Roth Capital Analyst Squares Up Against Hedge Fund In Ligand Pharma

Correction: A previous version of this article stated Cantor Fitzgerald's Irina Rivkind Koffler had a Hold rating on Ligand, which was incorrect. The analyst discontinued her coverage of the company on July 10. CJS Securities and Craig-Hallum's ratings on Ligand have also been added to the article.

In a report rolled out Wednesday, Roth Capital analysts Joseph Pantginis and Assaf Vestin reiterated a Buy rating and $135.00 price target on shares of Ligand Pharmaceuticals Inc. LGND, after partner Viking Therapeutics Inc VKTX announced it is moving VK2809, in the next few months, into a Phase II for dyslipidemia fatty liver disease.

The analysts think the recent IPO of Viking and Ligand's considerable stake (about 50 percent) provide long-term upside potential to the latter’s revenue streams. They anticipate that “current revenue streams from partnered products and the broad ‘in development’ portfolio are poised to drive significant growth in the near and longer term.”

On the other hand, Reverend Emmanuel Lemelson of Lemelson Capital Management recently told Benzinga the Viking IPO was not a positive thing. According to the hedge fund manager, by IPOing Viking, Ligand created a "pyramid scheme of shell companies" that has "almost no prospect" of future revenue and earnings with no assets. Sometime into the future, Ligand will be used as a case study into the "excesses of the stock market."

Related Link: Lemelson Doubles Short Position In Ligand Pharmaceuticals, Says It's Created 'Pyramid Scheme Of Shell Companies'

In a recent Benzinga article, “Lemelson argued that Ligand is using its ownership stake to boost its balance sheet with the profits from the IPO being recorded as earnings. Ligand won't record any losses in its P&L from Viking even though the company 'is guaranteed' to show losses in the future, he added.”

In this context, the hedge fund doubled its short position in Ligand, betting against the company -- and Roth Capital’s wage. Lemelson added the company isn't building “a real product or business” but is merely an 18-employees firm with a $2 billion market capitalization.

"That's the kind of thing you want to short. It's just not sustainable,” he concluded.

Taking A Look Around Wall Street

CJS Securities' Scott Solow holds a Market Outperform rating on Ligand, while Matt Tiampo of Craig-Hallum has a Buy rating on the stock.

Deutsche Bank analyst Gregg Gilbert, however, remains cautious. he recently downgraded the stock from Buy to Hold, as the risk/reward profile seems “balanced.”

Of the four firms that cover Ligand, three maintain Buy-equivalent ratings on the stock, while Gilbert's call is the only Hold.