We are a biopharmaceutical royalty company focused on deploying capital and licensing technologies to acquire and create diversified royalty streams from high-value medicines. Our primary business is investing in and structuring royalty interests in mid- to late-stage development and commercial biopharmaceutical products, allowing us to generate long-duration, non-dilutive cash flows supported by a lean corporate cost structure. Capital deployment and technology licensing are the primary drivers of our long-term growth.

Beginning in the third quarter of 2026, we changed the presentation of changes in the fair value of the contingent value rights (“CVRs”). These changes, previously reported in other non-operating income (expense), net, are now reported in a separate line item, “fair value adjustments to contingent liabilities,” within operating costs and expenses. We applied this change retrospectively, and prior period amounts have been reclassified to conform to the current period presentation.

As a result of the reclassification, we recorded losses of $6.3 million and 5.8 million within operating costs and expenses for the three and nine months ended September 30, 2026, respectively, and a gain of $0.5 million and a loss of $1.5 million for the three and nine months ended September 30, 2025, respectively. Each amount is offset by an equal and opposite change in other non-operating income (expense), net.

Our unaudited condensed consolidated financial statements include our financial statements and those of our wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. We have included all adjustments, consisting only of normal recurring adjustments, which we considered necessary for a fair presentation of our financial results. These unaudited condensed consolidated financial statements and accompanying notes should be read together with the audited consolidated financial statements included in our 2025 Annual Report. Interim financial results are not necessarily indicative of the results that may be expected for the full year.

We have one operating and reportable segment: investing in the clinical development and commercialization of high-value medicines. Our Chief Operating Decision Maker (“CODM”) is Todd Davis, our Chief Executive Officer and director. The CODM uses net income (loss) as a single segment profit or loss measure to evaluate our single segment performance, and in deciding whether to invest in the existing assets, or to new potential opportunities. Our CODM relies on internal management reporting processes that provide information on the segment operating (loss) income measure, as presented in our condensed statement of operations, for making financial decisions and allocating resources. The CODM does not evaluate, manage or measure performance of segments using asset information.


	Three months ended				Nine months ended
	September 30,				September 30,
	2026		2025		2026		2025
Total revenues and income	$	78,746	$	115,461	$	194,161	$	208,421
Share-based compensation	(29,026)		(14,746)		(53,275)		(32,579)
Other segment items:
Amortization of intangibles	(10,205)		(8,097)		(26,399)		(24,612)
Depreciation of property and equipment	(118)		(172)		(355)		(949)
Interest income	5,492		3,874		19,445		7,266
Interest expense	(2,898)		(910)		(6,393)		(2,930)
Other	(70,476)		21,863		(120,506)		(74,948)
Net (loss) income	$	(28,485)	$	117,273	$	6,678	$	79,669

Other for the three months ended September 30, 2026 and 2025 include the amount of other general, administrative, research and development expenses of $46.2 million and $34.5 million (net of share-based compensation and depreciation expenses), respectively, and additional income and expense items that are presented in the condensed consolidated statements of operations such as fair value adjustments to contingent liabilities, cost of Captisol and other non-operating income and expenses.

Other for the nine months ended September 30, 2026 and 2025 include the amount of other general, administrative, research and development expenses of $88.5 million and $111.6 million (net of share-based compensation and depreciation expenses), respectively, and additional income and expense items that are presented in the condensed consolidated statements of operations such as fair value adjustments to contingent liabilities, cost of Captisol and other non-operating income and expenses.

The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires the use of estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and the accompanying notes. Actual results may differ from those estimates and assumptions.

Our revenue is generated primarily from royalties on sales of products commercialized by our partners, supplemented by Captisol material sales and contract revenue from license fees and milestone payments. We partner with leading biopharmaceutical companies to leverage their capabilities in late-stage development, regulatory execution, and commercialization, while we focus on disciplined capital deployment, portfolio construction, and risk management. This also allows us to leverage each partner’s asset infrastructure in sales and marketing, manufacturing and R&D to avoid maintaining high-cost infrastructure ourselves.

For all revenue transactions, we apply the five‑step model in accordance with ASC 606, Revenue from Contracts with Customers, to determine revenue: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) we satisfy each performance obligation.

