Ligand Pharmaceuticals: 5 Different Insiders Have Sold Shares This Month

Feb.17.14 | About: Ligand Pharmaceuticals (LGND)

In this article, I will feature one healthcare stock that has seen intensive insider selling during the last 30 days. Intensive insider selling can be defined by the following three criteria:

  1. The stock was sold by three or more insiders within one month.
  2. The stock was not purchased by any insiders in the month of intensive selling.
  3. At least two sellers decreased their holdings by more than 10%.

Ligand Pharmaceuticals (NASDAQ:LGND) engages in the acquisition and development of royalty revenue generating assets in the United States.

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Insider selling during the last 30 days

Here is a table of Ligand's insider-trading activity during the last 30 days by insider.

Name Title Trade Date Shares Sold Rule 10b5-1 Current Ownership Decrease In Ownership
Jason Aryeh Director Feb 12-14 40,320 No 280,984 shares 12.5%
John Sharp CFO Feb 12 86,953 No 17,667 shares + 41,608 options 59.5%
Charles Berkman VP Feb 12 14,881 No 31,645 shares + 50,604 options 15.3%
John Higgins CEO Jan 16-Feb 12 31,875 Yes 119,099 shares + 143,125 options 10.8%
Matthew Foehr COO Feb 14 22,500 Yes 53,457 shares + 198,056 options 8.2%
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There have been 196,529 shares sold by insiders during the last 30 days. John Higgins and Matthew Foehr sold shares pursuant to a Rule 10b5-1 plan. More details about the Rule 10b5-1 trading plan can be found from this link.

Insider selling by calendar month

Here is a table of Ligand's insider-trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
February 2014 181,529 0
January 2014 15,000 0
December 2013 12,700 0
November 2013 528,628 0
October 2013 10,000 0
September 2013 519,023 0
August 2013 60,406 0
July 2013 0 0
June 2013 0 0
May 2013 4,000 0
April 2013 0 0
March 2013 0 0
February 2013 0 0
January 2013 0 39,600
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There have been 1,331,286 shares sold, and there have been 39,600 shares purchased by insiders since January 2013.

Financials

Ligand reported the full-year 2013 financial results on February 11 with the following highlights:

Revenue $49.0 million
Net income $11.4 million
Cash $17.3 million
Debt $9.1 million
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Outlook

Ligand's guidance is as follows:

Q1/2014 FY2014
Revenue $13-$14 million $62-$64 million
Non-GAAP EPS $0.22-$0.25 $1.40-$1.45
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(Source: Investor presentation)

Pipeline and upcoming milestones

Ligand could have 10 new royalty products in the market by 2017.

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(Source: Investor presentation)

Competition

Ligand's competitors include Eli Lilly and Company (NYSE:LLY), Merck & Co. (NYSE:MRK), and Roche Holding AG (OTCQX:RHHBY). Here is a table comparing these companies.

Company LGND LLY MRK RHHBY
Market Cap: 1.57B 58.48B 161.99B 250.97B
Employees: 21 37,925 77,300 85,080
Qtrly Rev Growth (yoy): 0.08 -0.03 -0.04 0.01
Revenue: 48.97M 23.11B 44.03B 52.08B
Gross Margin: 0.69 0.79 0.64 0.75
EBITDA: 18.66M 7.01B 15.93B 20.03B
Operating Margin: 0.33 0.24 0.21 0.34
Net Income: 8.83M 4.68B 4.40B 11.96B
EPS: 0.56 4.32 1.47 3.46
P/E: 138.59 12.55 37.71 21.33
PEG (5 yr expected): 2.01 40.89 9.05 2.50
P/S: 33.75 2.50 3.66 4.73
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Ligand has the highest P/S ratio among these four companies.

Here is a table of these competitors' insider-trading activities during the last 12 months.

Company Insider buying / shares Insider selling / shares
LLY 0 70,000
MRK 0 604,874
RHHBY N/A N/A
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Merck has also seen intensive insider selling during the last 30 days.

Conclusion

There have been five different insiders selling Ligand, and there have not been any insiders buying Ligand during the last 30 days. Four of these five insiders decreased their holdings by more than 10%. Ligand has an insider ownership of 1.60%.

Before going short Ligand, I would like to get a bearish confirmation from the Point and Figure chart. The two main reasons for the proposed short entry are relatively high P/S ratio, and the intensive insider-selling activity.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.