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Ligand (LGND) Beats on Q1 Earnings & Sales, Raises View

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Zacks Equity Research
·4 min read
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Ligand Pharmaceuticals Incorporated LGND 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.

Despite encouraging results, shares of Ligand were down 6.4% in after-hours trading on May 6. The company’s shares have declined 2.6% so far this year against the industry’s 3.7% increase.

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. Ligand primarily earns royalties on sales of Amgen's AMGN Kyprolis and CASI Pharmaceuticals' Evomela, which were developed using its Captisol technology. The significant decline in royalty revenues was due to loss of royalties from sales of Novartis’ NVS blockbuster drug, Promacta. In March 2019, Ligand sold Promacta rights, including royalty rights to worldwide net sales, to privately-held Royalty Pharma for $827 million.

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 GILD 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.

COVID-19 Impact

Ligand on its earnings call stated that COVID-19 did not have any material negative impact on the company’s business during the first quarter. The company also expects no material impact in the remaining three quarters. Meanwhile, development of remdesivir has generated significant Captisol revenues for the company. Gilead’s future development and manufacturing plans for remdesivir are likely to keep the strong demand trend for Captisol going in 2020.

However, the company has more than 200 programs in development, which are fully funded and conducted by more than 125 different pharmaceutical and biotechnology companies. Ligand expects COVID-19 to have adverse impact on certain ongoing clinical studies including delay in study initiations or a slowdown in patient enrollment. A few smaller companies may face fund shortage leading to inability to make payments to Ligand. Including these potential impacts, the company expects to record lower-than-previously-guided revenues related to royalties and contracts. However, it expects the increase in Captisol sales to more than offset the decline in these revenues.

2020 Guidance Raised

Ligand raised its 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 Zacks Consensus Estimate for revenues and earnings per share is pegged at $129.39 million and $3.45, respectively.

The company lowered its guidance for royalties and contract revenues while increasing the same for Captisol revenues. The 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.

Ligand Pharmaceuticals Incorporated Price, Consensus and EPS Surprise


Ligand Pharmaceuticals Incorporated Price, Consensus and EPS Surprise
Ligand Pharmaceuticals Incorporated Price, Consensus and EPS Surprise

Ligand Pharmaceuticals Incorporated price-consensus-eps-surprise-chart | Ligand Pharmaceuticals Incorporated Quote

Zacks Rank

Ligand currently has a Zacks Rank #2 (Buy).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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