Ligand's Strong 2025 Results Confirm Guidance, But Valuation Remains Stretched

What happened

Ligand Pharmaceuticals reported robust fourth-quarter and full-year 2025 financial results, driven by a 48% increase in royalty revenue, primarily from key products like FILSPARI and Ohtuvayre. The company reiterated its 2026 guidance, projecting revenues of $245-$285 million and adjusted EPS of $8.00-$9.00, aligning with previous expectations set during investor day. However, this performance is already priced into the stock at $198.58, as highlighted in the DeepValue report, which notes high valuation multiples of 78.9x P/E and 103.1x EV/EBITDA. The report emphasizes that the investment thesis remains dependent on confirmatory partner data, such as sustained FILSPARI sales near $100M quarterly and continued Ohtuvayre visibility under Merck. Thus, while the results are solid, they do not address the underlying concentration risks or provide new catalysts to justify a rating change from 'WAIT'.

Implication

The reiterated guidance offers stability but no upside surprise, keeping the stock range-bound near current levels. Royalty growth is positive but expected, as it was already factored into the 2026 framework and does little to mitigate concentration in FILSPARI and Ohtuvayre. High valuation multiples leave minimal margin for error, increasing sensitivity to any guidance miss or partner execution slip. Key risks, such as reduced Ohtuvayre disclosure post-Merck acquisition or a slowdown in FILSPARI demand, remain unaddressed and could trigger a multiple reset. Therefore, the prudent approach is to wait for a pullback to ~$175 or stronger 1H26 data validating the royalty ramp before considering an entry.

Thesis delta

The new information does not shift the core thesis; it confirms that Ligand is executing on its guided path, but the high valuation and dependency on a few products persist unchanged. No rating adjustment is warranted, and the 'WAIT' recommendation holds until more definitive partner data emerges in the next 3-6 months.