Epizyme, Inc. EPZM is scheduled to report its first-quarter 2015 results on Apr 28.
Last quarter, the company beat estimates posting a positive earnings surprise of 18.52%. On an average, Epizyme beat estimates in three of the last four trailing quarters with an average positive earnings surprise of 19.58%. We expect the company to beat expectations in the first quarter as well.
Factors Influencing this Quarter
With no products approved for commercialization yet, Epizyme’s top line will comprise of collaboration revenues only. The company will continue to face an increase in research and development expenses, particularly due to a rise in investments for pipeline development.
In such a scenario, investor focus should remain on pipeline updates.
Two most interesting candidates in Epizyme’s pipeline are EPZ-6438 and EPZ-5676. In Mar 2015, Epizyme re-acquired global rights for EPZ-6438 from Eisai Co. Ltd. ESALY except Japan (where Eisai will retain rights). Epizyme said on its fourth-quarter call that upon regaining full operational control of EPZ-6438, the company started working aggressively toward the development of the candidate. Epizyme plans to initiate a five-arm phase II study on the candidate in Europe in the second quarter of 2015 for diffuse large B-cell lymphoma patients and follicular lymphoma patients. Additionally, the company intends to launch phase II portion of a study on EPZ-6438 for non-Hodgkin B-cell lymphoma in the second quarter of 2015 in the EU. We expect Epizyme to shed light on the upcoming studies on its first-quarter call.
Meanwhile, Epizyme is developing EPZ-5676 for acute leukemia with alterations in the MLL gene.
What Our Model Indicates
Our proven model shows that Epizyme is likely to beat the Zacks Consensus Estimate in the first quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to increase the odds of an earnings surprise. This is the case as elaborated below.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +35.35% for Epizyme, since the Most Accurate estimate is a loss of 64 cents, while the Zacks Consensus Estimate stands at a loss of 99 cents.
Zacks Rank: Epizyme carries a Zacks Rank #3, which when combined with a positive ESP, makes us fairly confident of an earnings beat this season.
However, we caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Exelixis, Inc. EXEL has an Earnings ESP of +4.35% and a Zacks Rank #2. The company is scheduled to release results on Apr 30.
Actavis plc ACT has an Earnings ESP of +1.04% and a Zacks Rank #2. The company is scheduled to release results on May 11.
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