $ 87.72  204,332  $ 89.21 
$99.80-$99.80
 3,389  5.84 $ 99.80  3,389  $ 99.80 
$103.42-$103.42
 193,177  7.26 $ 103.42  80,185  $ 103.42 
$114.15-$114.15
 12,966  5.47 $ 114.15  12,966  $ 114.15 
2,991,473  6.07 $ 61.31  1,559,662  $ 60.83 

The assumptions used for the specified reporting periods and the resulting estimates of weighted-average grant date fair value per share of options granted:
  Year Ended December 31,
  2022 2021 2020
Risk-free interest rate
1.4%-4.3%
0.4%-1.2%
0.2%-1.4%
Expected volatility
49%-55%
47%-63%
47%-71%
Expected term
2.0 to 6.5 years
4.7 to 6.3 years
4.7 to 5.1 years

As of December 31, 2022, there was $32.7 million of total unrecognized compensation cost related to non-vested stock options under the 2002 Plan. That cost is expected to be recognized over a weighted average period of 2.7 years.
As of December 31, 2022, there was $4.8 million of total unrecognized compensation cost related to non-vested OmniAb stock options received upon aforementioned spin-off conversion. That cost is expected to be recognized over a weighted average period of 1.8 years.
Restricted Stock Activity
The following is a summary of our restricted stock activity and related information: 
Shares
Weighted-Average
Grant Date Fair
Value
Outstanding at January 1, 2020 147,259  $ 125.11 
Granted 111,306  $ 89.73 
Vested (52,363) $ 121.69 
Forfeited —  $ — 
Outstanding at January 1, 2021 206,202  $ 106.88 
Granted 167,292  $ 169.63 
Vested (98,501) $ 125.59 
Forfeited (10,850) $ 141.85 
Outstanding at December 31, 2021 264,143  $ 138.21 
Granted 260,577  $ 89.99 
Vested (138,867) $ 120.57 
Forfeited (19,383) $ 58.45 
Outstanding at October 31, 2022, before Separation and Regrant 366,470  $ 114.83 
Forfeited due to Separation, Before Regrant (366,470)
Balance at November 1, 2022, Before Regrant — 
Granted 424,473  $ 75.61 
Vested (73,385) $ 75.17 
Forfeited (2,635) $ 89.05 
Balance at December 31, 2022 348,453  $ 75.60 

As of December 31, 2022, unrecognized compensation cost related to non-vested stock awards under the 2002 Plan amounted to $12.4 million. That cost is expected to be recognized over a weighted average period of 1.7 years.
As of December 31, 2022, there was $1.2 million of total unrecognized compensation cost related to non-vested OmniAb stock awards received upon aforementioned spin-off conversion. That cost is expected to be recognized over a weighted average period of 1.0 years.
Employee Stock Purchase Plan
As of December 31, 2022, 35,881 shares of our common stock are available for future issuance under the Amended Employee Stock Purchase Plan, or ESPP. The ESPP permits eligible employees to purchase up to 1,250 shares of Ligand common stock per calendar year at a discount through payroll deductions. The price at which stock is purchased under the ESPP is equal to 85% of the fair market value of the common stock on the first of a six month offering period or purchase date, whichever is lower. There were 8,479, 8,448 and 6,455 shares issued under the ESPP in 2022, 2021 and 2020, respectively.
Share Repurchases
In September 2019, our Board of Directors approved a stock repurchase program authorizing the repurchase of up to $500.0 million of our common stock from time to time over a period of up to three years. This repurchase program expired in September 2022. During the year ended December 31, 2022 and 2021, we did not repurchase any common stock, respectively. During the year ended December 31, 2020, we repurchased 934,079 shares for $78.0 million.

