ZELSUVMI's FDA Approval: A Breakthrough for Pelthos and a Windfall for Ligand?

The July 2025 commercial launch of ZELSUVMI™ (berdazimer) topical gel 10.3% marks a pivotal moment in dermatology, positioning Pelthos Therapeutics (NYSE American: PTHS) as the first—and currently only—company to offer an FDA-approved at-home treatment for molluscum contagiosum, a viral skin infection affecting millions of children and adults in the U.S. But the true winner of this milestone may be its partner, Ligand Pharmaceuticals (NASDAQ: LGND), which stands to benefit from a strategic licensing deal, a controlling equity stake in Pelthos, and a platform technology with broader applications.

The Unmet Need: A Market Dominated by Gaps

Molluscum contagiosum, while often benign, is notoriously challenging to treat. Current options—such as cryotherapy, topical corticosteroids, or antiviral creams—require in-office procedures or have limited efficacy, leaving caregivers scrambling for alternatives. ZELSUVMI's approval addresses this gap by offering a once-daily, patient-administered gel that can be used at home. The FDA's nod in 2024 for use in patients as young as one year old further underscores its appeal in a pediatric-dominated market.

With no direct competitors on the horizon, ZELSUVMI's dominance is immediate. Analysts estimate the U.S. market for molluscum treatments could exceed $200 million annually, driven by the high incidence rate among children (up to 10% of pediatric skin conditions) and the growing demand for at-home care amid shifting healthcare preferences.

Ligand's Multi-Pronged Play: Royalties, Equity, and Technology

While Pelthos leads the commercialization effort, Ligand's role as both licensor and investor ensures it captures outsized value. Key terms of the partnership include:
- Upfront Milestone: A $5 million payment already received post-launch.
- Royalty Stream: 13% of global sales, with potential to add another $5 million in sales-based milestones.
- Equity Stake: Ligand's 56% ownership in Pelthos post-merger with Channel Therapeutics, following a $18 million investment.

The highlights the crux of Ligand's success: its proprietary NITRICIL™ platform. This nitric oxide-based technology enables precise drug delivery, a feature critical to ZELSUVMI's safety and efficacy. Ligand's licensing model—where it retains IP ownership while partners handle development and commercialization—minimizes its risk while amplifying returns.

Data-Driven Upside: Ligand's Financial Tailwinds

Ligand's financials already reflect the partnership's promise. show a 25% surge since ZELSUVMI's FDA approval was announced, with institutional buying intensifying post-merger. Meanwhile, Pelthos's illustrate how Ligand's equity stake could amplify returns if Pelthos's market cap grows.

But Ligand's upside isn't confined to ZELSUVMI. The NITRICIL™ platform's versatility—applicable to other dermatological and ophthalmic conditions—could attract partnerships in adjacent markets. With a history of licensing deals (e.g., Trogarzo for HIV), Ligand is well-positioned to capitalize on its IP without shouldering R&D costs.

Risks and Considerations

While the outlook is bright, risks linger. Pelthos must navigate distribution challenges for a pediatric-focused product, including payer coverage and physician adoption. Competitors may also enter the space, though ZELSUVMI's first-mover advantage and patent protection (through 2038) offer a buffer. For Ligand, dilution from Pelthos's Series A financing—a $50.1 million raise that included Ligand's $18 million—could pressure its stake if Pelthos issues more shares.

Investment Thesis: Play the Partner, Not the Player

For investors, Ligand presents a lower-risk entry into ZELSUVMI's success. Its diversified revenue streams (including royalties from other drugs like Bystolic) and 56% Pelthos stake create a “double-down” opportunity: gains from both equity appreciation and ZELSUVMI's sales. Pelthos, while more volatile, offers asymmetric upside if the product's adoption exceeds expectations.

Recommendation:
- Ligand (LGND): Buy with a 12–18 month horizon. Target price: $60–$70, assuming ZELSUVMI hits $150 million in annual sales by 2027.
- Pelthos (PTH): Consider a speculative allocation (5% of portfolio) for aggressive investors, with a focus on long-term growth.

In a crowded biotech landscape, ZELSUVMI's uniqueness and Ligand's strategic acumen make this partnership a standout opportunity. For investors seeking exposure to an underserved market—and a company poised to profit from it—this is a story worth watching.