We receive royalty revenue from intangible royalty assets based on sales by our partners of products covered by patents that we or our partners own under contractual agreements. We do not have future performance obligations under these license arrangements. We generally satisfy our obligation to grant intellectual property rights on the effective date of the contract. However, we apply the royalty recognition constraint required for sales‑based royalties, which requires royalties to be recorded no earlier than when the underlying sale occurs. Accordingly, royalties on sales of products commercialized by our partners are recognized in the quarter in which the product is sold. Our partners generally report sales information to us on a one‑quarter lag. As a result, we estimate expected royalty proceeds based on an analysis of historical experience and interim data provided by

We account for financial royalty assets related to developmental pipeline or recently commercialized products on a non-accrual basis. Developmental pipeline products are non-commercialized, non-approved products that require FDA or other regulatory approval, and thus have uncertain cash flows. Newly commercialized products typically do not have an established and reliable sales pattern, and thus have uncertain cash flows.

Revenue from Captisol sales is recognized when control of Captisol material is transferred or intellectual property license rights are granted to our customers in an amount that reflects the consideration we expect to receive in exchange for those products or rights. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. For Captisol material or intellectual property license rights, we consider our performance obligation satisfied once we have transferred control of the product or granted the intellectual property rights, meaning the customer has the ability to use and obtain the benefit of the Captisol material or intellectual property license rights. We recognize revenue for satisfied performance obligations only when we determine there are no uncertainties regarding payment terms or transfer of control. Sales tax and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. We have elected to recognize the cost of freight and shipping when control over Captisol material has been transferred to the customer as an expense in cost of Captisol. We expense incremental costs of obtaining a contract when incurred if the expected amortization period of the asset is one year or less or the amount is immaterial. We did not incur any incremental costs of obtaining a contract during the periods reported.

Our contracts with customers often include variable consideration in the form of contingent milestone payments. We include contingent milestone payments in the estimated transaction price when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. These estimates are based on historical experience, anticipated results and our best judgment at the time. If the contingent milestone payment is based on sales, we apply the royalty recognition constraint and record revenue when the underlying sale occurs. Significant judgments are required in determining the transaction price for our sales of intellectual property. Because of the risk that products in development with our partners will not reach development milestones or receive regulatory approval, we generally recognize any contingent payments that would be due to us upon the development milestone or regulatory approval.


	Three months ended				Nine months ended
	September 30,				September 30,
	2026		2025		2026		2025
Royalties
Filspari	$	16,839	$	9,078	$	41,728	$	20,957
Kyprolis	10,489		11,619		24,273		25,145
Capvaxive	3,801		3,206		8,086		6,341
Ohtuvayre	3,704		2,717		10,835		6,213
Rylaze	3,534		3,557		9,956		9,540
Teriparatide injection	1,325		2,632		4,116		6,121
Vaxneuvance	1,070		2,039		4,031		5,967
Other	6,665		5,313		14,695		11,548
Revenue from intangible royalty assets	47,427		40,161		117,720		91,832
Ojemda	7,002		—		7,002		—
Qarziba	5,952		5,976		18,401		17,303
Vabysmo	3,578		—		3,578		—
Ohtuvayre inventors	3,251		—		9,592		—
Miplyffa	1,675		—		1,675		—
Other	1,399		449		3,306		1,337
Income from financial royalty assets	22,857		6,425		43,554		18,640
Total royalties	70,284		46,586		161,274		110,472

Captisol	7,946		10,672		24,578		32,419
Contract revenue and income
Income from Pelthos Transaction	—		53,072		—		53,072
Contract revenue	341		131		3,134		6,441
Income	175		5,000		5,175		6,017
Total contract revenue and income	516		58,203		8,309		65,530
Total revenues and income	$	78,746	$	115,461	$	194,161	$	208,421

The restricted cash balance is restricted for use in connection with certain obligations under the Generation Bio merger agreement and Generation Bio CVR agreement, lease payments under Lease Agreement between HilleVax, Inc. and B9 LS Harrison & Washington LLC, dated March 14, 2022 (the “Boston Lease”) that XOMA acquired in its 2025 acquisition of HilleVax, Inc., tax reserve matter expenses and the additional closing net cash amount under the LAVA purchase agreement and LAVA CVR agreement, and obligations under the Metabasis CVR agreement.


