Ligand (LGND) Up 16.3% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Ligand Pharmaceuticals (LGND). 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 drivers.

Ligand Beats on Q4 Earnings & Sales

Ligand reported fourth-quarter 2019 adjusted earnings of 71 cents per share, which beat the Zacks Consensus Estimate of 68 cents. The company had reported adjusted earnings of $1.70 in the year-ago quarter. Fourth-quarter adjusted earnings exclude the impact of non-cash charge of $8.5 million related to Ligand’s investment in Viking Therapeutics, stock-based compensation and non-cash charges.

Total revenues decreased to $27 million from $59.6 million in the year-ago quarter mainly due to lower royalty revenues. However, the top line surpassed the Zacks Consensus Estimate of $24.9 million.

Quarterly Highlights

Royalty revenues were $11 million in the fourth quarter compared with $40.2 million in the year-ago quarter. Ligand primarily earns royalties on sales of Kyprolis and Evomela, 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 fourth quarter.

License fees, milestones and other revenues were $8.8 million in the fourth quarter compared with $9.3 million a year ago. Material sales were $7.1 million, down 29.7%.

Full-Year Results

Ligand’s adjusted earnings per share were $3.09 per share for the full year compared with $7.15 per share in 2018. Full-year revenues declined 52.2% to approximately $120.3 billion.

2020 Guidance

Ligand provided guidance for its sales and earnings for 2020 with its fourth-quarter results. The company updated its guidance following the acquisition of certain assets from privately-held Icagen in February 2020. The company expects total revenues to be approximately $128 million, up from previous guidance of $128 million. It expectsadjusted earnings per share for 2020 to be approximately $3.45 compared to the previous guidance of $3.40.

Guidance for total revenues includes approximately $7 million from Icagen business, $38 million in royalties, approximately $35 million from material sales, and license fees and milestones of approximately $48 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month. The consensus estimate has shifted -27.27% due to these changes.

VGM Scores

Currently, Ligand has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Ligand has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.