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What Awaits Ligand Pharmaceuticals (LGND) in Q3 Earnings?

Ligand Pharmaceuticals IncorporatedLGND is scheduled to report third-quarter 2015 results on Nov 9 after the market closes. Ligand has a decent track record with the company beating estimates in two of the last four quarters with an average positive earnings surprise of 16.28%.

In the last reported quarter, Ligand had posted a positive earnings surprise of 7.95%. Let's see how things are shaping up for the third quarter of 2015.

Factors Influencing this Quarter

At the time of announcing its second-quarter 2015 results, Ligand had reiterated the outlook for 2015 for both earnings and revenues. The company expects to earn $3.45-$3.50 per share on total revenues of $81-$83 million. Meanwhile, Ligand expects to earn $1.29-$1.34 per share on revenues of $48-$50 million in the second half of 2015. The company informed that about one-third of this second-half revenue and earnings outlook is projected for the third quarter of 2015.

Ligand's Captisol formulation technology has allowed it to enter into several agreements with leading health care companies like Amgen Inc. AMGN among others. These provide the company with funds in the form of upfront, milestone and royalty payments.

During the third quarter, Ligand continued to expand its partnership portfolio by inking deals with new partners (a new clinical-stage agreement with AiCuris for an undisclosed anti-infective Captisol-enabled program) and expanding relationships with existing ones (expanded its partnership with Sanofi SNY and entered into a worldwide agreement for the development and commercialization of SAR-125844). The company possesses a portfolio of more than 120 fully funded programs with more than 70 partners.

Meanwhile, Ligand 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 to a large extent depends on both revenues earned from royalties and Captisol material sales. While royalties depend on sales of Kyprolis and Promacta, Captisol material sales depend on the timing of Captisol purchases for clinical and commercial use.

Although Ligand's expenses are shared by its collaborative partners, the company is expected to see a sequential increase in operating expenses primarily due to the timing of costs associated with internal programs and business development activities.

On the third-quarter call, investors will focus on updates on the company's partnership portfolio and major pipeline assets as a lot of activity on the regulatory and development front are expected for the rest of the year.

Earnings Whispers?

Our proven model does not conclusively show that Ligand is likely to beat earnings 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 is 0.00% since the Most Accurate estimate stands at 21 cents per share, in line with the Zacks Consensus Estimate.

Zacks Rank: Ligand's Zacks Rank #3 when combined with an ESP of 0.00% makes surprise prediction difficult.

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

A Stock That Warrants a Look

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.

Merrimack Pharmaceuticals, Inc. MACK has an Earnings ESP of +2.44% and carries a Zacks Rank #3. The company is scheduled to report third-quarter 2015 results on Nov 9.

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SANOFI-AVENTIS (SNY): Free Stock Analysis Report

AMGEN INC (AMGN): Free Stock Analysis Report

LIGAND PHARMA-B (LGND): Free Stock Analysis Report

MERRIMACK PHAR (MACK): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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