Ligand (LGND) Stock Down Despite Q2 Earnings & Sales Beat

Ligand Pharmaceuticals Incorporated (NASDAQ:LGND) reported second-quarter 2019 adjusted earnings of 68 cents per share, which beat the Zacks Consensus Estimate of 61 cents. The company had reported adjusted earnings of $2.59 in the year-ago quarter. Second-quarter adjusted earnings exclude the impact of non-cash charge of $12.4 million related to Ligand’s investment in Viking Therapeutics, stock-based compensation and non-cash charges.

Total revenues in the quarter decreased to $25 million from $90 million in the year-ago period. However, the top line surpassed the Zacks Consensus Estimate of $22.9 million.

The company mentioned that all contracts previously signed with other companies related to the use of its technology platforms may not be active. Deals with Stemcentrx and ARMO BioSciences were not renewed, following their acquisition by AbbVie (NYSE:ABBV) and Eli Lilly (NYSE:LLY), respectively. Moreover, a deal with Celgene (NASDAQ:CELG) is currently inactive and Ligand does not expect a renewal due to the proposed acquisition of Celgene by Bristol-Myers. These developments may have spooked investors and presumably resulted in share price decline of 11.4% on Jul 30.

Shares of Ligand have declined 29.8% so far this year compared with the industry’s 0.3% decrease.

Quarterly Highlights

Royalty revenues were $6.6 million in the reported quarter compared with $31.4 million in the year-ago quarter. Ligand primarily earns royalties on sales of Amgen's (NASDAQ:AMGN) Kyprolis and CASI Pharmaceuticals' (NASDAQ:CASI) Evomela, which were developed using its Captisol technology. The significant decline in royalty revenues was due to loss of royalties from sales of Novartis’ (NYSE:NVS) blockbuster drug, Promacta.

In March, Ligand sold Promacta rights, including royalty rights to worldwide net sales, to privately-held Royalty Pharma for $827 million. Meanwhile, CASI Pharmaceuticals expects to launch Evomela in China later this year.

License fees, milestones and other revenues were $9.8 million in the second quarter compared with $51 million in the year-ago period. The company had recorded $47 million payment from WuXi Biologics related to amendment of OmniAb platform license agreement, in the year-ago quarter.

Material sales were $8.5 million, up 12.3% year over year due to the favorable timing of Captisol purchases for clinical and commercial use.

General and administrative expense was $11 million in the second quarter, up 18.3% from the year-ago quarter. Research and development expense almost doubled year over year to $12.2 million due to costs related to Vernalis acquisition and amortization of the upfront investments in Palvella and Novan programs.

Earlier this month, Ligand announced successful completion of a phase I study on its internal Captisol-enabled candidate, Iohexol. Data from the study demonstrated bioequivalence of the candidate to the reference Iohexol injection, Omnipaque.

Business Developments

During the quarter, Ligand inked four new deals related to its OmniAb platform and also signed or modified five deals related to Captisol technology. Its subsidiary, Vernalis signed a research collaboration agreement with privately-held PhoreMost Limited for an undisclosed novel oncology target in May. In the same month, Ligand granted rights to develop and commercialize Chk1 kinase inhibitor – VER250840 – discovered using Vernalis Design Platform to privately-held UK-based Cumulus Oncology. It also acquired economic rights to a late-stage candidate SB206 from Novan, Inc. The candidate is being developed for treating skin infections, including molluscum contagiosum.

In July, the company acquired a privately held antigen-discovery company, Ab Initio, for $12 million in cash.

In July, Sage Therapeutics announced the launch of its postpartum depression drug, Zulresso. The drug has been developed using Ligand’s Captisol technology. In June, Melinta Therapeutics announced that the FDA granted priority review to a supplemental new drug application for Baxdela, seeking label expansion in community-acquired bacterial pneumonia.

2019 Guidance Maintained

Ligand reiterated its guidance for 2019. It expects revenues to be approximately $118 million. Adjusted earnings are estimated to be $3.20 per share for 2019.

Zacks Rank

Ligand currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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