	September 30, 2026
Current restricted cash held for Boston Lease payments	$	4,059
Current restricted cash held for Metabasis CVR payments	53
Total current restricted cash	4,112

Noncurrent restricted cash held for Boston Lease payments	34,950
Noncurrent restricted cash held for LAVA CVR payments	6,738
Noncurrent restricted cash held for Boston Lease security deposit	1,633
Total noncurrent restricted cash	43,321
Total restricted cash	$	47,433


September 30, 2026	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
U.S. Government Agencies	$	109,368	$	—	$	(696)	$	108,672
Corporate notes/bonds	101,483		—		(514)		100,969
U.S. Treasuries	74,505		—		(407)		74,098
Commercial paper	32,989		—		(94)		32,895
Corporate equity securities	21,905		56,802		(3,904)		74,803
Total short-term investments	$	340,250	$	56,802	$	(5,615)	$	391,437

December 31, 2025
U.S. Government Agencies	$	175,780	$	89	$	(38)	$	175,831
Corporate notes/bonds	124,249		98		(52)		124,295
U.S. Treasuries	113,055		137		(4)		113,188
Commercial paper	74,473		21		(8)		74,486
Corporate equity securities	15,733		58,852		(3,791)		70,794
Total short-term investments	$	503,290	$	59,197	$	(3,893)	$	558,594

(Loss) gain from short-term investments in our condensed consolidated statements of operations includes both realized and unrealized losses and gains from our short-term investments in corporate equity securities and realized losses and gains from available-for-sale debt securities. The cost of available-for-sale debt securities sold is determined using the specific identification method.

Our investment policy is capital preservation and we only invest in U.S.-dollar denominated investments. Allowances are recorded for available-for-sale debt securities with unrealized losses. This limits the amount of credit losses that can be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and requires the reversal of previously recognized credit losses if fair value increases.

cost in excess of fair value. The unrealized losses are largely due to changes in interest rates and not due to unfavorable changes in the credit quality associated with these securities that impacted our assessment of collectability of principal and interest. As of September 30, 2026, we did not intend to sell these securities, and it was not more likely than not that we would be required to sell them before recovery of their amortized cost basis. No credit losses were recognized for the three and nine months ended September 30, 2026 and 2025.

Our accounts receivable arise primarily from sales on credit to customers. We establish an allowance for credit losses to present the net amount of accounts receivable expected to be collected. The allowance is determined using the loss-rate method, which requires an estimation of loss rates based on historical loss experience adjusted for factors relevant to determining the expected collectability of accounts receivable. Some of these factors include macroeconomic conditions that correlate with historical loss experience, delinquency trends, aging behavior of receivables and credit and liquidity quality indicators for industry groups, customer classes or individual customers.

During the three months ended September 30, 2026 and 2025, we considered the current and expected future economic and market conditions and determined that increases of $0.3 million and $0.3 million, respectively, were required in the allowance for credit losses. During the nine months ended September 30, 2026 and 2025, we considered the current and expected future economic and market conditions and determined that increases of $0.3 million and $0.4 million, respectively, were required in the allowance for credit losses.

Inventory, which consists of finished goods (Captisol), is stated at the lower of cost or net realizable value. We determine cost using the specific identification method. We analyze our inventory levels periodically and write down inventory to net realizable value if it has become obsolete, has a cost basis in excess of its expected net realizable value or is in excess of expected requirements. There was no obsolete inventory charge recorded during the three and nine months ended September 30, 2026 and 2025. In addition to finished goods, as of September 30, 2026 and December 31, 2025, inventory included prepayments of $1.6 million and $2.1 million, respectively, to our supplier for Captisol.


	September 30, 2026		December 31, 2025
Indefinite-lived intangible assets
Goodwill	$	207,860	$	101,541
Definite-lived intangible assets
Complete technology	29,619		29,619
Less: accumulated amortization	(22,239)		(20,809)
Trade name	2,642		2,642
Less: accumulated amortization	(2,076)		(1,976)
Customer relationships	29,600		29,600
Less: accumulated amortization	(23,262)		(22,144)
Contractual relationships	463,000		360,000
Less: accumulated amortization	(175,245)		(151,494)
Total definite lived intangible assets	302,039		225,438
Total goodwill and other identifiable intangible assets, net	$	509,899	$	326,979

Although a financial royalty asset does not have the contractual terms typical of a loan (such as contractual principal and interest), we account for financial royalty assets under ASC 310, Receivables. Our financial royalty assets are classified similar to loans receivable and are measured at amortized cost using the prospective effective interest method described in ASC 835-30 Imputation of Interest.

