The transaction delivered two forms of consideration to XOMA shareholders:

Cash component: $39.00 per share in cash — a fixed, certain payment that closed XOMA's Nasdaq listing on July 14, 2026.

Contingent value right (CVR): Each XOMA shareholder received one non-transferable CVR entitling the holder to 75% of net proceeds from certain ongoing litigation related to XOMA. Key features of the CVR:

• Non-transferable — CVRs cannot be sold or assigned; they remain with the original XOMA shareholders of record
• Contingent — whether any payment is made, and the amount, depends entirely on the outcome of the underlying litigation
• Structurally separated — prior to closing, a holding company restructuring transferred CVR-related assets and liabilities to a separate LLC and trust, isolating litigation economics from Ligand's operational royalty portfolio

This structure is a well-established technique in biopharma M&A for bridging valuation gaps when a target holds assets with uncertain but potentially significant value. The acquirer obtains the operating business at a defined price; the seller retains upside exposure to contingent outcomes without requiring the acquirer to pay for uncertain value upfront.

Before closing, XOMA completed a holding company restructuring that separated:

• CVR assets and liabilities — transferred to a dedicated LLC and trust structure for the benefit of CVR holders
• Operational royalty portfolio — transferred to the entity acquired by Ligand

This structural separation serves several purposes:

• Prevents litigation outcomes from affecting Ligand's consolidated financial statements (beyond the CVR liability)
• Provides CVR holders with a defined claim against a ring-fenced asset pool
• Simplifies post-closing integration by delivering Ligand a clean royalty portfolio without embedded litigation exposure

The acquisition is structurally distinct from traditional pharmaceutical company mergers. Rather than combining manufacturing facilities, sales forces, or R&D pipelines, the transaction consolidates royalty and milestone revenue streams — contractual rights to receive payments based on third-party drug sales and development milestones.

Post-acquisition Ligand portfolio:

• Total royalty assets: Over 200 commercial, clinical, and preclinical assets
• Commercial products: Seven marketed products including VABYSMO, OJEMDA, and MIPLYFFA
• Late-stage programs: 14 programs in late-stage development
• Earlier-stage assets: Over 100 additional assets at various development stages

Portfolio diversification rationale. A larger royalty portfolio reduces Ligand's dependence on the clinical or commercial performance of any single drug. Royalty aggregators derive value from the law of large numbers — a diversified portfolio of royalty streams from multiple drugs across multiple therapeutic areas and geographies produces more predictable aggregate cash flows than a concentrated position in one or two assets.

Ligand projects the following financial contributions from the acquisition:

The company characterizes the acquisition as immediately accretive to adjusted earnings per share.

The $125 million revolving credit facility established at closing provides Ligand with financing flexibility for future royalty acquisitions and general corporate purposes.

The merger agreement conditioned closing on:

• XOMA shareholder approval — obtained July 13, 2026
• Required regulatory approvals
• Hart-Scott-Rodino Act waiting period expiration or early termination

All conditions were satisfied; the transaction closed July 14, 2026 — one day after shareholder approval.

CVR enforceability. Non-transferable CVRs are governed by a CVR agreement between the issuer and a rights agent (typically a bank or trust company). The enforceability of CVR payment obligations depends on the precision of the triggering conditions, the definition of "net proceeds," and the dispute resolution mechanism. CVR holders should review the CVR agreement carefully for:

• Definition of covered litigation and qualifying proceeds
• Calculation methodology for "net proceeds" (deductions for legal fees, taxes, and expenses)
• Reporting obligations and audit rights
• Dispute resolution procedures

Structural separation and ring-fencing. The pre-closing LLC/trust restructuring is a sophisticated technique that requires careful attention to:

• Transfer of litigation claims and related contracts to the new entity
• Assumption of litigation-related liabilities
• Tax treatment of the restructuring and subsequent CVR payments
• Governance of the LLC/trust and fiduciary duties to CVR holders

Royalty aggregation model. Ligand's business model — acquiring royalty interests rather than developing drugs — raises distinct legal and regulatory considerations compared to traditional pharmaceutical companies. Royalty agreements are contractual instruments; their value depends on the underlying license agreements, the financial health of the royalty obligors, and the enforceability of payment obligations across jurisdictions.

HSR filing and clearance. The transaction required Hart-Scott-Rodino premerger notification. Royalty aggregation transactions have generally received expedited HSR review because they do not involve horizontal competition between the parties in product markets.

ULF New York monitors U.S. life sciences and biopharma M&A transactions. This update is prepared for informational purposes and does not constitute legal advice. For transaction-specific counsel, contact our New York office.