In July 2025, we closed our definitive merger agreement to combine Ligand’s wholly owned subsidiary, LNHC, Inc., the holding company for the Pelthos Therapeutics business, with CHRO Merger Sub Inc., a wholly owned subsidiary of Channel Therapeutics Corporation (“Channel”). Upon the effectiveness of the merger, LNHC, Inc. became a wholly owned subsidiary of Channel, and Channel changed its name to “Pelthos Therapeutics Inc.” (“Pelthos”) and began trading on the NYSE American exchange under the ticker symbol “PTHS.” We received shares of Pelthos common stock in connection with the merger. The merger was supported by approximately $50.0 million in equity private placement capital raised from a group of strategic investors (including Ligand) led by Murchinson Ltd. (“Investor Group”).

In connection with the Pelthos Transaction Ligand also invested $18.0 million and the other members of the Investor Group invested $32.0 million in Pelthos in exchange for shares of Pelthos’ Series A convertible preferred stock. Out of the $18.0 million invested by Ligand, $12.7 million was invested by us prior to the closing of the Pelthos Transaction in the form of an intercompany loan. In connection with the closing of the Pelthos Transaction, this intercompany loan was cancelled, and we contributed the remaining $5.3 million to Pelthos. The transactions described herein are collectively referred to as the “Pelthos Transaction.” As of June 30, 2026, we owned approximately 40% of Pelthos’ outstanding shares of common stock and approximately 66% of its outstanding shares of Series A convertible preferred stock. As of December 31, 2025, we owned approximately 48% of Pelthos’ outstanding shares of common stock and approximately 60% of its outstanding shares of Series A convertible preferred stock. Our ownership interest in Pelthos common stock is capped at 49.9% pursuant to the terms of the definitive agreements governing the Pelthos Transaction.

Our CEO and director, Todd Davis, also served as a director on Channel’s board of directors. Mr. Davis did not participate in, and recused himself from, both boards’ consideration and approval of the Pelthos Transaction, which, in the case of the Company, was approved by an authorized special transaction committee of the Board. Upon the consummation of the Pelthos Transaction, Mr. Davis and Richard Baxter, our Senior Vice President of Investment Operations, were appointed to Pelthos’ board of directors. As of June 30, 2026, Mr. Davis and Mr. Baxter continue to serve as members on the board of directors of Pelthos.

We recorded our Pelthos Series A convertible preferred shares and Pelthos common shares within other investments and equity method investments, respectively, in our condensed consolidated balance sheets, and elected to subsequently measure these investments under the fair value option. Changes in fair value are recognized in earnings each reporting period and presented as gain (loss) from change in fair value of equity method investments and other investments in our condensed consolidated statements of operations. Ligand was restricted from engaging in any transactions involving Pelthos common stock during the lock‑out period from July 1, 2025 through December 31, 2025.