Debt |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt | Debt 0.00% Convertible Senior Notes due 2031 In June 2026, we issued $700.0 million aggregate principal amount of 0.00% convertible senior notes due 2031 (the “2031 Notes”). The aggregate principal amount includes $75.0 million of additional notes purchased by the initial purchasers pursuant to their full exercise of the option to purchase additional notes. Net proceeds from the offering were approximately $679.0 million, after deducting fees and expenses. The 2031 Notes are general senior, unsecured obligations of Ligand and do not bear regular interest. The 2031 Notes will mature on September 15, 2031, unless earlier converted, redeemed or repurchased. Upon conversion, we will pay cash up to the aggregate principal amount of the 2031 Notes being converted and will pay or deliver, as applicable, cash, shares of our common stock, or a combination of cash and shares of our 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 2031 Notes being converted, in the manner and subject to the terms and conditions provided in the Indenture, dated June 25, 2026, entered into in connection with the 2031 Notes issuance (the “2031 Notes Indenture”). Holders may convert their 2031 Notes at their option prior to June 15, 2031, under certain circumstances, and at any time on or after June 15, 2031, until the second scheduled trading day immediately preceding the maturity date. The initial conversion rate is 2.9916 shares of our common stock per $1,000 principal amount of the 2031 Notes (equivalent to an initial conversion price of approximately $334.27 per share), subject to adjustment upon the occurrence of certain events. The maximum conversion rate, subject to adjustment, is 3.8143 shares of our common stock per $1,000 principal amount of the 2031 Notes, equivalent to a conversion price of approximately $262.17 per share. The 2031 Notes are not redeemable by us prior to September 21, 2029. On or after that date, and prior to the 51st scheduled trading day immediately preceding the maturity date of the 2031 Notes, we may redeem for cash all or part of the 2031 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 2031 Notes for cash at 100% of the principal amount plus accrued and unpaid interest, if any, to, but excluding, the purchase date, upon the occurrence of a “Fundamental Change” (as defined in the 2031 Notes Indenture). We account for the 2031 Notes in accordance with ASC 470-20, Debt with Conversion and Other Options. At issuance, we evaluated the terms of the 2031 Notes and determined that the embedded conversion feature does not require separate accounting as a derivative. The 2031 Notes are recorded as a single liability measured at amortized cost. Interest expense includes amortization of debt issuance costs, as discussed below. In connection with the issuance of the 2031 Notes in June 2026, we incurred approximately $21.0 million of debt discount and issuance costs, which primarily consisted of underwriting, legal and other professional fees. These costs are netted against the total debt liability and are amortized to interest expense using the effective interest method over the expected life of the 2031 Notes. The annual effective interest rate was 0.6% for the three and six months ended June 30, 2026. During the three and six months ended June 30, 2026, we recognized total interest expense of $0.01 million, consisting primarily of the amortization of debt issuance costs. The 2031 Notes 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. The following table summarizes information about the 2031 Notes and 2030 Notes as of June 30, 2026 (in thousands):
Convertible Note Hedge and Warrant Transactions Related to the 2031 Notes In connection with the pricing of the 2031 Notes and the initial purchasers’ exercise of their overallotment option to purchase additional notes, in June 2026, we entered into convertible note hedge transactions with certain of the initial purchasers of the 2031 Notes or their affiliates and certain other financial institutions (the “2031 Notes option counterparties”), with the intent to reduce the potential dilution to holders of our common stock upon conversion of the 2031 Notes and/or offset any cash payments we may be required to make in excess of the principal amount upon conversion of the 2031 Notes. The convertible note hedges have an exercise price of $334.27 per share and are exercisable when and if the 2031 Notes are converted. The convertible note hedge transactions are classified as equity instruments and are not accounted for as derivatives under ASC 815 because they meet the criteria for equity classification under ASC 815-40. We paid approximately $195.8 million for these convertible note hedge transactions, which was recorded as a reduction to additional paid-in capital in accordance with ASC 815-40. The convertible note hedge transactions will not be remeasured at fair value after initial recognition. We also entered into warrant transactions with the 2031 Notes option counterparties in connection with the pricing of the 2031 Notes and the initial purchasers’ exercise of their option to purchase additional notes, pursuant to which we issued warrants to purchase 2,094,120 shares of common stock (the “warrants”) to the 2031 Notes option counterparties. The warrant transactions may 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 is initially $524.34 per share, subject to customary anti-dilution adjustments under the terms of the warrants. We received approximately $114.1 million from the issuance of these warrants. The warrants have various expiration dates ranging from December 15, 2031 to May 7, 2032. 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 hedge transaction and the issuance of the warrants described above are each a separate transactions entered into by us and the 2031 Notes options counterparties and are not part of the terms of the 2031 Notes. 