The effective interest rate is calculated by forecasting the expected cash flows to be received over the life of the asset relative to the initial invested amount. The effective interest rate is recalculated in each reporting period as the difference between expected cash flows and actual cash flows are realized and as there are changes to expected future cash flows.

The gross carrying value of a financial royalty asset consists of the opening balance, or net purchase price for a new financial royalty asset, which is increased by accrued interest income (except for assets under the non-accrual method) and decreased by cash receipts during the period to arrive at the ending balance.

We evaluate financial royalty assets for recoverability on an individual basis by comparing the effective interest rate at each reporting date to that of the prior period. If the effective interest rate is lower for the current period than the prior period, and if gross cash flows have declined (expected and collected), we record a provision expense for the change in expected cash flows. The provision is measured as the difference between the financial royalty asset’s amortized cost basis and the net present value of the expected future cash flows, calculated using the prior period’s effective interest rate. In a subsequent period, if there is an increase in expected future cash flows, or if actual cash flows are greater than cash flows previously expected, we reduce the previously established cumulative allowance in part or in full.

In addition to the above allowance, we recognize an allowance for current expected credit losses under ASC 326, Financial Instruments – Credit Losses on our financial royalty assets. The credit rating, which is primarily based on publicly available data and updated quarterly, is the primary credit quality indicator used to determine the credit loss provision.

The carrying value of financial royalty assets is presented net of the cumulative allowances for changes in expected future cash flows and expected credit losses. The initial amount and subsequent revisions to allowances for changes in expected future cash flows and expected credit losses are recorded as part of general and administrative expenses in the condensed consolidated statements of operations.

When we are reasonably certain that a part of a financial royalty asset’s net carrying value (or all of it) is not recoverable, we recognize an impairment which is recorded in financial royalty assets impairment on the consolidated statements of operations. To the extent there was an allowance previously recorded for this asset, the amount of such impairment is written off against the allowance at the time that such a determination is made. Any future recoveries from such impairment are recognized when cash is collected in the respective period earnings.

We enter into transactions where we agree to fund a portion of the research and development (“R&D”) performed by our partners for products undergoing late-stage clinical trials in exchange for future royalties or milestones if the products are successfully developed and commercialized. In accordance with ASC 730, Research and Development, we account for the funded amounts as R&D expense when we have the ability to obtain the results of the R&D, the transfer of financial risk is genuine and substantive and, at the time of entering into the transaction, it is not yet probable that the product will receive regulatory approval. If these conditions are not met, we may record the funded amounts as a financial royalty asset. We may fund R&D upfront or over time as the underlying products undergo clinical trials.

Royalties earned on successfully commercialized products generated from R&D arrangements are recognized as revenue from intangible royalty assets in the same period in which the sale of the commercialized product occurs. Fixed or milestone payments receivable based on the achievement of contractual criteria for products arising out of our R&D arrangements are recognized as contract revenue and income in the period that the milestone threshold is met.

As a result of our early adoption of ASU 2025-07, Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606) (“ASU 2025-07”), certain assets previously accounted for as derivatives qualified for a new derivative scope exception introduced by ASU 2025-07, and are now accounted for as financial royalty assets effective January 1, 2025. Such assets include (1) our rights in future milestone and royalty payments from Agenus partner programs, (2) rights to receive from Primrose Bio 50% of milestone payments on certain contracts previously entered into by Primordial Genetics (“Primrose mRNA”), and (3) the Castle Creek Milestone (as defined in Note 4, Investment Transactions). For additional information, see Note 5, Financial Royalty Assets, net.


