E Why Ligand Pharmaceuticals Is A Good Long-Term Investment Opportunity

Investing in a biotechnology company involves most of the time considerable risk, however, this kind of businesses could bring tremendous reward when a new drug is approved. On the other hand, when a new drug in development fails in the trial, shares of the company could crash. To demonstrate this situation, let's observe the 52-week price change of the shares of the best biotechnology performers and the worst performers. The average 52-week price change of the best ten performers among the 172 biotechnology companies which are included in Russell 3000 index was at 215.5%, while the average of the ten worst performers was a decline of 89.6%, as shown in the tables below.

Ten Russell 3000 Best Performers Biotechnology Companies

Ten Russell 3000 Worst Performers Biotechnology Companies

Source: Portfolio123

A very promising biotechnology company which provides relatively small risk is Ligand Pharmaceuticals Incorporated (LGND​) due to its distinctive business model. Ligand is a biopharmaceutical company which is developing or acquiring technologies which enable pharmaceutical companies to develop new drugs. According to the company, their business model is based on doing what they do best: discovery of new medicines, early-stage of the drug development, product reformulation and partnering. Ligand's partners on their part are doing the late-stage development, regulatory management, and commercialization. Ligand has established numerous partnerships, licenses and other business relationships with the world's leading pharmaceutical companies. Ligand's business model enables the company to obtain revenue streams that are going along with an efficient and low corporate cost structure. By investing in Ligand's stock investors can participate in the high-promising biotech industry in a profitable, diversified and lower-risk business than most of the biotechnology companies.

Latest Quarter Results

On February 23, Ligand reported its fourth quarter and full year financial results and provided an operating forecast and program updates. Fourth quarter earnings per share beat analysts' expectations by $0.06 (5%). Ligand's revenues of $38.19 million for the quarter were76.6% higher than in the previous quarter, and up 80.2% year-over-year. Royalty revenues of $19.6 million were 70.4% greater than in the same quarter last year. Ligand showed earnings per share surprise in its most recent five quarters, as shown in the table below.

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