Seeking Alpha
Healthcare, option plays, dividend investing, biotech
Profile| Send Message|
( followers)  

Summary

  • Ligand announces new license agreement with Avion Pharmaceuticals.
  • As a result, I reiterate my bull thesis on Ligand, as Captisol continues to gain traction in the industry.
  • I anticipated that Ligand would augment its royalty platform going into Q3 2014. The latest announcement corroborates this position.

Several weeks ago, I wrote a bullish article on Ligand (NASDAQ:LGND), with a thesis stating that the company's outlook should improve with increasing royalty payments and new collaborations via its Captisol technology platform. I also stated that Wall Street is overlooking the fact that Ligand's partners will spend more than $800 million in R&D in 2014, which, in my opinion, validates Captisol and alleviates any concern about Ligand's legitimacy as an emerging pharmaceutical company. However, there are underlying risks to a Ligand investment, given that the company has reeled from a series of negative reports from a hedge fund called Lemelson Capital, which is short Ligand (see previous article for more details). Thus, some investors may be concerned that Lemelson's bearish assertions hold merit, and that the firm may continue to publish additional articles to drive the share price down. However, after the new licensing agreement, I reiterate my bull thesis as Ligand continues to demonstrate its ability to garner additional royalty arrangements, which likely improves long-term shareholder value as Ligand's partners advance Captisol-enabled products to market.

As reported by Yahoo, some key highlights of the license agreement with Avion Pharmaceuticals are as follows:

  • Ligand and Avion agree to advance four Captisol-enabled programs, enhancing Ligand's "multiple shots on goal" to well over 100.
  • Ligand is entitled to an up-front licensing fee, milestone and royalty payments.
  • The programs are fully funded, enabling Ligand to sit back and reap the potential long-term success of these clinical products.
  • The partnership demonstrates increasing market demand for oral and topical administration.

With the Avion partnership, I believe Ligand's long-term prospects improve substantially. As a reminder, Ligand is statistically supported to benefit from FDA approval of more than 10 of over 100 clinical products in its collaborative pipeline. The four Captisol-enabled programs being advanced by Avion improves the likelihood of additional marketed products, which, in turn, improves Ligand's long-term outlook, given its contractual right to milestone and royalty payments on the potential sales of Avion's four Captisol-enabled clinical products. More importantly, what I find astonishing is Ligand's rate of acquiring strategic partnerships. Only in late June, the company announced an important partnership with TG Therapeutics (NASDAQ:TGTX) to develop and commercialize Ligand's Interleukin-1 Receptor Associated Kinase-4 (IRAK-4) inhibitors. Fast forward to August, Ligand has incorporated four additional Captisol-enabled programs into its pipeline of assets, thereby demonstrating the increasing market demand for Captisol. As a result, I see no reason to modify my "buy" recommendation on Ligand.

Source: Update: Ligand's New License Agreement Strengthens Portfolio