ZELSUVMI Launch Positions Ligand Pharmaceuticals for Growth in a Booming Skin Care Market

The dermatology market is on the rise, and Ligand Pharmaceuticals (NASDAQ: LGND) is poised to capture a significant slice of the action. Its 56% ownership stake in Pelthos Therapeutics, paired with a 13% sales royalty on ZELSUVMI—the first FDA-approved oral treatment for molluscum contagiosum—creates a compelling value proposition. As the global market for molluscum treatments expands from $3.135 billion in 2024 to an estimated $4.39 billion by 2031, Ligand's strategic partnership with Pelthos unlocks both growth and stability for investors.

The Market Opportunity: A $4.4 Billion Prize by 2031

Molluscum contagiosum (MC), a viral skin infection affecting an estimated 122 million people globally (per 2010 data), has long relied on topical treatments, cryotherapy, or manual removal. ZELSUVMI's oral formulation represents a breakthrough, offering a non-invasive alternative for the 2–5-year-old pediatric population and immunocompromised patients, who account for the majority of cases. With a 5.0% CAGR driving the market, the addressable population is primed for growth as awareness of MC's impact on quality of life expands.

The U.S. market alone, where ZELSUVMI was approved in late 2024, is projected to account for over 30% of global revenue. This is due to robust healthcare spending and the high prevalence of MC in densely populated urban areas. Meanwhile, emerging markets in Asia Pacific—where warm, humid climates favor viral spread—are ripe for penetration. Ligand's royalty model allows it to capitalize on this without shouldering the full risk of commercialization, a key advantage in a sector where drug development costs often exceed $1 billion.

Ligand's Financial Engineering: Ownership + Royalty = Dividend Stability

Ligand's 56% equity stake in Pelthos positions it to benefit directly from Pelthos's operational performance, while the 13% sales royalty adds a recurring revenue stream. This dual mechanism insulates investors from the volatility inherent in traditional biotech equity stakes. Even in a conservative scenario where ZELSUVMI captures just 10% of the U.S. MC market by 2026, Ligand's royalty could generate over $20 million annually—enough to support its dividend, which has grown at a 6% CAGR over the past decade.

The chart above underscores Ligand's history of dividend resilience. Unlike many biotechs that prioritize growth over payouts, Ligand's royalty-driven model aligns with its track record of consistent returns. The Pelthos partnership amplifies this advantage, creating a “moat” against earnings volatility.

Unlocking Value Through Proprietary Technology

ZELSUVMI's active ingredient, a novel immune-modulating compound, leverages Pelthos's proprietary platform, which targets viral replication without suppressing the broader immune system. This approach minimizes side effects and positions ZELSUVMI as a first-line treatment in pediatric care—a segment where safety is paramount. The technology's scalability is further evident in Pelthos's pipeline, which includes candidates for herpes simplex virus and atopic dermatitis. Ligand's equity stake ensures it benefits as this platform expands beyond MC.

Risks and Considerations

The primary risk lies in ZELSUVMI's market adoption. While the FDA approval is a strong validation, payers may initially push back on covering an oral treatment with a price tag expected to exceed $1,000 per course. Competitors like Verrica's JYNARPIVIRSE™ (a topical solution) and Novan's nitric oxide therapy offer alternatives, though neither addresses the unmet need for an oral option.

Additionally, Pelthos's ability to manage manufacturing and distribution at scale remains unproven. Ligand's 56% stake, however, grants it board-level influence over strategic decisions, mitigating execution risk.

Investment Thesis: Buy the Royalty Machine

Ligand's partnership with Pelthos exemplifies the “asset-light” biotech model: minimal upfront capital expenditure, high-margin royalties, and equity upside in a high-growth segment. With ZELSUVMI's launch, the company is transitioning from a pure royalty play (historically relying on products like Pfizer's XELJANSE™) to an active participant in emerging markets.

For income investors, the dividend yield of 2.8% (well above the S&P 500's 1.2%) offers stability, while growth investors can target capital appreciation as ZELSUVMI's sales ramp up. A price target of $55–$60 by 2026—up from its current $42—appears reasonable given the royalty's contribution and Pelthos's valuation upside.

Final Take

Ligand's ZELSUVMI play is a rare opportunity to invest in a dermatology breakthrough without the typical biotech risks. The combination of a large, growing market, a differentiated therapy, and a royalty structure that de-risks Ligand's exposure makes this a compelling buy for both income and growth portfolios. In a sector where innovation often comes with high volatility, this is a value creation story with legs.

Investor Action: Consider adding Ligand to your portfolio at current levels. Monitor Pelthos's Q3 2025 sales reports for ZELSUVMI adoption trends.