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Why Is Ligand (LGND) Up 16.3% Since Last Earnings Report?

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It has been about a month since the last earnings report for Ligand Pharmaceuticals (LGND - Free Report) . Shares have added about 16.3% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Ligand Beats on Q1 Earnings & Sales

Ligand reported first-quarter 2020 adjusted earnings of 89 cents per share, which beat the Zacks Consensus Estimate of 61 cents. The company had reported adjusted earnings of $1.16 in the year-ago quarter.

Total revenues decreased 23.7% year over year to $33.2 million mainly due to lower royalty revenues. However, the top line surpassed the Zacks Consensus Estimate of $26.05 million.

Quarterly Highlights

Ligand started presenting Service revenues as a separate line item, effective from the first quarter of 2020. It includes revenues generated from Vernalis, Icagen and OmniChicken businesses. The company previously included the item within License fees, milestones and other revenues. Beginning first-quarter 2020, the company started to report revenues under four categories — Royalties, Captisol, Service revenues and Contract revenues.

Royalty revenues were $6.6 million in the first quarter compared with $19.5 million in the year-ago quarter. The significant decline in royalty revenues was due to loss of royalties from sales of Promacta.

Please note that excluding Promacta royalties recorded in the year-ago quarter, royalty revenues increased year over year in the first quarter.

Captisol sales were $21.1 million compared with $9 million in the year-ago quarter. The significant increase was due to higher sales of Captisol to support evaluation of Gilead’s remdesivir as treatment for patients with severe COVID-19. Remdesivir received FDA’s Emergency Use Authorization on May 1 in the United States.

Contract revenues were $2.1 million in the first quarter compared with $11.1 million a year ago. Service revenues were $3.4 million in the first quarter compared with $3.9 million a year ago.

2020 Guidance Raised

Ligand raised its earlier guidance for sales and earnings for 2020 provided in February. The company expects total revenues and earnings for 2020 to be approximately $140 million and $3.65 per share, compared with the previous guidance of $133 million and $3.62 per share, respectively.

The company lowered its guidance for royalties and contract revenues while increasing the same for Captisol revenues. Service revenue guidance remained unchanged. Guidance for total revenues includes approximately $32 million in royalties (previously $38 million) and approximately $18 million from contract revenues (previously $30 million). Captisol sales are expected to be $60 million (previously $35 million) and Service revenues are expected to be about $25 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -15.22% due to these changes.

VGM Scores

At this time, Ligand has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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.

Outlook

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.


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