	September 30, 2026		December 31, 2025
Agenus PIPE Series A Warrant	$	1,591	$	—
LeonaBio Warrants	179		—
Total current derivative assets(1)	$	1,770	$	—

Orchestra Warrant	$	10,323	$	3,799
Agenus Warrant(2)	6,087		1,322
Castle Creek Warrants	5,650		4,989
AvenCell embedded derivative	2,638		—
Agenus PIPE Series B Warrant	2,389		—
Pelthos Conversion Option	1,535		3,432
Arecor Warrant	581		629
LeonaBio Warrants	—		1,461
Total noncurrent derivative assets	$	29,203	$	15,632

(2) In connection with the entry into the Purchase and Sale Agreement with Agenus in May 2024, Agenus issued us a five-year warrant (“Agenus Warrant”) to purchase 867,052 shares of its common stock, at an exercise price equal to $17.30. On December 22, 2025, we entered into an amendment to the Purchase and Sale Agreement with Agenus reducing the Agenus Warrant exercise price from $17.30 to $7.50. The fair value of the Agenus Warrant is determined using a Black-Scholes model. The following assumptions were used as of September 30, 2026 and December 31, 2025, respectively: expected term of 2.7 years and 3.4 years, volatility of 111% and 97%, risk-free rate of 4.9% and 3.6%, Agenus stock price of $9.93 and $3.14.

Gains on changes in the fair value of warrants and options of $8.5 million and $9.1 million were recognized in other non-operating income (expense), net, for the three and nine months ended September 30, 2026, respectively. Losses on change in the fair value of warrants and options of $0.7 million and $0.1 million were recognized in other non-operating income (expense), net, for the three and nine months ended September 30, 2025, respectively.

We account for investments in entities over which we have significant influence using the equity method of accounting. Under this method the investment is initially recorded at cost and subsequently adjusted for our share of the investee’s earnings or losses and any dividends received, unless the fair value option under ASC 825-10 is elected. Such selection is made on an instrument-by-instrument basis and is irrevocable.

Equity method investments for which we have elected the fair value option are measured at fair value, with changes in fair value 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. We elected the fair value option for our equity method investment in Pelthos. The election was made to simplify the accounting and reporting process, as Pelthos is a publicly traded entity with a readily available market price. We also elected the fair value option for our 25% equity method investment in RemainCo, acquired in the XOMA Acquisition (see Note 2). The election was made to provide a more relevant measure of the investment given the nature of the underlying litigation-related assets.

Equity method investments for which the we have not elected the fair value option are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Any impairment of equity method investments is presented as gain (loss) from change in fair value of equity method investments and other investments in our condensed consolidated statements of operations. These equity method investments are reviewed for indicators of impairment at each reporting period and are written down to fair value if there is evidence of a loss in value that is other‑than‑temporary. We did not elect the fair value option for our equity method investments in Primrose Bio or AvenCell. There was no impairment of our equity method investment in Primrose Bio during the three and nine months ended September 30, 2026 and 2025, or of our equity method investment in AvenCell during the three and nine months ended September 30, 2026.

The equity method investment in Primrose Bio is adjusted for our share of the investee’s earnings or losses and for any dividends received. Our share of Primrose Bio’s earnings or losses is presented within other non‑operating income (expense), net, in our condensed consolidated statement of operations. We do not record our share of the investee’s losses once the investment balance has been reduced to zero. We resume recognition of our share of the investee’s earnings only after previously unrecognized losses have been recovered. As of December 31, 2024, the equity method investment in Primrose Bio

had been written down to zero. We have no outstanding advances, guarantees, or commitments to fund Primrose Bio’s losses. Therefore, our proportionate share of Primrose Bio’s net loss for the three and nine months ended September 30, 2026 and 2025 was not recorded. We owned 27.3% and 31.5% of Primrose Bio’s outstanding equity as of September 30, 2026 and December 31, 2025, respectively.

We have significant influence over AvenCell, primarily through our right to designate one member of AvenCell’s board of directors and our ownership of AvenCell Series C-1 preferred stock, which we concluded is in-substance common stock. Accordingly, the equity method investment in AvenCell is adjusted for our share of the investee’s earnings or losses and for any dividends received. Our share of AvenCell’s earnings or losses is presented within other non-operating income (expense), net, in our condensed consolidated statement of operations. We do not record our share of the investee’s losses once the investment balance has been reduced to zero. We resume recognition of our share of the investee’s earnings only after previously unrecognized losses have been recovered. As of September 30, 2026, the equity method investment in AvenCell was $3.2 million. Other than the contingent funding commitments described in Note 4, Investment Transactions, we have no outstanding advances, guarantees, or commitments to fund AvenCell’s losses. We owned 10.7% of AvenCell’s outstanding equity as of September 30, 2026. We also hold the Series C-2 Warrant of AvenCell (the “AvenCell Series C-2 Warrant”), which is presented within other investments (see Other Investments below).

