Ligand Pharmaceuticals has agreed to acquire Xoma in an all-cash deal worth roughly $740 million, combining two of the pharmaceutical industry's largest royalty aggregators. The transaction, expected to be announced Monday, values Xoma at $39 per share—representing a significant premium to its recent market cap of around $450 million.

Both companies operate in a niche corner of biotech: they fund drug development in exchange for royalty rights on future sales. The deal will give Ligand exposure to more than 120 drugs through Xoma's existing portfolio, expanding its footprint in the royalty aggregation space. Xoma had a market value of roughly $700 million on a fully diluted basis.

Royalty streams have become increasingly valuable assets in the pharmaceutical industry, where investors seek predictable cash flows from drug sales rather than the binary outcomes of clinical trials. This deal positions Ligand to capture a broader slice of the industry's long-term profitability.