Ligand: Interesting Pharma Play On Sale

Ligand Pharmaceuticals is an interesting and diverse play on growth of the pharmaceutical industry.

I like the interesting business model, as Ligand appears to have a very rich pipeline.

A very strong momentum run has seen a big reversal, yet current valuations require further pipeline conversion to offer appeal.

Ligand Pharmaceuticals (LGND) is an interesting business with a distinctive business model, which actually looks quite compelling. Investors feel the same as shares have seen a huge run higher over the past few years, which has violently reversed course in recent months actually creating a more compelling situation currently.

Nonetheless, I am not actively buying a big stake just yet. For now I just hold a symbolic stake, as I require continued growth or a further pullback before buying a larger stake.

Ligand – The Alternative Business Model

Ligand itself explains quite well why it is pursuing an alternative strategy in the complicated pharmaceutical industry. It rightfully observes that most research programs fail and that not all programs are created equal in terms of risks and reward. Ligand aims to create the best of both worlds by connecting its patent, know how and data together with the research programs of partners, thereby creating the best of both worlds.

Specific tasks provided by Ligand include early research, drug discovery, tools, data and patents, new technologies and assets. The combination of current revenues, pipeline and strong technology drive the value created by Ligand and has been the major force behind the huge run higher in the shares.

Over time, the portfolio of underlying approved drugs has grown dramatically, with underlying product revenues increasing from less than $400 million in 2012 to more than $2.3 billion in 2018. On these sales, the company has on average obtained royalty rates between 3.5% and 5.5% on aggregate, with current rates trending towards the higher of the range.

The company currently has a program with 178 (potential) drugs with over a 100 partners of which half is still pre-clinical phase. 18 products are being marketed and about 35% is in either phase 1, 2 or 3. Note that the partners of the company include all the major players within the industry. The underlying technology which makes Ligand a desired collaboration partner for these companies include the OmniAb and Captisol technologies. …

https://seekingalpha.com/article/4231581-ligand-interesting-pharma-play-sale