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Ligand (LGND) Down 9.1% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

A month has gone by since the last earnings report for Ligand Pharmaceuticals (LGND). Shares have lost about 9.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Ligand due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Ligand Beats on Q4 Earnings & Sales, Raises ’19 View

Ligand reported fourth-quarter 2018 adjusted earnings of $1.70 per share, significantly up from the year-ago figure of $1.31. Earnings also beat the Zacks Consensus Estimate of $1.27.

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Total revenues in the quarter increased to $59.6 million from $50.5 million in the year-ago period. Moreover, the top line surpassed the Zacks Consensus Estimate of $54.17 million.

Quarterly Highlights

Royalty revenues were $40.2 million in the reported quarter, up approximately 42% year over year. The increase in royalty revenues was mainly driven by higher sales of Promacta and Kyprolis.

Both the drugs sustained a strong growth rate in 2018, crossing a billion dollar in sales during the period. The positive trend for these two drugs is expected to aid Ligand’s growth.

License fees, milestones and other revenues were $9.3 million in the fourth quarter compared with $14.4 million in the year-ago period. Material sales increased 31.2% to $10.1 million from the year-ago quarter due to the favorable timing of Captisol purchases for clinical and commercial use.

Business Developments

In October, Ligand completed the acquisition of UK-based biotechnology company, Vernalis, for approximately $43 million. During the quarter, the company also invested in Palvella Therapeutics and Dianomi Therapeutics acquiring economic or royalty rights to their investigational products.Ligand also entered into worldwide license agreements with Genagon Therapeutics AB and iMetabolic Biopharma Corporation, granting them access to OmniAb platform technologies to discover fully human antibodies. The company also entered into a platform license agreement with Fred Hutchinson Cancer Research Center, granting the latter rights to use OmniAb rodent platform technologies to develop new products. The company also signed a Captisol use agreement with Merck KGaA and reVision Therapeutics.

The company’s partners have made significant progress with their pipeline candidates using Ligand’s technology platform.

Full Year Results

The company reported total revenues of $251.5 million in 2018, up 78.2% year over year. Adjusted earnings were $7.15 per share compared with $3.26 per share in 2017.

2019 Guidance Raised

Ligand increased its guidance for 2019. It now expects revenues to be approximately $224 million higher than its previous guidance of $212 million. However, the expected revenues for 2019 are lower than 2018 revenues, which included $47 million in one-time payment from WuXi.

The expected revenues include royalties of nearly $154 million, material sales of roughly $27 million and license fees and milestones of almost $43 million.

Adjusted earnings are estimated to be $6.05 per share for 2019 compared with $5.50 expected previously.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 21.62% due to these changes.

VGM Scores

At this time, Ligand has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision has been net zero. It comes with little surprise Ligand has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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