A few months ago, I wrote a bullish article on Ligand (NASDAQ:LGND), with a thesis stating that the company's outlook should improve with increasing royalty payments and new collaborations using its Captisol technology platform. I also stated that Wall Street is overlooking the fact that Ligand's partners will spend more than $800 million in R&D in 2014, which, in my opinion, validates Captisol and should alleviate any concern about Ligand's legitimacy as an emerging pharmaceutical company.

However, there are underlying risks to a Ligand investment, given that the company has reeled from a series of negative reports from a hedge fund called Lemelson Capital, which is short Ligand (see original article for more details). This prompts concern that Lemelson's bearish assertions could hold merit, and that the firm will continue to publish additional articles to drive the share price down, in my opinion. However, after Ligand announced Friday that its partner Retrophin received Orphan Drug designation by the FDA for Sparsentan, I reiterate my bullish thesis.

Some key highlights from Ligand's latest announcement are as follows:

• Retrophin received orphan drug designation from the U.S. Food and Drug Administration for Sparsentan for the treatment of focal segmental glomerulosclerosis (FSGS).

• Sparsentan is an investigational therapeutic agent which acts as both a selective endothelin receptor antagonist and an angiotensin receptor blocker.

• Retrophin is conducting the Phase 2 DUET trial of Sparsentan for the treatment of FSGS, a leading cause of end-stage renal disease. There are currently no therapies approved for the treatment of FSGS in the United States.

• Ligand licensed worldwide rights of Sparsentan (RE-021) (formerly known as DARA) to Retrophin in 2012, at the time of Retrophin's formation.

The Orphan Drug designation should improve the commercial prospects for Sparsentan. For not only does the designation provide Ligand and Retrophin with seven years of marketing exclusivity in the U.S. if approved, but it also provides 10 years of marketing exclusivity in Europe. Thus, should Sparsentan receive regulatory approval in the U.S. and Europe, the revenue potential would be substantial given that the partnership could market the compound with multiple years of exclusivity. I believe this is amplified by the fact that there is no approved treatment for FSGS, and there are reportedly more than 50,000 FSGS patients in the US alone. This represents a billion dollar sales opportunity for the partnership. Going forward, therefore, I reiterate my bull thesis given Ligand's outstanding potential in this indication.