What Lies Ahead For Ligand (LGND) This Earnings Season?

Ligand Pharmaceuticals Incorporated (NASDAQ:LGND) is scheduled to report first-quarter 2018 results on May 8, after the market closes.

Ligand’s stellar earnings history shows estimate beat in three of the last four quarters, thereby missing the consensus mark only once. It also delivered an average positive earnings surprise of 24.88%.

Shares of Ligand have outperformed the industry in a year’s time. The stock has surged 40.4% versus the industry’s decline of 12.3%.

Last reported quarter, Ligand pulled off a positive surprise of 23.58%. Let’s see, how things are shaping up for this announcement.

Factors at Play

Ligand’s Captisol formulation technology has helped it form partnerships with several leading healthcare companies that provide funds as milestone and royalty payments. Royalties depend on the sales of the company’s two key partnered assets, namely Novartis AG’s (NYSE:NVS) Kyprolis and Amgen’s Promacta.

On first-quarter conference call, we expect investors’ focus to remain on the company’s updates regarding partnerships as well as its major pipeline assets.

In January 2018, the company entered into two worldwide OmniAb platform license agreements, one with Ferring Pharmaceuticals and the other, with Glenmark Pharmaceuticals. Pursuant to the deals, both companies will use Ligand’s full OmniAb platform to discover fully human mono and multispecific antibodies. Ligand is entitled to receive annual platform access payments, development and regulatory milestone payments and tiered royalties for each product incorporating an OmniAb antibody.

Meanwhile, in March 2018, Ligand signed another contract with venBio Partners, which permits the latter to use Ligand’s full OmniAb platform to discover fully human mono- and bispecific antibodies.

These partnership agreements in turn lend Ligand funds in the form of milestone and royalty payments.

We expect an update on several major pipeline assets at first-quarter earnings release. With respect to the company’s internal pipeline, various candidates are being developed for indications like diabetes. One of the most advanced candidates is LGD-6972, presently undergoing a phase II study for the treatment of type II diabetes. The company reported positive top-line data from the same in the second half of 2017. It further expects LGD-6972 to fetch in future licensing opportunities.

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 this last completed quarter. This is because a stock needs to have both a positive Earnings ESP and a bullish Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as elaborated below.

Zacks 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 $1.28. The metric represents the percentage difference between both estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Ligand sports a Zacks Rank #1 (Strong Buy), which increases the predictive power of ESP. However, a company’s 0.00% ESP 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 a couple of health care stocks worth considering with the right combination of elements to beat on earnings this time around:

Emergent Biosolutions Inc. (NYSE:EBS) has an Earnings ESP of +61.80% and a Zacks Rank #3. The company is scheduled to release first-quarter results on May 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Adverum Biotechnologies, Inc. (NASDAQ:ADVM) has an Earnings ESP of +6.90% and a Zacks Rank of 3. The company is expected to release first-quarter results on May 8.

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