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

Ligand Pharmaceuticals Inc. LGND is scheduled to report third-quarter 2017 results on Nov 9, after the market closes. Ligand’s earnings history has been a mixed bag with the company having surpassed expectations in two of the last four quarters and missed in the other two. It also delivered an average positive surprise of 6.19%.

Ligand’s shares have outperformed the industry so far this year. The stock has rallied 44.1% compared with the industry’s 3.9% increase.

Last quarter, Ligand delivered a positive earnings surprise of 67.50%. 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.

We expect investors’ focus to remain on the company’s updates regarding partnerships and major pipeline assets on the third-quarter conference call.

In July, the company announced that it has entered into another commercial license and supply agreement with Amgen, granting it rights to use Captisol in the formulation of its anti-CD33 x anti-CD3 (BiTE) bispecific antibody, AMG 330. Per the agreement terms, Ligand is entitled to potential milestone payments, royalties and revenues from the future sales of AMG 330.

Notably in October, Ligand inked a deal to acquire Crystal Bioscience. Pursuant to the 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 acquisition to contribute up to $1 million of revenues during the fourth quarter of 2017. It thus raised the total revenue guidance for 2017 to at least $134 million compared with the previous guidance of $133 million.

We expect an update on several major pipeline assets in the company’s portfolio on the third-quarter conference call. With regard to its 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 study in September. 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 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 -15.00%, representing the difference between the Most Accurate estimate of 51 cents and the Zacks Consensus Estimate of 60 cents.You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Though Ligand’s Zacks Rank of 1 increases the predictive power of ESP, a company needs to have a positive ESP to be confident about an earnings surprise. Hence, the combination leaves the case inconclusive.

We caution against the Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Some health care stocks worth considering with the right combination of elements to surpass estimates this quarter are:

Agenus Inc. AGEN is scheduled to release results on Nov 7. The company has an Earnings ESP of +8.11% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Alnylam Pharmaceuticals, Inc. ALNY is scheduled to release results on Nov 7. The company has an Earnings ESP of +2.02% and a Zacks Rank #3.

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