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Will Agios (AGIO) Disappoint Estimates in Q2 Earnings?
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Agios Pharmaceuticals, Inc. (AGIO - Free Report) is scheduled to report second-quarter 2016 results on Aug 4, before the opening bell. Last quarter, the company had posted a positive surprise of 11.59%. Let’s see how things are shaping up for this announcement.
Factors at Play
Agios, a development-stage biopharmaceutical company, is focused on the development of treatments for cancer and rare genetic metabolic disorders. Currently, the company has several interesting candidates in its pipeline including AG-221 (IDH2 mutant inhibitor – phase III – relapsed/refractory acute myeloid leukemia/AML) and AG-120 (IDH1 mutant inhibitor – phase III study in frontline AML patients with an IDH1 mutation to be initiated in the second half of 2016).
Meanwhile, during the quarter (Jun 2016), the company announced encouraging initial data on its pyruvate kinase deficiency candidates, AG-348 (phase II) and AG-519 (phase I).
The key highlight of the quarter was the new global strategic collaboration signed between Agios and Celgene Corporation . Announced in May 2016, the collaboration will focus on metabolic immuno-oncology for the discovery, development and commercialization of novel therapies utilizing Agios’ innovative cellular metabolism research platform. Agios will receive an upfront cash payment of $200 million plus potential additional payments if certain development and regulatory milestones are achieved.
Additionally, both Agios and Celgene agreed to amend certain rights under their 2010 collaboration with the former gaining full global development and commercialization rights to AG-120. Previously, Agios held only the U.S. rights to AG-120. There were no other changes to the existing IDH partnership (AG-221 and AG-881) between Agios and Celgene.
As a result of an upfront payment of $200 million related to the new collaboration, Agios’ pro forma cash balance as of Mar 31, 2016, was $556 million. Agios expects to end 2016 with cash, cash equivalents and marketable securities of more than $390 million (previous guidance: cash, cash equivalents and marketable securities of more than $180 million). While the updated cash guidance takes into account full ownership of AG-120 (as of Aug 15, 2016), it does not include any potential milestone payment. The company expects that its cash, cash equivalents and marketable securities will be sufficient to fund its operating expenses and capital expenditure requirements through mid-2018.
With no approved products in its portfolio, investor focus should remain on the company’s pipeline updates since a number of pipeline-related activities are lined up for the remainder of 2016.
Surprise History
Agios’ performance so far has been disappointing with the company missing expectations in three of the last four reported quarters. Overall, the company has delivered an average miss of 93.02%.
Our proven model does not conclusively show that Agios is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. However, that is not the case here, as you will see below.
Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -11.72%.
Zacks Rank: Agios’ Zacks Rank #3 increases the predictive power of the ESP, but a negative ESP makes a surprise prediction difficult.
Note that we caution against stocks with a Zacks Rank #4 or 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 a couple of health care stocks that you may want to consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Exelixis, Inc. (EXEL - Free Report) has an Earnings ESP of +3.70% and carries a Zacks Rank #3. The company is scheduled to report second-quarter results on Aug 3.
Intercept Pharmaceuticals, Inc. has an Earnings ESP of +5.05% and carries a Zacks Rank #3. It is scheduled to report second-quarter results on Aug 4.
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Will Agios (AGIO) Disappoint Estimates in Q2 Earnings?
Agios Pharmaceuticals, Inc. (AGIO - Free Report) is scheduled to report second-quarter 2016 results on Aug 4, before the opening bell. Last quarter, the company had posted a positive surprise of 11.59%. Let’s see how things are shaping up for this announcement.
Factors at Play
Agios, a development-stage biopharmaceutical company, is focused on the development of treatments for cancer and rare genetic metabolic disorders. Currently, the company has several interesting candidates in its pipeline including AG-221 (IDH2 mutant inhibitor – phase III – relapsed/refractory acute myeloid leukemia/AML) and AG-120 (IDH1 mutant inhibitor – phase III study in frontline AML patients with an IDH1 mutation to be initiated in the second half of 2016).
Meanwhile, during the quarter (Jun 2016), the company announced encouraging initial data on its pyruvate kinase deficiency candidates, AG-348 (phase II) and AG-519 (phase I).
The key highlight of the quarter was the new global strategic collaboration signed between Agios and Celgene Corporation . Announced in May 2016, the collaboration will focus on metabolic immuno-oncology for the discovery, development and commercialization of novel therapies utilizing Agios’ innovative cellular metabolism research platform. Agios will receive an upfront cash payment of $200 million plus potential additional payments if certain development and regulatory milestones are achieved.
Additionally, both Agios and Celgene agreed to amend certain rights under their 2010 collaboration with the former gaining full global development and commercialization rights to AG-120. Previously, Agios held only the U.S. rights to AG-120. There were no other changes to the existing IDH partnership (AG-221 and AG-881) between Agios and Celgene.
As a result of an upfront payment of $200 million related to the new collaboration, Agios’ pro forma cash balance as of Mar 31, 2016, was $556 million. Agios expects to end 2016 with cash, cash equivalents and marketable securities of more than $390 million (previous guidance: cash, cash equivalents and marketable securities of more than $180 million). While the updated cash guidance takes into account full ownership of AG-120 (as of Aug 15, 2016), it does not include any potential milestone payment. The company expects that its cash, cash equivalents and marketable securities will be sufficient to fund its operating expenses and capital expenditure requirements through mid-2018.
With no approved products in its portfolio, investor focus should remain on the company’s pipeline updates since a number of pipeline-related activities are lined up for the remainder of 2016.
Surprise History
Agios’ performance so far has been disappointing with the company missing expectations in three of the last four reported quarters. Overall, the company has delivered an average miss of 93.02%.
AGIOS PHARMACT Price and EPS Surprise
AGIOS PHARMACT Price and EPS Surprise | AGIOS PHARMACT Quote
What Our Model Indicates
Our proven model does not conclusively show that Agios is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. However, that is not the case here, as you will see below.
Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -11.72%.
Zacks Rank: Agios’ Zacks Rank #3 increases the predictive power of the ESP, but a negative ESP makes a surprise prediction difficult.
Note that we caution against stocks with a Zacks Rank #4 or 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 a couple of health care stocks that you may want to consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Exelixis, Inc. (EXEL - Free Report) has an Earnings ESP of +3.70% and carries a Zacks Rank #3. The company is scheduled to report second-quarter results on Aug 3.
Intercept Pharmaceuticals, Inc. has an Earnings ESP of +5.05% and carries a Zacks Rank #3. It is scheduled to report second-quarter results on Aug 4.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>