Wells Fargo Securities Initiating Coverage on Ligand Pharmaceuticals, Inc. With Hold Rating
Friday December 20, 6:56 am ET
SAN FRANCISCO, Dec. 20 /PRNewswire-FirstCall/ -- Alan Auerbach, biotechnology analyst at Wells Fargo Securities, has initiated coverage on the shares of Ligand Pharmaceuticals, Inc. (Nasdaq: LGND - News) with a Hold rating.
Below are direct quotations from Mr. Auerbach's research report:
* Initiating coverage on Ligand Pharmaceuticals Inc. with a Hold rating. Comparable biotechnology companies are currently trading at 6.7x consensus FY03 revenue estimates, while Ligand is currently trading at 2.6x our FY03 revenue estimate. While we recognize that the stock's valuation is cheap, we are concerned that, given the growing pains the company experienced in FY02, investors may wait on the sidelines until growth of the company's drugs gets back on track and the Avinza co-promotion agreement is finalized.
* Avinza could be Ligand's biggest drug. We believe that Ligand's recently launched drug Avinza has the potential to be the company's largest product. In addition, we believe that the company is looking to complete a co-promotion agreement with Avinza, which could be an important catalyst to the drug's revenues and could help the drug achieve peak sales of approximately $300 million.
* In-line drugs all have off-label growth opportunities. Ligand's in-line drugs -- Ontak, Targretin capsules, and Targretin and Panretin gels -- all have the opportunity for sales growth through increased off-label use, in our opinion.
* Twice lowered FY02 guidance could put Ligand in the penalty box. Although it is certainly not uncommon for an emerging biotechnology company to experience some growing pains, we believe that investors may put Ligand in the penalty box and take a "show me" attitude until sales growth of Ligand's drugs begins to get back on track.
* Overhang from convertible offering and Elan-owned stock. We believe that investors may also be concerned with both the dilution and the perceived overhang from the company's recent convertible offering, as 25.2 million shares are available to come into the market once the stock goes above the conversion price of $6.17. In addition, Elan has 11.8 million shares that are locked up until April; these could be viewed as additional overhang. |
