Transaction overview
Ligand Pharmaceuticals, a biopharmaceutical company based in San Diego, announced on August 16, 2023, its acquisition of Xoma Royalty, a royalty-focused healthcare investment firm also based in the United States, for $739 million. The deal was finalized on the same day as it was announced, giving Ligand full ownership of Xoma Royalty's portfolio and intellectual property.
Xoma Royalty specializes in acquiring and managing drug royalties from pharmaceutical companies operating across various therapeutic areas. This acquisition by Ligand is aimed at expanding its presence in multiple treatment categories through access to a diversified royalty stream.
Deal structure and financing
The exact equity and debt split for the $739 million deal has not been disclosed, but it is known that Stifel, Citi, Baird, Citigroup Global Markets Inc., Jefferies, and Piper Sandler served as financial advisors to Ligand Pharmaceuticals. On the sell-side, Leerink Partners and H.C. Wainwright & Co. provided advisory services to Xoma Royalty.
Lock-up terms for key executives at Xoma Royalty have been stipulated, but specific details regarding these terms are not publicly available. Additionally, there is no information on any IPO optionality in the deal structure.
Strategic context
The acquisition of Xoma Royalty by Ligand Pharmaceuticals is driven by the strategic objective to enhance its footprint across various therapeutic areas through a diversified royalty portfolio. This move underscores Ligand's commitment to expanding its revenue base and mitigating risks associated with focusing solely on one area of healthcare innovation.
Xoma Royalty’s rationale for divesting itself from its portfolio could be linked to the growing pressure faced by royalty companies concerning drug affordability and patient access, as highlighted by Ligand Pharmaceuticals' CEO Todd Davis. The deal also aligns with broader trends in the pharmaceutical industry where firms are increasingly looking at diversified revenue streams through strategic acquisitions.
Regulatory path
The acquisition has undergone regulatory scrutiny from both U.S. federal authorities and potentially relevant state regulators due to its size and the nature of the companies involved. As part of standard procedures, filings under the Hart-Scott-Rodino (HSR) Act were likely submitted for review. However, no specific remedies or conditions have been reported by either party concerning this transaction.
Given the cross-border implications and the significant value of the deal, regulatory agencies in other jurisdictions where Xoma Royalty operates might also be involved, although exact jurisdictions remain unspecified due to the lack of detailed public disclosure regarding international filings.