Form 4: Pelthos Therapeutics Note Conversion Price Reduced

Pelthos Therapeutics shareholders approved a waiver, leading to a reduced conversion price for Ligand Pharmaceuticals' senior secured convertible note.

Summary

• Ligand Pharmaceuticals Inc. (the 'Reporting Person') is a Director and 10% Owner of Pelthos Therapeutics Inc. (the 'Issuer').
• On November 6, 2025, Pelthos Therapeutics Inc. issued a senior secured convertible note (the 'Convertible Note') with an aggregate principal amount of $9 million to Ligand Pharmaceuticals Inc.
• The original conversion price of the Convertible Note was $34.442 per share.
• On December 17, 2025, Pelthos Therapeutics Inc. shareholders approved a waiver of NYSE American LLC rules, which typically require shareholder approval for private placements constituting 20% or more of pre-transaction outstanding common stock.
• As a direct result of this shareholder approval, the conversion price of the Convertible Note was reduced from $34.442 per share to $29.73 per share.
• This change in conversion price is reported as the cancellation of the original Convertible Note and the acquisition of a new Convertible Note with the revised terms.
• The Convertible Note includes a beneficial ownership limitation of 49.9% with respect to Ligand Pharmaceuticals Inc.

Sentiment

Score: 7

Explanation: The filing reports a positive outcome for the reporting person (Ligand Pharmaceuticals Inc.) due to a favorable adjustment in the convertible note's terms, allowing for greater equity ownership in Pelthos Therapeutics Inc. While potentially dilutive for Pelthos's existing shareholders, the filing itself is a factual report of a beneficial change for the reporting entity.

Positives

• Shareholder approval for the waiver of NYSE American LLC rules facilitated the transaction and the subsequent reduction in the conversion price.
• The reduction in the conversion price of the Senior Secured Convertible Note from $34.442 to $29.73 per share is beneficial for the noteholder (Ligand Pharmaceuticals Inc.), as it allows for conversion into a greater number of Pelthos Therapeutics Inc. common shares for the same principal amount.

Negatives

• The reduction in the conversion price means Pelthos Therapeutics Inc. will issue more common stock upon conversion for the same $9 million principal, potentially leading to greater dilution for existing shareholders.

Risks

• Potential dilution for existing Pelthos Therapeutics Inc. shareholders due to the lower conversion price, meaning more shares will be issued upon conversion of the Senior Secured Convertible Note.
• The Senior Secured Convertible Note includes a beneficial ownership limitation of 49.9% for the reporting person, which could restrict full conversion if it exceeds this threshold without further action.

Future Outlook

The Senior Secured Convertible Note has an expiration date of November 6, 2027, indicating the period over which conversion may occur. The shareholder approval facilitates the potential future conversion of the note into a larger number of common shares for the noteholder, Ligand Pharmaceuticals Inc.

Management Comments

• The reporting person may be deemed to be a director by deputization by virtue of the fact that each of Todd Davis, Chief Executive Officer of the reporting person, and Richard Baxter, Senior Vice President of Investment Operations of the reporting person, serves on the board of directors of the Issuer.

Industry Context

This transaction reflects a common financing strategy for biotechnology or pharmaceutical companies like Pelthos Therapeutics Inc., where convertible notes are used to raise capital. Shareholder approval for exceeding certain issuance thresholds (like 20% of outstanding stock in a private placement, as per NYSE American LLC rules) is a standard governance requirement to prevent excessive dilution without investor consent.

Corporate Governance

Related Party Transactions

• Ligand Pharmaceuticals Inc., which is a 10% owner of Pelthos Therapeutics Inc. and has two executives (Todd Davis and Richard Baxter) serving on the board of directors of Pelthos Therapeutics Inc., was issued a $9 million senior secured convertible note by Pelthos Therapeutics Inc.

Stakeholder Impact

• Shareholders (Pelthos Therapeutics Inc.): Potential for increased dilution due to the lower conversion price, meaning more shares will be issued upon conversion of the note for the same capital raised.
• Noteholder (Ligand Pharmaceuticals Inc.): Benefits from the reduced conversion price, allowing for a greater equity stake in Pelthos Therapeutics Inc. for the same investment amount.

Next Steps

• Potential future conversion of the Senior Secured Convertible Note into common stock of Pelthos Therapeutics Inc. at the new conversion price of $29.73 per share, subject to the 49.9% beneficial ownership limitation.

Key Dates

Keywords

SEC Form 4, Convertible Note, Pelthos Therapeutics, Ligand Pharmaceuticals, Shareholder Approval, Conversion Price, Beneficial Ownership, NYSE American, Equity Financing