Epizyme, Inc. is schedule to report second-quarter 2016 results on Aug 9 before the opening bell. Last quarter, the company recorded a positive earnings surprise of 14.58%. Let’s see how things are shaping up for the company this quarter.

Factors Influencing This Quarter

Epizyme is a development-stage company with no approved product in its portfolio. Its top line comprises revenues earned through collaborations. Hence, investor focus will remain on pipeline updates.

Epizyme’s lead candidate, tazemetostat (an EZH2 inhibitor), is being evaluated for relapsed or refractory non-Hodgkin lymphoma (NHL) and advanced solid tumors.

The company is currently evaluating tazemetostat in a phase II study in adults with relapsed or refractory NHL, a phase II study in adults with certain genetically defined solid tumor (INI1-negative tumors, SMARCA4-negative tumors or synovial sarcomas) and a phase I study in children with certain INI1-negative tumors (rhabdoid tumors and synovial sarcomas).

Research and development spend is expected to increase in 2016 due to expenses related to ongoing and planned studies on tazemetostat, including registration-supporting studies in patients with NHL, and adult and pediatric patients with certain genetically defined solid tumors.

In Jun 2016, Epizyme entered into a collaboration agreement with Roche Holding AG’s (RHHBY Quick QuoteRHHBY - Free Report) Genentech to evaluate tazemetostat, in combination Genentech's Tecentriq (atezolizumab). The combination will be evaluated in a phase Ib study for the treatment of patients with relapsed or refractory diffuse large B-cell lymphoma (DLBCL).

Meanwhile, a phase II study on tazemetostat for the treatment of patients with mesothelioma is expected to begin in the third quarter of 2016.

On its last-quarter earnings call, the company stated that it continues to expect the cash position to be sufficient to fund operations through at least the end of 2017.

We expect the company to shed further light on the development of tazemetostat in its second-quarter call.

Surprise History

Epizyme’s track record has been strong, with the company beating estimates in three of the last four quarters and missing on one occasion, with an average positive earnings surprise of 7.59%.

EPIZYME INC Price and EPS Surprise

EPIZYME INC Price and EPS Surprise | EPIZYME INC Quote

Earnings Whispers

Our proven model does not conclusively show that Epizyme 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. This 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 -6.00% since the Most Accurate estimate is pegged at a loss of 53 cents and the Zacks Consensus Estimate stand at a loss of 50 cents.

Zacks Rank: Epizyme has a Zacks Rank #4 (Sell). As it is, we caution against stocks with a Zacks Ranks #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is witnessing negative earnings revisions.

Stocks That Warrant a Look

Here are a couple of health care stocks that you may want to consider instead, as our model shows that they have the right combination of elements to post an earnings beat this quarter.

Impax Laboratories has an Earnings ESP of +3.03% and a Zacks Rank #2. The company is scheduled to report results on Aug 9.

Mylan N.V. has an Earnings ESP of +1.75% and a Zacks Rank #2. The company is scheduled to report results on Aug 9.

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 >>