Please ensure Javascript is enabled for purposes of website accessibility

Here's Why Ligand Pharmaceuticals Inc Is Plunging Today

By Brian Feroldi – Sep 27, 2016 at 4:26PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares drop in response to its partner Amgen reporting less-than-stellar clinical data.

Image source: Getty.


Shares of Ligand Pharmaceuticals (LGND 0.64%), an owner of royalty assets in the healthcare space, are falling by more than 13% as of 3:30 p.m. EDT in response to its partner Amgen (AMGN 0.12%) reporting disappointing clinical news.

So what

Amgen released Phase 3 results from its CLARION trial earlier today. This was a head-to-head study that pitted Amgen's hit cancer drug Kyprolis against Takeda's Velcade in treating patients with newly diagnosed multiple myeloma.

Results from the 54-week study showed that patients who used Kyprolis showed a progression-free survival (PFS) of 22.3 months. Unfortunately, that was only slightly ahead of the 22.1 months observed in the Velcade group, so the trial failed to prove statistical significance. In addition, patients in the Kyprolis group had a fatality rate of 6.5%. That was higher than the 4.3% rate observed in the Velcade group.

Traders are punishing Ligand's stock in response because it earns a royalty on total sales of Kyprolis. In fact, Ligand credits much of its recent financial growth to the huge success of Kyprolis. Thus, if this clinical update ultimately leads to a slowdown in sales of Kyprolis then it threatens to slow Ligand's revenue and profit growth, too.

Now what

While this news certainly isn't good, I'm more inclined to look at this drop as a buying opportunity than a reason to abandon ship. While Kyprolis is an important drug, investors should remember that Ligand currently has 150 other partnered or licensed programs in development. That gives the company multiple ways to win, even if Kyprolis doesn't live up to its full potential.

Currently, analysts are projecting that Ligand's profit growth will exceed 45% over the next five years. While that rate is likely to fall in light of today's update, shares were only trading for about 21 times next year's earnings estimate to begin with. I'd argue that that valuation was already quite low given the company's prospects, so it wouldn't surprise me one bit to see shares bounce back from today's drubbing in the coming weeks.

Brian Feroldi has no position in any stocks mentioned. Like this article? Follow him on Twitter where he goes by the handle @Longtermmindset or connect with him on LinkedIn to see more articles like this.

The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Amgen Stock Quote
$283.74 (0.12%) $0.34
Ligand Pharmaceuticals Stock Quote
Ligand Pharmaceuticals
$73.61 (0.64%) $0.47
$28.97 (3.84%) $1.07

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.