Citron Research, the activist short-seller headed by Andrew Left, has dug up some nasty evidence against Ligand Pharmaceuticals Inc. (LGND).

In a 23-page report, Citron accused the San Diego-based biopharmaceutical company of misleading investors, adding that its future revenue calculations are a "pipe dream." The short seller then slapped a $35 price target on the stock, implying 80% downside from the report’s publication date.

The Allegations

After failing to successfully develop its own drugs, Ligand switched its business model to focus on collecting royalties and milestone payments from compounds and intellectual property that it licenses to other drug developers.

Ligand seeks to prove its credibility by telling investors that most of its future revenues come from Sage Therapeutics Inc. (SAGE), Retrophin Inc. (RTRX), Sermonix Pharmaceuticals, Bristol-Myers Squibb Co. (BMY), Eli Lilly & Co. (LLY) and Roivant Sciences, otherwise known as “The Big 6.” However, Citron claimed that those companies account for just for 7% of its potential milestone payments and that Ligand’s pipeline is instead dependent on a series of questionable looking firms.

Viking Therapeutics Inc. (VKTX) was identified as Ligand’s main customer, accounting for over 50%, or $1.5 billion, of potential milestones payments. Citron questioned if this pipeline is realistic, noting that Ligand would have bought out Viking if it was. The short seller also warned that Viking insiders have been selling off stock over the past year, indicating that they have little confidence in the company’s prospects.

From there, the research becomes even more damning. Citron revealed that a further 20% of Ligand’s future revenues are said to come from drugs developed by privately-held Sermonix Pharmaceuticals, Chiva Pharmaceuticals, iMetabolic BioPharma and Seelos Therapeutics.

Citron investigated these companies and discovered that they barely exist. The short seller discovered that Sermonix’s business address can be traced to a mailbox in a UPS store in Columbus, Ohio, Chiva shares its address with a telemarketing firm in Los Altos Hills, California, Seelos’ New York address hasn’t been occupied for over a year and iMetabolic’s listed address is home to a fertility center.

Needless to say, investors weren’t impressed with these findings. On Wednesday, shares in the biopharmaceutical company fell 16.48% to $110.05.