At-the Market Equity Offering Program
On September 30, 2022, we filed a registration statement on Form S-3 (the “Shelf Registration Statement”), which became automatically effective upon filing, covering the offering of common stock, preferred stock, debt securities, warrants and units.
On September 30, 2022, we also entered into an At-The-Market Equity Offering Sales Agreement (the “Sales Agreement”) with Stifel, Nicolaus & Company, Incorporated (the “Agent”), under which we may, from time to time, sell shares of our common stock having an aggregate offering price of up to $100.0 million in “at the market” offerings through the Agent (the
“ATM Offering”). The Shelf Registration Statement included a prospectus covering the offering, issuance and sale of up to $100.0 million of our common stock from time to time through the ATM Offering. The shares to be sold under the Sales Agreement may be issued and sold pursuant to the Shelf Registration Statement. To date, we have not issued any shares of common stock in the ATM Offering.
Balance Sheet Account Details Balance Sheet Account Details
Short-term Investments
Excluding our investments in Viking, the following table summarizes the various investment categories at December 31, 2022 and 2021 (in thousands):
Cost
Gross unrealized
gains
Gross unrealized
losses
Estimated
fair value
December 31, 2022
Short-term investments
Mutual Funds $ 81,815  $ —  $ (1050) $ 80,765 
Bank deposits 5,012  2  (34) 4,980 
     Commercial paper 7,211  3  —  7,214 
Corporate bonds 6,701  13  (58) 6,656 
Corporate equity securities 5,807  262  (4,239) 1,830 
U.S. government securities 2,232  —  (70) 2,162 
Warrants —  135  —  135 
$ 108,778  $ 415  $ (5,451) $ 103,742 
December 31, 2021
Short-term investments
     Mutual fund $ 152,136  $ —  $ (249) $ 151,887 
     Bank deposits 63,389  13  (21) 63,381 
     Commercial paper 36,008  2  (12) 35,998 
     Corporate bonds 29,308  17  (38) 29,287 
     Corporate equity securities 5,807  402  (2,027) 4,182 
     U.S. government securities 5,577  —  (23) 5,554 
     Warrants —  408  —  408 
$ 292,225  $ 842  $ (2,370) $ 290,697 

Gain (loss) from short-term investments on our consolidated statements of operations includes both realized and unrealized gain (loss) from our short-term investments in public equity and warrant securities, and realized gain (loss) from available-for-sale debt securities.
The following table summarizes our available-for-sale debt securities by contractual maturity (in thousands):
December 31, 2022
Amortized Cost Fair Value
Within one year $ 57,158  $ 57,036 
After one year through five years 2,794  2,769 
     Total $ 59,952  $ 59,805 
The following table summarizes our available-for-sale debt securities in an unrealized loss position (in thousands):

Less than 12 months 12 months or greater Total
Gross
Unrealized
Losses		 Estimated
Fair Value		 Gross
Unrealized
Losses		 Estimated
Fair Value		 Gross
Unrealized
Losses		 Estimated
Fair Value
December 31, 2022
Bank deposits $ (34) $ 2,470  $ —  $ —  $ (34) $ 2,470 
Corporate bonds (21) 3,887  (37) 947  (58) 4,834 
Commercial paper —  3,836  —  —  —  3,836 
U.S. Government Securities (70) 2,161  —  —  (70) 2,161 
     Total $ (125) $ 12,354  $ (37) $ 947  $ (162) $ 13,301 
December 31, 2021
Bank deposits $ (13) $ 20,008  $ —  $ —  $ (13) $ 20,008 
Corporate bonds (15) 27,252  (5) 2,996  (20) 30,248 
Commercial paper (6) 6,689  (32) 10,125  (38) 16,814 
U.S. Government Securities —  —  (23) 5,553  (23) 5,553 
     Total $ (34) $ 53,949  $ (60) $ 18,674  $ (94) $ 72,623 

