Here's a novel idea: what if you could invest in the biopharma industry without betting the farm on whether one specific drug makes it through clinical trials? That's essentially the pitch from Bank of America, which just started covering Ligand Pharmaceuticals Inc (LGND) with a Buy rating and a $244 price target.

The bank's analyst, Jason Zemansky, argues that Ligand's unique model as a "royalty aggregator" offers a compelling, lower-risk way to get exposure to biopharma growth. Think of it as a financier and technology licensor to the drug development world. Instead of building labs and running trials itself, Ligand provides capital to other biopharma companies and licenses out its own portfolio of technologies, collecting royalties on successful products down the line.

It's a bit like being a venture capitalist for drug development, but with a diversified portfolio built over time. Backed by what the analyst calls an experienced management team, Ligand is positioned to hit its growth targets. The current money-making engine is fueled by royalties from 12 major commercial-stage assets. But the real potential upside, according to the note, lies in the pipeline: over 100 other programs that could start generating additional revenue, plus access to more than $1 billion in capital ready to be deployed into new deals.

The timing of the bullish call follows a solid quarterly report from Ligand. The company posted fourth-quarter adjusted earnings of $2.02 per share, handily beating the consensus estimate of $1.56. Sales came in at $59.7 million, also above the Wall Street expectation of $55.6 million. Perhaps more importantly for the growth story, the company reaffirmed its fiscal 2026 guidance, projecting adjusted earnings between $8.00 and $9.00 per share (consensus is $8.29) and sales between $245 million and $285 million (consensus is $265.7 million).

So why does Bank of America think this is such an attractive setup? The note points to valuation and margins. "Ligand is also well-positioned for future success," the bank wrote. Because the company doesn't shoulder the massive costs of discovering, developing, and commercializing drugs itself—no sprawling R&D campuses or giant sales forces—its margins are higher than those of traditional biopharma firms. It's an asset-light approach to a capital-intensive industry.

The growth outlook also stands out. The analyst's model shows Ligand's 5-year growth profile outpacing large-cap peers. The note estimates large pharmaceutical companies will grow top-line sales at a 5% compound annual growth rate (CAGR) and bottom-line earnings at a 12% CAGR over five years. For large-cap biotech, those figures are +5% and +9%, respectively. Ligand, by leveraging its royalty model across a broadening base, is positioned to do better.

Investors seemed to like the initiation, pushing Ligand's stock up 4.30% to $221.42 on the news. At that price, the bank's $244 target suggests there's still about 10% upside from here. For investors who believe in the long-term growth of biopharma but get nervous about binary clinical trial outcomes, Ligand's royalty-focused model might just be the lower-volatility vehicle they've been looking for.