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Ligand (LGND) Tops Q1 Earnings, Revenues, Updates View

Ligand Pharmaceuticals Inc. LGND reported first quarter 2016 earnings of 79 cents per share (including the impact of stock-based compensation expense), well above the Zacks Consensus Estimate of 46 cents per share and the year-ago earnings of 19 cents per share.

Excluding the impact of non-cash stock-based compensation expense, earnings in the first quarter came in at 97 cents per share, significantly above the year-ago earnings of 33 cents per share.

Total revenue in the quarter jumped 103% year over year to $29.6 million and surpassed the Zacks Consensus Estimate of $26 million.

Quarter in Details

Royalty revenues were $14.4 million in the reported quarter, up 39.8% from the year-ago quarter, reflecting higher royalties on sales of Promacta and Kyprolis. Label expansion for these drugs should bring in additional royalties.

Material sales came in at $5.3 million in the reported quarter, up 43.2% due to the timing of Captisol purchases for clinical and commercial use.

License and milestone revenues came in at $9.9 million, up from $0.6 million in the year-ago period reflecting the timing of milestones and upfront license fees earned, and the OMT acquisition.

Research & development expenses increased 18.9% to $4 million primarily due to the timing of funding of internal development programs.

General & administrative expenses surged 13.9% year over year to $6.8 million, reflecting costs associated with the OMT acquisition and non-cash stock-based compensation expense.

Announces Synthetic Royalty Acquisition

In addition to announcing first quarter results, Ligand announced the acquisition of economic rights to several programs owned by CorMatrix for $17.5 million. Ligand will receive a portion of revenue (synthetic royalty) from CorMatrix’s existing marketed products which consists of vascular, cardiac and pericardial tissue repair products.

Ligand will also get a share of revenue and potential milestones from the currently marketed CorMatrix CanGaroo ECM Envelope for cardiac implantable electronic devices. Ligand is also entitled to a mid-single digit royalty from CorMatrix’s development-stage Micronized ECM product and replacement valve products.

According to the deal terms, Ligand will get a guaranteed minimum annual payment of $2.75 million. Ligand said that CorMatrix’s existing and pipeline medical devices address market opportunities estimated to exceed $1 billion annually.

The deal is expected to be immediately accretive to Ligand. While 2016 revenues will be boosted by about $1 million, earnings per share will be boosted by approximately 4 cents.

2016 Guidance

Ligand raised its 2016 outlook for both earnings and revenues. Including the impact of the synthetic royalty acquisition from CorMatrix, Ligand now expects total revenues of $115 million - $119 million in 2016 and earnings of $3.41 - $3.46 per share. At the time of releasing fourth quarter results, the company had guided towards revenues of $114 million - $118 million and earnings of $3.37 - $3.42 per share.

Ligand said that it expects revenues to cross $160 million in 2017 while earnings are expected to exceed $5.03 per share. This includes a contribution of approximately $2 million of revenue from the CorMatrix assets and about 8 cents incremental EPS contribution.

Our Take

Ligand’s first quarter results were strong with the company beating on all fronts. Ligand raised its outlook for 2016 as well. Kyprolis and Promacta should continue to perform well. Ligand continues to work on expanding its portfolio and the CorMatrix deal represents the company’s entry into the medical devices segment. During the first quarter, Ligand entered into agreements with several other companies as well.

Ligand is a Zacks Rank #3 (Hold) stock. Some better-ranked stocks in the healthcare sector include Anika Therapeutics Inc. ANIK, Cambrex Corporation CBM and OncoMed Pharmaceuticals, Inc. OMED – all three are Zacks Rank #1 (Strong Buy) stocks.

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