It has been about a month since the last earnings report for Ligand Pharmaceuticals (LGND). Shares have added about 5.3% 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 the most recent earnings report in order to get a better handle on the important catalysts.
Ligand Misses on Q3 Earnings & Sales
Ligand reported third-quarter 2019 adjusted earnings of 49 cents per share, which missed the Zacks Consensus Estimate of 65 cents. The company had reported adjusted earnings of $1.32 in the year-ago quarter. Third-quarter adjusted earnings exclude the impact of non-cash charge of $10.5 million related to Ligand’s investment in Viking Therapeutics, stock-based compensation and non-cash charges.
Total revenues in the quarter decreased to $24.8 million from $45.7 million in the year-ago period. However, the top line surpassed the Zacks Consensus Estimate of $23.16 million.
Royalty revenues were $9.8 million in the reported quarter compared with $36.1 million in the year-ago quarter. Ligand primarily earns royalties on sales of Kyprolis and Evomela, which were developed using its Captisol technology. The significant decline in royalty revenues was due to loss of royalties from sales of Novartis’ Promacta.
Please note that excluding Promacta royalties recorded in the year-ago quarter, royalty revenues increased almost 39% year over year in the third quarter. The growth was driven by higher royalty rate on Kyprolis sales as the drug’s sales reached higher royalty rate tier and higher sales of Evomela following its launch in China.
CASI Pharmaceuticals launched Evomela in China in August 2019.
License fees, milestones and other revenues were $8.2 million in the third quarter compared with $2.5 million in the year-ago period. Material sales were $6.8 million, down 2.9% year over year.
General and administrative expense was $9.5 million in the third quarter, down 1.1% from the year-ago quarter. Research and development expense more than 150% year over year to $13.7 million.
Ligand inked new OmniAb license agreements with six companies including Takeda Pharmaceutical. It also entered into agreements related to its Captisol technology with several companies during the quarter.
In September, Amgen announced successful completion of a phase III study evaluating Kyprolis in combination with dexamethasone and J&J’s cancer drug, Darzalex. The company also signed an agreement to commercialize Kyprolis in China. In July, Sage Therapeutics announced the launch of its postpartum depression drug, Zulresso.
Meanwhile, Ligand is actively repurchasing its shares since November 2018. The company has $500 million share repurchase program, and it has utilized about $91 million so far. =
Ligand continues to expect sales for 2019 to be $118 million. However, it lowered adjusted earnings estimate from $3.20 per share to $3.00 for 2019, which reflects certain changes in tax expense, especially related to sale of Promacta royalty right.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -10.64% due to these changes.
At this time, Ligand has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. 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 this revision has been net zero. Notably, Ligand has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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