Citigroup thinks investors should consider Ligand Pharmaceuticals for a more conservative bet on the biotech industry. The bank initiated the biotech stock at a buy rating and price target of $270, implying upside of 46% from Ligand’s Monday closing price of $184.67. Shares have soared nearly 79% this year. LGND YTD mountain LGND YTD chart Citi analyst Yigal Nochomovitz attributed Ligand’s year-to-date rally to “recent materialized gains from long-term investments contributing to profitability,” he wrote. However, he still believes the stock’s current level underappreciates its ultimate valuation, as shares could rise further from here due to upcoming catalysts with partnered programs. The analyst called Ligand “the ‘Goldilocks’ pick for investors seeking exposure to biotech upside while mitigating volatility” due to its broad portfolio of products. In contrast, most biotech companies offer a binary bet on one or two drugs. “LGND’s focus on 1) royalty aggregation of development/commercial-stage assets, 2) out-licensing of novel platforms, and 3) investments into mid-to late-stage clinical programs limits biotech’s volatility by preventing concentration risk to any single name without restricting upside,” the analyst added. In the near term, Nochomovitz sees an increase in royalty revenue driven by strong commercial performance and various collaborations and licensing from Filspari, Kyprolis, Ohtuvayre and Qarziba. While royalties from cancer treatments Kyprolis and Qarziba are expected to decline modestly in the coming years, this should be more than offset by the other two assets. “Collectively, the four products contribute ~60-70% of LGND’s total expected 2025 royalties of ~$150M,” he wrote. “We expect Filspari and Ohtuvayre to each generate > $1B in sales in 2027, which we estimate would result in royalties from these two products equivalent to royalties generated by all assets in 2025 of ~$150M.” Filspari slows kidney function decline in adults with primary IgA nephropathy, while Ohtuvayre treats patients with chronic obstructive pulmonary disease. Meantime, Nochomovitz also applauded Ligand’s investments in late-stage clinical programs, which signal the next stage of long-term growth. These programs’ collective royalties in 2035 are expected to match that of Filspari and Ohtuvayre, combined.