Company: LGNZZ
Filing Date: 2025-02-28
Form Type: 10-K
Source: 0000886163-25-000012
Chunk: 129

Company: LIGAND PHARMACEUTICALS INC
Filing Date: 2025-02-28
Form: 10-K
Item: Item 8
Chunk 129
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 of impairment. To test the Company’s evaluation of indicators of impairment for finite-lived intangibles, our audit procedures included, among others, assessing the methodologies and testing the completeness and accuracy of the Company’s analysis of events or changes in circumstances. As part of our evaluation, we considered market conditions, industry and economic trends, changes in regulations, clinical success and historical and forecasted financial results, in assessing whether an indicator of impairments exists.Financial royalty assets - recognition of incomeDescription of the MatterAs disclosed in Note 6 to the consolidated financial statements, the Company’s total financial royalty assets, net, were $195.0 million as of December 31, 2024. For the year ended December 31, 2024, the Company recognized income from financial royalty assets of $13.4 million. As explained in Note 1 and 6 to the consolidated financial statements, the Company’s financial royalty assets are measured at amortized cost and income is recognized using the prospective effective interest method. Auditing management’s recognition of income under the effective interest method involved complex auditor judgment, as the assumptions used to forecast the prospective interest rate include estimates of expected future cash flows from the underlying royalties and are therefore affected by uncertainties such as future demand for the underlying product.How We Addressed the Matter in Our AuditWe obtained an understanding, evaluated the design and tested the operating effectiveness of controls related to the recognition of income on financial royalty assets. This included testing controls over management’s review of the significant assumptions and other inputs used in estimating the forecasted cash flows. To test the income recognized, our audit procedures included, among others, evaluating the completeness and accuracy of the data used to develop the key assumption identified above. For example, we tested the inputs to the model, principally comprising of historic product sales and estimates of nearer-term sales.  We also evaluated management’s expected future cash flows for the products underlying the royalties and performed a sensitivity analysis over the resulting forecasted product sales. 

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Valuation of Agenus partnered programs in Agenus acquisitionDescription of the MatterAs disclosed in Note 2 and 7 to the consolidated financial statements, the Company recorded $21.3 million of non-current derivative assets in acquired rights from future milestone and royalty payments (“Agenus partnered programs”) in the Agenus acquisition.  As of December 31, 2024, total non-current derivative assets in the Agenus partnered programs were $6.3 million and unrealized losses from derivative instruments were $15.