Ligand to acquire XOMA Royalty for $739mn in deal that doubles biotech royalty portfolio

Ligand Pharmaceuticals has agreed to acquire XOMA Royalty Corporation in an all-cash deal valued at approximately $739mn, doubling the size of its biotech royalty portfolio and cementing its position as one of the dominant aggregators in a niche corner of the pharmaceutical industry that has attracted growing investor attention.

The Florida-based group will pay $39 per share in cash for the Emeryville, California-headquartered company, representing a 14 per cent premium to XOMA's 30-day volume-weighted average price as of 24 April, the last trading day before the announcement on Monday. XOMA shareholders will also receive a non-transferable contingent value right, entitling them to a portion of 75 per cent of any future net proceeds from XOMA's ongoing patent royalty litigation against Janssen Biotech over the AbbVie-marketed psoriasis drug Tremfya.

The transaction, unanimously approved by both boards, is expected to close in the third quarter of 2026, subject to XOMA shareholder approval and regulatory clearance. Entities affiliated with BVF Partners — which control around 21 per cent of XOMA's common stock, or roughly 44 per cent on a fully converted basis — have signed a voting agreement supporting the deal, materially de-risking the path to closing.

Ligand will fund the acquisition through existing cash and borrowings under its revolving credit facility. The group expects to retain approximately $200mn in cash following the transaction, alongside its equity holdings and liquid securities, leaving it well-positioned to continue its target run-rate of $150mn to $250mn in annual royalty asset investment.

Todd Davis, chief executive of Ligand, said the deal would be "immediately accretive to earnings" and would "more than double the size" of the company's portfolio, broadening its exposure across development stages, therapeutic areas and modalities. The acquisition adds three commercial royalty streams of particular note — Vabysmo, Roche's blockbuster ophthalmology drug, Day One Biopharmaceuticals' brain cancer therapy Ojemda, and Zevra Therapeutics' Niemann-Pick disease drug Miplyffa — alongside more than 100 partnered development-stage programmes. In total, Ligand's portfolio will expand to more than 200 assets across seven new commercial products.

Davis said Ligand had pursued an all-cash structure because management believes the company's shares are undervalued, and wanted to avoid dilution so that "all of the cash flows from the XOMA portfolio will flow directly to our existing shareholders".

The company raised its 2026 financial guidance to reflect the deal, lifting expected adjusted earnings per share to $8.50–$9.50 from a prior range of $8.00–$9.00, and increasing royalty revenue guidance to $225–$250mn from $200–$225mn. Total revenue is now forecast at $270–$310mn. The acquisition is expected to add around $0.50 to adjusted EPS in 2026, assuming the third-quarter close, and around $1.50 in 2027.

Ligand shares rose around 3.9 per cent in pre-market trading on the day of the announcement.

The deal is the latest sign of how the biopharma royalty aggregation model — pioneered most prominently by Royalty Pharma — has matured into a distinct corner of the industry. Royalty aggregators acquire passive interests in the future revenues of approved or developmental drugs, offering biotech developers an alternative to dilutive equity raises or restrictive debt, and offering investors exposure to pharmaceutical cash flows without the operational risks of drug development or commercialisation. The model has gained particular traction as smaller biotech firms have struggled with constrained access to traditional capital markets in recent years.

For Ligand, the consolidation play addresses a structural challenge facing all royalty aggregators: building portfolio scale to smooth out the inherent lumpiness of individual product revenues. The addition of XOMA's commercial assets — particularly the high-profile Vabysmo royalty — provides a meaningful step-change in both diversification and earnings power, while the development-stage programmes preserve longer-dated optionality.