Isis Pharmaceuticals, Inc. ISIS is scheduled to report second-quarter 2015 results on Aug 4. Isis Pharma’s track record has been pretty good with the company having comfortably beaten estimates in the last three of the four quarters. In the last reported quarter, Isis Pharma recorded a positive earnings surprise of 26.32%.
Overall, the company posted an average positive earnings surprise of 34.08% over the past four quarters. Let’s see how things are shaping up for this announcement.
Higher Revenues Could Drive Q2 Results
Isis Pharma’s antisense technology has allowed it to enter into several agreements with leading health care companies like Biogen BIIB among others that provide the company with a steady stream of funds in the form of upfront, milestone and other payments.
Isis Pharma continued to expand its partnership portfolio in the second quarter by signing a license agreement with one of the leading health care companies, Bayer AG BAYRY, for the development and commercialization of ISIS-FXIRx (prevention of thrombosis). The deal could see Isis Pharma receiving payments that may go up to $375 million including a $100 million upfront payment and a $55 million milestone payment upon the advancement of the program following completion of a phase II study in addition to royalties. The company expects to record between $70 million and $90 million of the upfront payment in the second quarter of 2015.
At the time of announcing first-quarter results, the company announced that it had already generated $110 million in payments from its partners.
Meanwhile, Isis Pharma recorded a 24.4% increase in operating expenses in the first quarter and expects the same to rise modestly in 2015 considering that the company’s expenses are shared by its collaborative partners and it has sufficient cash to move its pipeline into the next stage of development.
Going into the second quarter announcement, investor focus will remain on Isis Pharma’s pipeline development – several studies including ISIS-TTRRx (transthyretin amyloidosis – phase III), ISIS-SMNRx (spinal muscular atrophy in infants and children – phase III) and volanesorsen (familial chylomicronemia syndrome and partial lipodystrophy – phase III) among others are ongoing.
Earnings Whispers?
Our proven model does not conclusively show that Isis Pharma is likely to beat the Zacks Consensus Estimate in the second quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here, as elaborated below.
Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00% since the Most Accurate estimate is in line with the Zacks Consensus Estimate at 34 cents per share.
Zacks Rank: Isis Pharma carries a Zacks Rank #1. Isis Pharma’s Zacks Rank #1 when combined with an ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stock to Consider
Here is a health care stock that you may want to consider, as our model shows that it has the right combination of elements to post an earnings beat this quarter.
Agios Pharmaceuticals, Inc. AGIO has an Earnings ESP of +75% and carries a Zacks Rank #1. It is scheduled to report second-quarter results on Aug 6.
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