0.75% Convertible Senior Notes due 2030 In August 2025, we issued $460.0 million aggregate principal amount of 0.75% convertible senior notes due 2030 (the “2030 Notes”). The aggregate principal amount includes $60.0 million of additional notes purchased by the initial purchasers pursuant to their full exercise of the option to purchase additional notes. Net proceeds from the offering were approximately $445.1 million, after deducting the initial purchasers’ discount and debt issuance cost. The 2030 Notes are general senior, unsecured obligations of Ligand and accrue interest at a rate of 0.75% per year, payable semiannually in arrears on April 1 and October 1 of each year, beginning on April 1, 2026. The 2030 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 2030 Notes being converted and will pay or deliver, as applicable, cash, shares of our common stock, or a combination of cash and shares of our 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 2030 Notes being converted, in the manner and subject to the terms and conditions provided in the Indenture entered into in connection with the 2030 Notes issuance (the “2030 Notes Indenture”). Holders may convert their 2030 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 the 2030 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 shares of our common stock per $1,000 principal amount of the 2030 Notes, equivalent to a conversion price of approximately $147.01. The 2030 Notes are not redeemable by us prior to October 6, 2028. On or after that date, and prior to the 51st scheduled trading day immediately preceding the maturity date of the 2030 Notes, we may redeem for cash all or part of the 2030 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 2030 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 2030 Notes Indenture). We account for the 2030 Notes in accordance with ASC 470-20, Debt with Conversion and Other Options. At issuance, we evaluated the terms of the 2030 Notes and determined that the embedded conversion feature does not require separate accounting as a derivative. The 2030 Notes are recorded as a single liability measured at amortized cost. Interest expense includes interest recognized at the stated coupon rate, and amortization of the debt discount and issuance costs, as discussed below. In connection with the issuance of the 2030 Notes in August 2025, 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 against the total debt liability and are amortized to interest expense using the effective interest method over the five-year expected life of the 2030 Notes. The annual effective interest rate, including the coupon portion, was 1.4% for the three and six months ended June 30, 2026. During the three months ended June 30, 2026, we recognized a total of $1.6 million in interest expense, which includes $0.9 million in coupon expense and $0.7 million in amortized issuance costs. During the six months ended June 30, 2026, we recognized a total of $3.1 million in interest expense, which includes $1.7 million in coupon expense and $1.4 million in amortized issuance costs. The 2030 Notes 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. Convertible Note Hedge and Warrant Transactions Related to the 2030 Notes In connection with the pricing of the 2030 Notes and the initial purchasers’ exercise of their overallotment option to purchase additional notes, in August 2025, we entered into convertible note hedge transactions with certain of the initial purchasers of the 2030 Notes or their affiliates and certain other financial institutions (the “2030 Notes option counterparties”), with the intent to reduce the potential dilution to holders of our common stock upon conversion of the 2030 Notes and/or offset any cash payments we may be required to make in excess of the principal amount upon conversion of the 2030 Notes. The convertible note hedges have an exercise price of $194.79 per share and are exercisable when and if the 2030 Notes are converted. If upon conversion of the 2030 Notes, the price of our common stock is above the exercise price of the convertible note hedges, the 2030 Notes 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 transactions are classified as equity instruments and are not accounted for as derivatives under ASC 815, because they meet the criteria for equity classification under ASC 815-40. We paid $113.3 million for these convertible note hedges, which were recorded as a reduction to additional paid-in capital in accordance with ASC 815-40. The convertible note hedge transactions are not remeasured at fair value after initial recognition. We also entered into warrant transactions with the 2030 Notes option counterparties in connection with the pricing of the 2030 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 the 2030 Notes option counterparties. The warrant transactions may 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 from the issuance of these warrants. The warrants have various expiration dates ranging from January 2, 2031 to May 27, 2031. 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 2030 Notes. Holders of the 2030 Notes or warrants will not have any rights with respect to the convertible note hedges. Revolving Credit Facility On October 12, 2023, we entered into a $75.0 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 (as amended from time to time, 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 $75.0 million to fund the Revolving Credit Facility. Borrowings under the Revolving Credit Facility accrue interest at a rate equal to either the Term Secured Overnight Financing Rate (“Term SOFR”) or a specified base rate, in each case 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 on unused 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 in the swingline, 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 financial maintenance covenants, and events of default applicable to us. In the event of a violation of the representations, warranties and covenants made in the Credit Agreement, we may not be able to utilize the Revolving Credit Facility or the repayment of amounts outstanding thereunder could be accelerated. Amendments to Revolving Credit Facility On July 8, 2024, we entered into the first amendment to the Credit Agreement, which, among other things, increases the aggregate Revolving Credit Facility amount from $75.0 million to $125.0 million. In connection with the offering of the 2030 Notes, on August 11, 2025, we entered into the second amendment to the Credit Agreement, which, among other things, permits certain cash settlement payments on the 2030 Notes, subject to customary conditions set forth therein. On September 12, 2025, we entered into the third amendment to the Credit Agreement, which, among other things, extends the maturity date of the Revolving Credit Facility to September 12, 2028 and modifies the minimum consolidated EBITDA (as defined in the Credit Agreement) covenant to require us to maintain not less than $55.0 million of consolidated EBITDA for the trailing four-quarter period ended September 30, 2025 and each trailing four-quarter period ending thereafter. In connection with the issuance of the 2031 Notes, on June 22, 2026, we entered into the fourth amendment to the Credit Agreement, which, among other things, permits the issuance of the 2031 Notes and modifies the minimum Consolidated EBITDA for the four consecutive fiscal quarter periods ending June 30, 2026, September 30, 2026, December 31, 2026, and March 31, 2027 to be $100.0 million and for the fiscal quarter periods ending June 30, 2027 and thereafter, $150.0 million. As of June 30, 2026, and December 31, 2025, we had $124.4 million of available borrowing capacity under the Revolving Credit Facility and $0.6 million of letters of credit outstanding.
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