Buy Ligand Shares; HC Wainwright Sets $146 Price Target

HC Wainwright initiated coverage of Ligand Pharmaceuticals Inc. (NASDAQ: LGND) with a Buy rating and 12 month price target of $146, saying Ligand is a profitable unique company that has royalty rights to over 140 potential medicines that its 85+ partners are funding the development.

Analyst Carol Ann Werther said Ligand also has a proven track record of discovering NCEs and books royalties on nine products. A new chemical entity (NCE), according to the U.S. Food and Drug Administration, is a drug that contains no active moiety that has been approved by the FDA.

"Within the next five years, the approved drugs may triple," Werther wrote in a note to clients.

The two main royalty providers now are Pomacta and Kyrolis on their way to obtaining billion-dollar sales. Werther expects five-year CAGR of approximately 18 percent for both products.

Ligand recorded third consecutive full year of profitability as the revenue continues to grow and the cash operating expenses are relatively flat, and the trend is expected to continue.

"We believe the company can book revenues of $120.6 million in 2016, $156.2 million in 2017. This is approximately a 5 year 30 percent compounded growth rate, which we view conservative. Similarly, we forecast an approximately a 30 percent CAGR for EPS from 2016 through 2021," Werther added.

Shares closed Wednesday's trading at $94.54. They were down 10 percent this year.