The shares of Ligand Pharmaceuticals Inc. (NASDAQ:LGND) received an Outperform rating with a $98 price target from Christopher S. James, M.D., an analyst who initiated coverage on the stock from Brinson Patrick Equity Research.
In a note to investors, the analyst emphasized that Ligand Pharmaceuticals Inc. (NASDAQ:LGND) is a profitable biotechnology company and it has a growing royalty-based business combined with a low operating cost structure.
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Ligand Pharmaceuticals product royalties
James noted that the biotechnology company has more than 90 fully funded programs with royalty generating products. According to the analyst, Ligand Pharmaceuticals Inc. (NASDAQ:LGND) generates its current cash flows from royalties from the sales of Promacta distributed by GlaxoSmithKline plc (NYSE:GSK) (LON:GSK) and Kyprolis distributed by Amgen, Inc. (NASDAQ:AMGN) as well as from significant sales of Captisol.
Promacta is an oral drug designed to stimulate the production of platelets to prevent bleeding caused by thrombocytopenia (low platelet count). The sales of Promacta increased from $205 million to $292 million worldwide last year. James estimated that Promacta sales will rise to $435 million this year and more than $1 billion by 2017.
According to him, GlaxoSmithKline plc (NYSE:GSK) (LON:GSK) is strongly committed to the Promacta franchise, and Ligand Pharmaceuticals Inc. (NASDAQ:LGND) receives tiered royalties of 4.7% and 9.4% on net annual sales of Promacta.
On the other hand, James emphasized that Kyprolis was the primary reason of Amgen, Inc. (NASDAQ:AMGN) to buy Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX) for approximately $10.4 billion. Kyprolis is a selective proteasome inhibitor approved by FDA in 2012. It is also an injectable agent formulated with Ligand’s Captisol, a treatment for patients with multiple myeloma.
During the fourth quarter last year, the sales of Kyprolis were $73 million. James estimated that its sales will reach $419 million this year and $671 million in 2015 and $973 million by 2016. Ligand Pharmaceuticals Inc. (NASDAQ:LGND) receives tiered royalties of 1.5% and 3% on the annual nets sales of the product including milestones and revenue from Captisol’s material sales under its 2005 agreement with Onyx.
Multiple alliances with big pharmaceutical companies
Aside from GlaxoSmithKline plc (NYSE:GSK) (LON:GSK) and Amgen, Inc. (NASDAQ:AMGN), Ligand Pharmaceuticals Inc. (NASDAQ:LGND) has multiple partnerships with big pharmaceutical companies including Merck & Co., Inc. (NYSE:MRK), Bristol-Myers Squibb Co (NYSE:BMY), and Pfizer Inc. (NYSE:PFE), etc.
“We point out that Ligand’s partner, Pfizer Inc. (NYSE:PFE) recently launched Duavee for the treatment ofhot flashes and prevention of osteoporosis. Given that 70% of the 33 million eligible U.S. women (45 – 59 y.o.) are not treated for menopause, we view Duavee as a major opportunity and paradigm change in women’s health,” wrote James.