Ligand Pharmaceuticals Incorporated LGND is scheduled to report second-quarter 2015 results on Aug 4 after the market closes. Ligand Pharma has a decent track record with the company beating estimates in two of the last four quarters with an average earnings surprise of 20.54%.
In the last reported quarter, Ligand Pharma had posted a positive earnings surprise of 66.67%. Let’s see how things are shaping up for the second quarter of 2015.
Factors at Play
In June this year, Ligand Pharma provided an updated financial outlook for the second quarter as well as the full year taking into consideration the impact of Viking Therapeutics’ VKTX initial public offering, which closed on May 4, 2015. Ligand Pharma raised its earnings guidance for the second quarter of 2015 keeping the revenue guidance intact.
Ligand Pharma expects second quarter 2015 earnings in the range of $1.71–$1.75 per share (previous guidance: 37–40 cents per share) and revenues in the range of $17 million to $17.5 million (unchanged).
We note that Ligand Pharma’s Captisol formulation technology has resulted in partnerships with several leading health care companies like Amgen AMGN among others, providing the company with funds in the form of milestone and royalty payments. The company boasts a portfolio of more than 120 fully funded programs with more than 70 partners.
Ligand Pharma records the majority of its revenues from royalties earned from its two key partnered assets – Kyprolis and Promacta. Moreover, the quarterly revenue pattern at Ligand Pharma over the past couple of years shows that the company’s second quarter typically records the lowest royalty revenue due to escalating royalty tiers that are paid every alternate quarter.
Although Ligand Pharma’s expenses are shared by its collaborative partners, the company is expected to see a sequential increase in its operating expenses primarily due to the timing of costs associated with its internal pipeline and business development activities.
On the second quarter call, investors will focus on updates on the company’s major pipeline assets as a lot of activity on the regulatory and development front along with milestone payments are expected this year.
Earnings Whispers?
Our proven model does not conclusively show that Ligand Pharma is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) to announce an earnings surprise. That is not the case here as you will see below.
Zacks ESP: The Earnings ESP for Ligand Pharma is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.51 per share.
Zacks Rank: Ligand Pharma carries a Zacks Rank #1. Ligand Pharma’s Zacks Rank #1 when combined with an ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stock to Consider
Here is a health care stock that you may want to consider, as our model shows that it has the right combination of elements to post an earnings beat this quarter.
Agios Pharmaceuticals, Inc. AGIO has an Earnings ESP of +75% and carries a Zacks Rank #1. It is scheduled to report second-quarter results on Aug 6.
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