Why Ligand Pharma, Viking Therapeutics tumbled yesterday, but is gaining today

Shares of Ligand Pharmaceuticals (LGND) took a beating on Wednesday after a bearish report by Citron Research led by short-seller Andrew Left criticized the company of misleading investors and dubbing its pipeline a “pipe dream.”

The stock plunged 17% to a yearly low of $110.05 on Wednesday, while Viking Therapeutics (VKTX), where Ligand holds a majority stake, fell 6.5%. LGND stock has so far plunged 60% from its 52-week high on September 28.

In the report, Citron Research also suggested a price target of $35 on Ligand stock, representing a 68% more downside from the last close.

However, things cleared for both the pharma companies on Thursday after many company bulls including Raymond James criticized the report, calling it “ridiculous”. On Thursday, Ligand stock jumped over 4%, while Viking shares were up over 3%.

The Citron Research report raised numerous doubts on the San Diego-based drug company’s operations and partnerships.

After falling flat on its attempts to develop its own drug in the early 2000s, Ligand’s CEO was kicked out and its operation strategy was changed to buying out other pharma companies as well as forming partnerships to develop new drugs.

However, Citron Research contacted some of the privately-held partners from whom, it expects to receive a fifth of its potential milestone payments. The research firm claims, while some of the addresses hardly resemble a drug-development facility, others are either short of funding or are sitting on top of massive liabilities.

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Separately, while acknowledging the royalties received by Ligand, Citron claimed that three-fourths of it was coming from just one drug, which will lose exclusivity soon.

The report also questioned why Ligand was selling shares of Viking Therapeutics (VKNG), which constitute almost 50% of its potential milestones payments, unless they don’t have much confidence in the firm. Citron added that Viking insiders were themselves selling the stock over the whole of last year, suggesting its pipeline sees little chances of success.

Ligand Pharmaceuticals is set to report fourth quarter and full-year earnings on February 7.

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