Our investment policy is capital preservation and we only invested in U.S.-dollar denominated investments. We held a total of 12 positions which were in an unrealized loss position as of December 31, 2022. We believe that we will collect the principal and interest due on our debt securities that have an amortized cost in excess of fair value. The unrealized losses are largely due to changes in interest rates and not to unfavorable changes in the credit quality associated with these securities that impacted our assessment on collectability of principal and interest. We do not intend to sell these securities nor do we believe that we will be required to sell these securities before the recovery of the amortized cost basis. Accordingly, no credit losses were recognized for the twelve months ended December 31, 2022.
Property and equipment are stated at cost and consists of the following (in thousands):
December 31,
2022 2021
Lab and office equipment $ 14,172  $ 13,417 
Leasehold improvements 7,446  5,265 
Computer equipment and software 989  924 
22,607  19,606 
Less accumulated depreciation and amortization (10,125) (6,415)
$ 12,482  $ 13,191 
Depreciation of equipment is computed using the straight-line method over the estimated useful lives of the assets which ranges from three to ten years. Leasehold improvements are amortized using the straight-line method over their estimated useful lives or their related lease term, whichever is shorter. Depreciation expense of $3.8 million, $2.4 million, and $1.5 million was recognized for the twelve months ended December 31, 2022, 2021, and 2020, respectively, and was included in operating expenses.
Goodwill and identifiable intangible assets consist of the following (in thousands):
December 31,
2022 2021
Indefinite-lived intangible assets
     Goodwill $ 105,673  $ 105,673 
Definite-lived intangible assets
     Complete technology 55,211  55,211 
          Less: Accumulated amortization (22,560) (18,916)
     Trade name 2,642  2,642 
          Less: Accumulated amortization (1,577) (1,444)
     Customer relationships 29,600  29,600 
          Less: Accumulated amortization (17,670) (16,184)
     Contractual relationships 362,000  362,000 
Less: Accumulated amortization (65,191) (36,218)
Total goodwill and other identifiable intangible assets, net $ 448,128  $ 482,364 

Amortization of finite-lived intangible assets is computed using the straight-line method over the estimated useful life of the asset of up to 20 years. Amortization expense of $34.2 million, $34.2 million, and $11.6 million was recognized for the years ended December 31, 2022, 2021, and 2020, respectively. Estimated amortization expense for the years ending December 31, 2023 through 2027 is $34.1 million per year. For each of the years ended December 31, 2022, 2021, and 2020, there was no material impairment of intangible assets with finite lives.
Accrued liabilities consist of the following (in thousands):
  December 31,
  2022 2021
Compensation $ 6,201  $ 6,532 
Professional fees 662  2,046 
Amounts owed to former licensees 3,989  630 
Royalties owed to third parties 12  149 
Return reserve and customer refunds —  2,420 
Acquisition related liabilities —  1,000 
Subcontractor —  1,759 
Supplier 634  848 
Other 4,183  2,195 
$ 15,681  $ 17,579 

Contingent liabilities:
In connection with the acquisition of CyDex in January 2011, we issued a series of CVRs and also assumed certain contingent liabilities. We may be required to make additional payments upon achievement of certain clinical and regulatory milestones to the CyDex shareholders and former license holders.
In connection with the acquisition of Metabasis in January 2010, we entered into four CVR agreements with Metabasis shareholders. The CVRs entitle the holders to cash payments as frequently as every six months as proceeds are received by us upon the sale or licensing of any of the Metabasis drug development programs and upon the achievement of specified milestones.
For CVRs associated with the Pfenex, see “Note (4), Acquisitions” for more information.
The following table summarizes roll-forward of contingent liabilities as of December 2022 and 2021 (in thousands):
December 31, 2020 Payments Fair Value Adjustment December 31, 2021 Payments Fair Value Adjustment Repurchases December 31, 2022
Cydex $ 507  $ (50) $ (108) $ 349  $ —  $ (265) $ —  $ 84 
Metabasis 3,822  —  (464) 3,358  —  71  —  3,429 
Pfenex 37,600  —  (37,600) —  —  —  —  — 
Total $ 41,929  $ (50) $ (38,172) $ 3,707  $ —  $ (194) $ —  $ 3,513