Deutsche Downgrades Ligand As Risk/Reward Becomes Challenging

Deutsche Bank has downgraded Ligand Pharmaceuticals Inc. LGND to Sell from Hold on valuation.

Despite acknowledging the long-term potential of Ligand's "more than 150 shots-on-goal," the brokerage sees downside in shares over the next one year if there is lag in revenue momentum and lack of new pipeline "upsides."

That said, Deutsche Bank noted "that one particularly high-profile opportunity, MRK's BACE inhibitor, could create significant volatility when Phase III studies read out in mid-2017."

Despite expecting continued strong royalty growth from core assets Promacta and Kyprolis, downside, Deutsche said that Kyprolis could face greater competitive pressure as newer entrants in the multiple myeloma market gain traction.

Related Link: Opioid Addiction: What To Do When A Loved One Is Hooked, According To Science

The notable ones are Johnson & Johnson JNJ's Darzalex, Bristol-Myers Squibb Co BMY's Empliciti and Takeda Pharmaceutical Co Ltd (ADR) TKPYY's Ninlaro.

"We note that monthly IMS sales growth for Kyprolis has slowed from 40 percent in 1Q16 to 17 percent in 2Q16, with growth in May (18 percent) and June (5 percent) well below the April level (32 percent)," analyst Gregg Gilbert wrote in a note.

Among Ligand's other "Big 6" pipeline assets, Gilbert models material royalty contribution from Melinta's Baxdela starting in 2017.

Following the company's second-quarter results, the analyst cut his 2016 EPS estimate by 5.8 percent to $2.75. However, Gilbert hiked his price target on the stock by $6 to $110.

At time of writing, shares of Ligand had fallen 6.48 percent on the day to $123.82.

Full ratings data available on Benzinga Pro.

Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email feedback@benzinga.com with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!
Market News and Data brought to you by Benzinga APIs
Comments
Loading...
Date
ticker
name
Actual EPS
EPS Surprise
Actual Rev
Rev Surprise
Posted In: Analyst ColorBiotechEarningsNewsShort IdeasDowngradesHealth CarePrice TargetAnalyst RatingsTrading IdeasGeneralBaxdlaDarzalexDeutsche BankEmplicityGregg GilbertKyprolisMelintaNinlaroPromacta
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!