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Ligand (LGND) Beats on Q3 Earnings & Revenues, Raises View

Zacks

Ligand Pharmaceuticals Incorporated LGND reported third-quarter 2018 adjusted earnings of $1.32 per share, significantly up from the year-ago figure of 69 cents. The bottom line also beat the Zacks Consensus Estimate of 99 cents.

Ligand’s shares were up 5% on Nov 8 following the earnings release as the company beat estimates and raised 2018 guidance. Shares of the company have rallied 25% so far this year against the industry’s 14% decrease.

Total revenues in the quarter increased to $45.7 million from $33.4 million in the year-ago period. Moreover, the top line surpassed the Zacks Consensus Estimate of $42.9 million.


Quarterly Highlights

Royalty revenues were $36.1 million in the reported quarter, up approximately 64.8% year over year. Ligand primarily earned royalties on sales of Novartis' NVS Promacta, Amgen's AMGN Kyprolis and Spectrum Pharmaceuticals' SPPI Evomela, which were developed using Ligand’s Captisol technology. The increase in royalty revenues was mainly driven by higher sales recorded by Promacta and Kyprolis, which are on track to achieve blockbuster status this year.

Under the new accounting standard ASC 606, adopted at the start of this year, Ligand said that third-quarter 2018 royalties should be compared with fourth-quarter 2017 royalties due to the timing of revenue recognition. Royalties for the fourth quarter of 2017 were $28.3 million.

License fees, milestones and other revenues were $2.5 million compared with $3.8 million in the year-ago quarter. Material sales decreased 9.1% to $7 million in the year-ago quarter due to the unfavorable timing of Captisol purchases for clinical and commercial use.

Research & development (R&D) expenses increased 14.6% to $5.5 million and general & administrative expenses rose 37.1% year over year to $9.6 million.

Business Developments

In October, Ligand completed the acquisition of UK-based biotechnology company, Vernalis, for approximately $43 million. Vernalis has a broad pipeline of partnered programs and ongoing collaborations along with $32 million of cash after deal fees. The acquisition will add eight fully-funded partnered programs including pipeline products for respiratory, oncology and CNS indications.

The company’s partners have made significant progress with their pipeline candidates using Ligand’s technology platform. Melinta Therapeutics’ Baxdela demonstrated positive results in patients with community-acquired bacterial pneumonia. Viking Therapeutics and Aldeyra Therapeutics announced positive results from their mid-stage studies evaluating their candidates in non-alcoholic fatty liver disease and dry eye disease, respectively.

During the quarter, Ligand also entered into a license agreement with Fred Hutchinson Cancer Research Center, granting the latter rights to use the OmniAb rodent platform technologies to develop new products. Ligand will receive a share of revenues from the sale of any product developed using this technology. The company also signed a Captisol use agreement with Sunshine Lake Pharma.

2018 Guidance

Ligand increased its guidance for 2018 for the second consecutive quarter. It now expects full-year revenues to be approximately $240 million compared with its previous guidance of $232 million. The expected revenues include royalties of nearly $122 million, material sales of roughly $25 million and license fees and milestones of almost $93 million with the potential for up to an additional $5 million in license fees and milestones. Adjusted earnings are estimated to be $6.52 per share for 2018 compared with $6.30 expected previously.

Zacks Rank

Ligand currently has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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