Shares of Ligand PharmaceuticalsLGND tumbled 16.5% after a short-seller Citron Research issued a negative report on the stock.
Per Citron, Ligand's pipeline is "nothing but a pipe dream." The research report projects that the stock price has "80% downside from its current" trading levels. Ligand is currently trading at $110.4, while Citron has a $35 price target for Ligand.
Ligand's stock has plummeted 51.5% in the past six months compared with the industry 's decline of 15.3%
The Citron report puts a big question on Ligand's claims of future revenues and recent acquisitions. Per the report, Ligand, which started off as a biopharmaceutical company, has failed to develop its own drugs. The company then changed its strategy and started acquiring candidate drugs/technologies and forming partnerships with other pharma companies for the development of drugs. The company essentially provides development platforms enabling other drug companies to create drugs effectively. Ligand's Captisol formulation technology has allowed it to enter into several licensing deals and generate royalties.
The report says that Ligand has just four approved drugs, with one accounting for more than 75% of royalties and is set to lose patent exclusivity shortly. The report alleges Ligand's claims of pipeline/future revenues coming from "The Big 6" as misleading. The big six companies include Sage Therapeutics (SAGE), Retrophin, Inc. Sermonix Pharmaceuticals, Bristol-Myers Squibb (BMY), Eli Lilly (LLY) and Roivant Sciences.
However, per Citron, Ligand likes to name bigwigs like Bristol-Myers and Lilly in its presentation of future revenues, while more than 60% of Ligand's "milestones" come from Viking Therapeutics (VKTX) and Vernalis.
Viking accounts for approximately 51% of Ligand's projected milestones. In October 2018, Ligand acquired Vernalis for $11 million and added two primary candidates - CPI-444 and RPL554 - to its portfolio. However, RPL554 has failed in phase II studies. With one of the two drugs failing its trials and the acquisition price for the entire company being slightly more than a public shell, Citron has questioned Ligand's claims of potential milestones of $364 million.
Citron further cautions investors that if Ligand thought the Viking pipeline was promising, they would be buying Viking's stock and not their own. However, Ligand has been selling Viking stock since Sep 25, 2018.
While time will tell how the business for Ligand unfolds hereafter, Ligand's dependence on other companies for revenues as royalties is a concern.
Ligand currently has a Zacks Rank #3 (Hold).
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