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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 third-quarter 2018 results on Nov 8, before market open.

Ligand has a stellar earnings history. Its earnings beat estimates in all the last four quarters, with the average positive earnings surprise being 59.54%. The company delivered a positive earnings surprise of 178.49% in the last reported quarter.

Shares of Ligand have outperformed the industry so far this year. The stock has surged 16.4% against the industry’s decline of 16.8% 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 and milestone, material sales, and royalty payments from companies that use its technology platforms to develop their drugs. The majority of royalties come from sales of two drugs – Novartis AG’s (NVS - Free Report) Promacta and Amgen’s Kyprolis – which were developed using Ligand’s Captisol formulation technology. Novartis and Amgen reported good growth in sales of these drugs in their third-quarter earnings release, which is likely to boost royalties for Ligand.

Material sales to partners using its Captisol material have also increased significantly in the first half and the trend is expected to continue in the third quarter on the back of strong sales of drugs developed using the Captisol technology.

The company raised its revenue guidance on its second-quarter earnings call. The company expects revenues to be approximately $86 million in the second half of 2018. The Zacks Consensus Estimate for revenues and earnings is pegged at $42.9 million and $1.00 per share, respectively in the third quarter.

Ligand’s partners are also progressing well with the development of the candidates with some of them under review or in late-stage studies. We expect the company to provide updates on the progress of partnered products.

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 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 $1.00.  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 some biotech stocks that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter.

CRISPR THERAPTC (CRSP - Free Report) has an Earnings ESP of +3.53% and a Zacks Rank #1. The company is expected to release third-quarter results on Nov 14. You can see the complete list of today’s Zacks #1 Rank stocks here.

Compugen Ltd. (CGEN - Free Report) has an Earnings ESP of +58.33% and a Zacks Rank #2. The company is scheduled to release third-quarter results on Nov 7.

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