Company: LGNZZ
Filing Date: 2025-02-28
Form Type: 10-K
Source: 0000886163-25-000012
Chunk: 179

Company: LIGAND PHARMACEUTICALS INC
Filing Date: 2025-02-28
Form: 10-K
Item: Item 8
Chunk 179
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 Fair Value

Financial royalty assets are measured and carried on the balance sheet at amortized cost using the effective interest method or on a non-accrual basis. Management calculates the fair value of financial royalty assets using a forecasted royalty receipts. The projected future cash flows derive from royalty payments and milestones, then discounted using appropriate individual discount rates. The fair value of financial royalty assets and other economic rights assets is classified as Level 3 within the fair value hierarchy since it is determined based upon inputs that are both significant and unobservable. The estimated fair value and related carrying values of financial royalty assets as of December 31, 2024 were $196.6 million and $195.0 million, respectively. The estimated fair value and related carrying value of the financial royalty assets as of December 31, 2023 were $75.9 million and $62.3 million, respectively. To determine the fair value of long-term financial royalty assets, we estimated future underlying product sales, applied a probability of technical and regulatory success for development stage programs, estimated a timeline for any development and regulatory milestones, and applied a discount rate based on the level of partner execution and commercialization risk, in the range of 15-30% and 10-45% as of December 31, 2024, and 2023, respectively. Weighted average discount rate (weighted by relative fair value) was 19% and 18% as of December 31, 2024, and 2023, respectively.

9. Leases

Finance leaseIn May 2020 and January 2021, we entered into an agreement and the first amendment with Hovione, our third-party manufacturer, to increase our manufacturing of Captisol, respectively. The agreements are considered to include an embedded finance lease under ASC 842, Leases, as it provides the Company the right to use the underlying equipment to exclusively manufacture Captisol. As of December 31, 2021, we had fully paid consideration of $69.1 million for prepaid inventory and capacity ramp-up fee. We allocated consideration in the agreements between lease and non-lease components using relative standalone prices. Since the inception of the agreements, we have allocated $50.2 million of the consideration paid to the non-lease component which is accounted for as prepaid inventory and being amortized to cost of Captisol based on the usage. The remaining balance of $18.9 million was recognized as a right of use asset. As of December 31