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Endocyte, Inc. (ECYT - Snapshot Report) reported fourth quarter 2013 net loss per share of 8 cents, narrower than the Zacks Consensus Estimate of a loss of 13 cents but wider than the year-ago loss of 2 cents.

Fourth quarter 2013 revenues were $17.3 million, up 19.3% from the year-ago quarter. Revenues comprised solely of collaboration revenues. Revenues surpassed the Zacks Consensus Estimate of $16 million.

In the reported quarter, research and development (R&D) expenses were $13.5 million, up 28.7%. Costs related to the PROCEED and TARGET trials were primarily responsible for the increase. Development costs associated with the expansion and advancement of the preclinical pipeline and compensation expense led to the rise in R&D expenses.

We note that Endocyte and Merck & Co. Inc. (MRK - Analyst Report) entered into a partnership in Apr 2012, wherein Endocyte granted Merck an exclusive license to develop, manufacture and commercialize vintafolide outside the U.S. As per the agreement, Merck is funding manufacturing costs for vintafolide, including some portion of the PROCEED and TARGET trials.

By the end of the fourth quarter of 2013, manufacturing responsibilities were transferred completely to Merck. Hence, the company will no longer incur any manufacturing costs.

In the reported quarter, general and administrative (G&A) expenses jumped 34% to $6.7 million. The increase was attributable to establishing commercial capability. An increase in compensation expenses was also responsible for pushing G&A costs up. Merck is funding all patent expenses for vintafolide.

2013 Details

Endocyte reported 2013 loss of 50 cents per share, narrower than the Zacks Consensus Estimate of a loss of 55 cents but wider than the 2012 loss of 48 cents per share.

Full year revenues were $64.9 million, beating the Zacks Consensus Estimate of $63 million. Revenues in 2012 were $34.7 million.

Pipeline Update

Endocyte is seeking EU approval for vintafolide (platinum-resistant ovarian cancer) and for a folate-targeted molecular imaging agent, etarfolatide. In Jan 2014, the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) confirmed questions to be addressed by Endocyte regarding these applications. These questions were subsequently addressed in Feb 2014. The committee is expected to give its opinion in a meeting in Mar 2014. Both vintafolide and etarfolatide enjoys orphan drug status in the U.S. and EU.

Endocyte completed enrollment in the phase IIb TARGET study of vintafolide in non-small cell lung cancer (NSCLC) patients. Top-line data from the study is expected in Mar 2014. The study achieved its targeted number of events needed for analysis of the primary endpoint.

Endocyte and Merck will initiate a phase II randomized trial on vintafolide in folate receptor-positive triple negative breast cancer in the second quarter of 2014.

Endocyte has made significant progress in 2013 with its pipeline. The first half of 2014, promises to be eventful for the company. Shares of Endocyte rose 4.8% on the impressive fourth-quarter earnings release. Endocyte carries a Zacks Rank #1 (Strong Buy). Investors may also consider companies like Lannett Co., Inc. (LCI - Snapshot Report) and Biogen Idec Inc. (BIIB - Analyst Report), which carry a comparable Zacks Rank #1.

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