UPDATE: Short-Seller Article on Ligand (LGND) is Silly, Underlying Strength Remains - Roth Capital

June 17, 2014 8:44 AM EDT
Get Alerts LGND Hot Sheet
Price: $123.63 +2.32%

Rating Summary:
    9 Buy, 5 Hold, 1 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 12 | Down: 7 | New: 31
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(Updated - June 17, 2014 8:54 AM EDT)

Roth Capital keeps Ligand Pharma (Nasdaq; LGND) at Buy with a $92 price target following a recent short-seller article.

Analyst Joseph Pantginis commented, A web-based platform for investing articles published a strongly bearish article on LGND on Monday afternoon. LGND's stock subsequently lost most of the gain it had experienced earlier in the day following positive Phase I glucagon receptor antagonist data. We believe many of the article's claims were flawed and believe LGND remains a solid name based on quality current and future revenue streams.

UPDATE - Broader summary of Pantginis' counterarguments to the article:

The article argues that in 27 years in operation, LGND has simply accumulated a $669 million deficit and diluted shareholders. We note that when John Higgins took over as CEO ~6 years ago, he drastically reduced yearly burn from $100 to $20 million and transformed the company. This burn level has remained relatively constant for several years and now that LGND is profitable, the company has those net losses as significant tax assets, and the company’s effective tax rate over the next five years or so is about 2%.

The author also notes that GSK recently divested Promacta to Novartis (NVS-NC). We want to be clear that this was part of an exchange of assets in which GSK divested its entire oncology program, including Promacta, to Novartis and Novartis divested its vaccine program to GSK. This was part of a larger joint venture to include combination of the companies' consumer divisions to create a larger consumer healthcare business. We believe Promacta is in good hands with Novartis and do not expect major impacts to Promacta revenue from this transition. We also expect that Novartis will continue to develop the drug for various oncology indications, work which GSK has begun. We believe oncology indications provide a significant potential upside for Promacta.

And finally, the author calls LGND's claim of abundant collaborations just a "Red Herring." We disagree and believe that LGND's has clearly shown great success in collaboration, with at least 10 commercial-stage partnerships and many more in the pipeline with leading pharma companies, such as GSK, Pfizer (PFE-NC), and Merck (MRK-NC) , as well as with many biotech companies.

For an analyst ratings summary and ratings history on Ligand Pharma click here. For more ratings news on Ligand Pharma click here.

Ligand Pharma closed at $64.89 yesterday.



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