Other investments represent our investments in equity securities and equity-linked instruments of third parties that are not accounted for under the equity method and over which we do not have control, including the AvenCell Series C-2 Warrant, an equity-linked instrument of AvenCell, an investee over which we have significant influence. Our equity securities and equity-linked instruments that do not have a readily determinable or estimable fair value are measured using the measurement alternative in accordance with ASC 321, which is cost less impairment, if any, adjusted for observable price changes in orderly transactions for the identical or similar investment of the same issuer. Any impairment or upward or downward adjustment recognized during the period is presented as gain (loss) from change in fair value of equity method investments and other investments in our condensed consolidated statements of operations.

Our investment in Pelthos Series A preferred shares has a readily determinable fair value and is measured at fair value, with changes in fair value recognized as (loss) gain from change in fair value of equity method investments and other investments in our condensed consolidated statements of operations. For additional information, see Note 3, Pelthos Transaction.


	September 30, 2026		December 31, 2025
Pelthos Series A convertible preferred shares	$	72,018	$	106,262
Equity securities in Primrose Bio	10,056		6,531
InvIOs investment	4,500		4,500
Pelthos loan receivable	6,083		4,158
Equity securities in Zerion	1,253		—
AvenCell Series C-2 Warrant	569		—
Total other investments	$	94,479	$	121,451

During the three and nine months ended September 30, 2026, we recognized losses from changes in the fair value of our Pelthos Series A preferred shares of $24.9 million and $34.2 million, respectively. During each of the three and nine months ended September 30, 2025, we recognized a gain from the change in fair value of our Pelthos Series A preferred shares of $52.8 million.

Accrued liabilities consist of the following (in thousands):


	September 30, 2026		December 31, 2025
Royalties owed to third parties	$	16,040	$	16,202
Compensation	7,595		6,388
Professional fees	4,802		1,997
Value-added tax	2,411		1,753
Subcontractor	1,756		1,756
Accrued interest	1,725		1,307
Customer deposit	621		621
Other	715		1,429
Total accrued liabilities	$	35,665	$	31,453

As part of the acquisition of XOMA Royalty Corporation on July 14, 2026, we assumed certain CVRs and other contingent payment obligations associated with XOMA’s prior acquisitions. CVRs were issued to former shareholders of HilleVax, LAVA, Generation Bio, Turnstone, and Kinnate in connection with XOMA’s acquisition of each of these companies. These obligations principally relate to future distributions of lease-related proceeds, security deposits, tax reserve amounts, closing net cash adjustments and specified milestone payments under the HilleVax, LAVA, Generation Bio, Turnstone, Pulmokine, and Kinnate arrangements. We recorded the estimated fair value of these assumed obligations as part of the preliminary purchase price allocation in accordance with ASC 805, Business Combinations. Following the acquisition date, these obligations are remeasured at fair value at each reporting date throughout the terms of the related arrangements, with changes recognized in fair value adjustments to contingent liabilities in the condensed consolidated statements of operations.

In connection with the acquisition of CyDex in January 2011, we recorded a contingent liability for amounts potentially due to holders of the CyDex CVRs and former license holders. The liability is periodically assessed based on events and circumstances related to the underlying milestones, royalties and material sales.

In connection with the acquisition of Metabasis in January 2010, we issued four tradable CVRs for each outstanding Metabasis share. Two of the CVRs remained outstanding as of September 30, 2026. The outstanding Metabasis CVRs entitle holders to cash payments as cash is received from the sale or partnering of certain Metabasis drug development programs and upon the occurrence of certain other triggering events.

The CyDex and Metabasis CVR liabilities are remeasured at fair value at each reporting date throughout the terms of the related arrangements, with changes recognized in fair value adjustments to contingent liabilities in the condensed consolidated statements of operations. See Note 6, Fair Value Measurements, for additional information.

As of September 30, 2026, we had $17.3 million of unrecognized tax benefits, included in other long-term liabilities, compared with $16.6 million as of December 31, 2025. We recognize a tax position only if it is more likely than not to be sustained upon examination based on its technical merits. The ultimate resolution may differ materially from our current estimate of the liability, and any difference, together with related interest and penalties, will be recorded in the provision for income taxes in the period it is determined.

