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Ligand (LGND) Down 12% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Ligand Pharmaceuticals (LGND - Free Report) . Shares have lost about 12% 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 drivers.

Ligand Q1 Earnings Miss, Sales Beat Estimates

Ligand reported second-quarter 2022 adjusted earnings (excluding the impact of gross profit for Captisol sales related to COVID-19) of 34 cents per share, missing the Zacks Consensus Estimate of 54 cents. The company had reported adjusted earnings of 76 cents in the year-ago quarter.

Adjusted earnings (including impact of gross profit for Captisol sales related to COVID-19) for the second quarter stood at $1.03 per share, a 36.8% decline year over year.

Total revenues of $57.4 million declined 32.2% from the year-ago quarter as growth in Royalties revenues was more than offset by lower Captisol sales and Contract revenues. The top line, however, beat the Zacks Consensus Estimate of $40 million.

Quarterly Highlights

Royalty revenues were up 108% year over year to $18.0 million in the second quarter. Growth in Royalties was mainly driven by additional sales of drugs developed using its Pelican platform.

The OmniAb business generated $0.14 million of total royalties in the second quarter.

Total Captisol sales declined 52.7% year over year to $29.5 million. The decrease was due to lower sales of Captisol to support the manufacturing of COVID drug, Veklury whose sales were hurt by lower demand.

Ligand reported its Captisol sales separately from core assets and COVID-related sales. While the core Captisol sales were down 65.7% year over year to $3.3 million, the COVID-related Captisol sales declined 50.4% year over year to $26.2 million.

Contract revenues were down 26.8% year over year to $9.9 million in the second quarter. OmniAb business generated $7.2 million of total Contract revenues in the second quarter.

2022 Guidance Raised

Ligand raised its guidance for sales from its combined business for 2022. The company expects total revenues to be between $169 million and $188 million in 2022, suggesting a significant year-over-year decline. The company continues to expect royalties in the range of $62 million to $66 million, Captisol sales are expected to be between $55 million and $60 million while contract revenues are expected in the range of $52 million to $62 million. It expects core Captisol sales to be in the range of $17 million to $19 million and the remaining Captisol sales from COVID-related therapies.

Ligand reiterated that the OmniAb business is expected to generate $35 million to $45 million of revenues, especially in the contract revenue line.

Excluding OmniAb and COVID-related Captisol sales, management expects to record revenues in the range of $97 million to $104 million.

Management now expects to record adjusted earnings between $2.40 and $3.00 per share in 2022. These figures include contribution of both OmniAb revenues and COVID-related Captisol sales that are likely to be between 60 cents and 95 cents per share.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

The consensus estimate has shifted 185.71% due to these changes.

VGM Scores

Currently, Ligand has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile 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 looks promising. Notably, Ligand has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Ligand belongs to the Zacks Medical - Biomedical and Genetics industry. Another stock from the same industry, AVEO Pharmaceuticals , has gained 4.2% over the past month. More than a month has passed since the company reported results for the quarter ended June 2022.

AVEO reported revenues of $25.3 million in the last reported quarter, representing a year-over-year change of +234.7%. EPS of -$0.24 for the same period compares with -$0.48 a year ago.

For the current quarter, AVEO is expected to post a loss of $0.23 per share, indicating a change of +23.3% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

AVEO has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.


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