Ligand Pharmaceuticals Incorporated LGND provided a summary of the accounting impact of the recently concluded (May 4, 2015) initial public offering (IPO) of Viking Therapeutics VKTX and an updated financial outlook for the second quarter as well as full year 2015.
Accounting Impact Details
Ligand Pharma owns 48.7% of Viking Therapeutics’ outstanding common stock (as of May 31, 2015). As a result, Ligand Pharma will report its proportion of Viking's losses or gains (based on actual holdings) under ‘Gain (loss) on investment in Viking’ in its statement of operations. This will be a non-cash provision for losses or gains and the amount will be deducted from Ligand Pharma’s earnings per share.
In connection with the closing of the IPO, Viking will be deconsolidated from Ligand Pharma's balance sheet. Upon deconsolidation, the convertible note receivable will be recorded at a fair value of about $5.5 million and will be adjusted every quarter to reflect changes at fair value. Moreover, Ligand Pharma’s statement of operations for the second quarter of 2015 is expected to include approximately $28.2 million of non-operating income as ‘Gain on deconsolidation’ mainly due to the equity milestone received from Viking upon the close of its IPO in addition to the value received upon the underwriters' exercise of their overallotment option.
2015 Earnings Outlook Upped
Taking into consideration the impact of the Viking IPO, Ligand Pharma raised its earnings guidance for both the second quarter and full year 2015.
For the second quarter of 2015, Ligand Pharma now expects earnings in the range of $1.71–$1.75 per share (previous guidance: 37–40 cents per share). The Zacks Consensus Estimate is currently 19 cents per share. The earnings guidance excludes changes in contingent liabilities, mark-to-market adjustment for amounts owed to licensors, non-cash stock-based compensation expense, non-cash debt related costs and equity in net loss from Viking.
For 2015, Ligand Pharma expects earnings in the range of $3.45–$3.50 per share (previous guidance: $2.14–$2.18 per share). The Zacks Consensus Estimate currently stands at $1.47 per share.
However, Ligand Pharma maintained its revenue guidance for both the second quarter and full year. For the second quarter, Ligand Pharma still expects total revenues in the range of $17 million to $17.5 million. The Zacks Consensus Estimate is $17 million.
For 2015, Ligand Pharma continues to expect total revenues in the range of $81 million to $83 million. The Zacks Consensus Estimate is $82 million.
Ligand Pharma currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the health care sector are Gilead Sciences Inc. GILD and Actelion Ltd. ALIOF. Both hold a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment