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What Lies in Store for Ligand (LGND) This Earnings Season?

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Ligand Pharmaceuticals Incorporated (LGND - Free Report) is scheduled to report second-quarter 2018 results on Aug 6, after market close.

Ligand has a stellar earnings history. Its earnings beat estimates in all the last four quarters, delivering an average positive earnings surprise of 31.79%. The company reported a positive earnings surprise of 21.09% in the last quarter.

Shares of Ligand have outperformed the industry in a year’s time. The stock has surged 63% against the industry’s decline of 5.3% in the said time frame.

Let’s see how things are shaping up for this announcement.

Factors at Play

Ligand earns revenues in the form of license fees, milestone and royalty payments from companies that use its technology platforms to develop their drugs. The company’s Captisol formulation technology is used by several companies including two key partners, Novartis AG (NVS - Free Report) and Amgen for Promacta and Kyprolis, respectively.

Ligand also licenses its OmniAb platform to pharma/drug companies, which is used to discover fully human antibodies. In June, the company received a license fee of $47 million from Hong Kong-based WuXi Biologics related to amendment of the OmniAb platform agreement. This may be reflected in second-quarter results.

The company out-licensed glucagon receptor antagonist program in the fourth quarter of 2017 and is focusing on diagnostic imaging market. Thus, we expect investors’ focus to remain on the company’s updates regarding partnerships on the second-quarter conference call.

Moreover, the label expansion of Kyprolis and launch of Baxdela by Melinta Therapeutics in January is expected to boost Ligand’s royalty payments.

The company expects revenues to be in the range of $82 million to $84 million and adjusted earnings per share to be in the range of $2.32 to $2.37 in the second quarter. The Zacks Consensus Estimate for revenues and earnings is pegged at $60.46 million and 93 cents per share, respectively.

Operating expenses differ on a quarterly basis, depending mainly on the timing of costs associated with internal programs and business development activities.

Earnings Whispers

Our proven model does not conclusively show that Ligand is likely to beat estimates in the soon-to-be reported quarter. This is because a stock needs to have both a positive Earnings ESP and a bullish Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as elaborated below.

Earnings ESP: Ligand has an Earnings ESP of 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at 93 cents.  You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Ligand carries a Zacks Rank #3, which when combined with Earnings ESP of 0.00% makes surprise prediction difficult.

We caution against Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are a couple of health care stocks with the right combination of elements to beat on earnings this time around:

Horizon Pharma (HZNP - Free Report) has an Earnings ESP of +2.56% and a Zacks Rank #3.  The company is scheduled to release second-quarter results on Aug 8. You can see the complete list of today’s Zacks #1 Rank stocks here.

BioDelivery Sciences (BDSI - Free Report) has an Earnings ESP of +3.23% and a Zacks Rank of 2. The company is expected to release second-quarter results on Aug 9.

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