Share-based compensation expense for awards to employees and non-employee directors is a non-cash expense and is recognized on a straight-line basis over the vesting period. The following table summarizes share-based compensation expense recorded as components of research and development expenses and general and administrative expenses for the periods indicated (in thousands):


	Three months ended				Nine months ended
	September 30,				September 30,
Equity settled awards:	2026		2025		2026		2025
Research and development	$	1,286	$	1,230	$	3,313	$	3,089
General and administrative	16,895		13,516		39,117		29,490
Share-based compensation, Ligand	18,181		14,746		42,430		32,579
Settlement of XOMA employee RSUs(1)	10,845		—		10,845		—
Total share-based compensation	29,026		14,746		53,275		32,579

A limited amount of performance-based restricted stock units contain a market condition based on our relative total shareholder return ranked on a percentile basis against the Nasdaq Biotechnology Index over a three-year performance period, with a range of 0% to 200% of the target amount granted to be issued under the award. Share-based compensation cost for these awards is measured using the Monte Carlo simulation valuation model and is not adjusted for the achievement, or lack thereof, of the performance conditions.

Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed based on the sum of the weighted average number of common shares and potentially dilutive common shares outstanding during the period. Diluted net loss per share is computed using only the weighted average number of common shares outstanding during the period, as potentially dilutive securities are excluded when a net loss is reported.

Potentially dilutive common shares consist of shares issuable under the 2030 Notes (as defined below), 2031 Notes (as defined below), warrants issued in connection with the 2030 Notes, warrants issued in connection with the 2031 Notes, stock options, restricted stock, and performance stock awards. The 2030 Notes and 2031 Notes are considered to be Instrument C, under which we must settle the accreted value of the debt instrument in cash upon conversion and may choose to settle the conversion spread in cash, shares, or a combination of cash and shares. The dilutive effect of Instrument C is limited to the conversion spread, which is included in the calculation of diluted earnings per share under the if-converted method, assuming the spread is settled in shares, to the extent dilutive. The warrants are included in diluted earning per share using the treasury stock method and will have a dilutive effect to the extent the average market price per share of common stock during the period exceeds the applicable exercise price of the warrants.

Potentially dilutive common shares from stock options and restricted stock are determined using the average share price for each period under the treasury stock method. In addition, the following amounts are assumed to be used to repurchase shares: proceeds from exercise of stock options and the average amount of unrecognized compensation expense for the awards. For additional information, see Note 9, Stockholders’ Equity.


	Three months ended		Nine months ended
	September 30,		September 30,
	2026	2025	2026	2025
Weighted average shares outstanding:	19,962	19,578	19,970	19,367
Dilutive potential common shares:
Restricted stock and performance stock awards	—	337	354	260
Stock options	—	714	1,074	543
2030 Convertible Senior Notes	—	—	420	—
Warrant related to the 2030 Notes	—	—	4	—
Shares used to compute diluted (loss) income per share	19,962	20,629	21,822	20,170

Potentially dilutive shares excluded from calculation due to anti-dilutive effect:
Restricted stock and performance stock awards	390	—	19	58
Stock options	1,229	447	195	797
2030 Convertible Senior Notes	805	733	—	247
2031 Convertible Senior Notes	274	—	384	—
Warrant related to the 2030 Notes	2,349	2,361	2,357	796
Warrant related to the 2031 Notes	2,094	—	1,404	—
Anti-dilutive shares	7,141	3,541	4,359	1,898

The Euro is the functional currency of Apeiron and the corresponding financial statements have been translated into U.S. dollars in accordance with ASC 830-30, Translation of Financial Statements. Assets and liabilities are translated at end-of-period rates while revenues and expenses are translated at average rates in effect during the period in which the activity took place. Equity is translated at historical rates and the resulting cumulative translation adjustments are included as a component of accumulated other comprehensive income (loss).

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income (Subtopic 220-40): Expense Disaggregation Disclosures. This update requires public entities to provide additional disaggregated expense disclosures in the notes to the financial statements. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. We are currently evaluating the impact that this guidance will have on our disclosures.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which clarifies the applicability of interim reporting guidance and consolidates certain interim disclosure requirements from other ASC topics. ASU 2025-11 is effective for interim periods within fiscal years beginning after December 15, 2027, for public business entities, with early adoption permitted. We are currently evaluating the impact that this guidance will have on our disclosures.