It has been about a month since the last earnings report for Ligand Pharmaceuticals (LGND - Free Report) . Shares have added about 4.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Ligand due for a pullback? 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 Beats on Q2 Earnings & Revenues, Raises View
Ligand reported second-quarter 2018 adjusted earnings of $2.59 per share, significantly up from the year-ago figure of 67 cents. The bottom line also beat the Zacks Consensus Estimate of 93 cents.
Total revenues in the quarter increased to $90 million from $28 million in the year-ago period. Moreover, the top line surpassed the Zacks Consensus Estimate of $60.46 million.
Royalty revenues were $31.4 million in the reported quarter, up approximately 120.9% year over year, including royalties from the sales of Novartis' Promacta, Amgen's Kyprolis and Spectrum Pharmaceuticals' Evomela. The increase in royalty revenues was mainly driven by higher sales recorded by Promacta and Kyprolis. Under the new accounting standard ASC 606, adopted at the start of this year, Ligand said that second-quarter 2018 royalties should be compared with third-quarter 2017 royalties due to the timing of revenue recognition. Royalties in the third quarter of 2017 were $21.9 million.
License fees, milestones and other revenues were $51 million compared with $8.2 million in the year-ago quarter, mainly owing to a $47 million upfront payment received upon amendment of the licensing agreement of Ligand’s OmniAb platform with China-based WuXi Biologics.
Material sales increased to $7.6 million from $5.6 million in the year-ago quarter, riding on the favorable timing of Captisol purchases for clinical and commercial use.
Research & development (R&D) expenses increased 27.1% to $6.1 million and general & administrative expenses rose 43.1% year over year to $9.3 million.
Ligand entered into a research and development agreement with Janssen, a subsidiary of Johnson & Johnson, for the development of heavy-chain-only version of Ligand’s OmniChicken. Ligand also entered into agreements with other smaller companies related to the use of its OmniChicken and Captisol platform.
The company’s partners have made significant progress with their pipeline candidates using Ligand’s technology platform. Sage Therapeutics filed a new drug application for intravenous brexanolone for the treatment of postpartum depression. Retrophin and Aldeyra Therapeutics initiated phase III studies of their respective pipeline candidates, sparsentan and ocular reproxalap.
2018 Guidance Raised
Ligand increased its guidance for 2018 and expects full-year revenues to be approximately $232 million compared with its previous guidance of $226 million. The expected revenues include royalties of nearly $120 million, material sales of roughly $23 million and license fees and milestones of almost $89 million with the potential for up to an additional $9 million in license fees and milestones. Adjusted earnings are estimated to be $6.30 per share for 2018 compared with $6.15 expected previously.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -11.34% due to these changes.
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 F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Ligand has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.