Ligand Pharmaceuticals Incorporated announced it will receive $10 million from a contractually specified royalty rate buy-down following the sale by CorMatrix Cardiovascular Inc. of rights to its commercial pericardial repair and CanGaroo® Envelope extracellular matrix (ECM) products to Aziyo Biologics. In May 2016, Ligand acquired rights to royalties on these products and several pipeline ECM programs from CorMatrix for $17.5 million.
Under the terms of the original transaction, Ligand was entitled to a $10 million payment if, upon acquisition, the new owner elected to buy-down the royalty rate. As a result of this transaction, Ligand will receive a 5% royalty on these commercial products from Aziyo, down from the original 20% royalty with CorMatrix. As part of the royalty rate reduction, Aziyo has agreed to pay Ligand up to $10 million of additional sales-based milestones tied to the commercial success of the currently-marketed products and to extend the term on these royalties by one year. Ligand's rights to potential royalties from CorMatrix upon the successful development of its remaining pipeline ECM programs remain unchanged.

As a result of this transaction, Ligand will book an estimated $2 million of additional revenue in 2017, net of offsetting non-cash accounting expenses. Previous net revenue guidance for 2017 was at least $130 million, and Ligand now expects 2017 net revenue to increase to at least $132 million. The additional revenue is expected to be classified as contract revenue and royalty revenue is expected to be slightly lower for the full year due to the lower royalty rate on CorMatrix products beginning with the second half of 2017. Additional upside in contract revenue guidance is reduced from $24 million to $14 million, reflecting the revenue from the royalty rate buy-down and associated amortization. This new revenue guidance implies a minimum adjusted diluted EPS for 2017 of $2.90, increased from original guidance of at least $2.70.