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What's in Store for Ligand (LGND) This Earnings Season?

Ligand Pharmaceuticals Incorporated LGND is scheduled to report fourth-quarter 2017 results on Feb 21, after the market closes. Ligand’s earnings history has been a mixed bag with the company surpassing expectations in two of the last four quarters and missing in the other two. It also delivered an average beat of 8.22%.

Shares of Ligand have outperformed the industry in a year’s time. The stock has surged 48.6% against the industry’s 2.5% decline.

 

Last quarter, Ligand pulled off a positive earnings surprise of 15%. 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 it with funds as milestone and royalty payments. Royalties depend on the sales of its two key partnered assets, Novartis AG’s NVS Kyprolis and Amgen’s Promacta.

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

Last month, the company entered into two worldwide OmniAb platform license agreements, one with Ferring Pharmaceuticals and the other with Glenmark Pharmaceuticals. Pursuant to the agreement, 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 October 2017, Ligand inked a deal to acquire Crystal Bioscience. Pursuant to this acquisition, Crystal Bioscience’s HuMab technology will be part of Ligand’s OmniAb brand and be called OmniChicken. Addition of the OmniChicken platform to Ligand’s OmniAb technology supplements a third species for the fully-humanized antibody discovery.

Ligand anticipates Crystal Bioscience’s buyout to contribute up to $1 million of revenues during the fourth quarter of 2017.

We expect an update on several major pipeline assets on the conference call of the to-be-reported quarter. With regard 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 treatment of type II diabetes. The company reported positive top-line data from the same in September 2017. It further expects LGD-6972 to bring 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 quarter. This is because a stock needs to have both a positive Earnings ESP and a solid 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 $1.06. 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 carries a Zacks Rank #5 (Strong Sell), which lowers the predictive power of ESP. Notably, we caution against all Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions. Moreover, a company’s ESP of 0.00% makes surprise prediction difficult.

 

Stocks That Warrant a Look

Here are a couple of health care stocks with the right combination of elements to beat on earnings this time around:

Exelixis, Inc. EXEL is scheduled to announce fourth-quarter results on Feb 26. The company has an Earnings ESP of +8.94% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Puma Biotechnology, Inc. PBYI is slated to release fourth-quarter financial numbers on Mar 1. The company has an Earnings ESP of +2.02% and a Zacks Rank #3.

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