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What's in Store for Prothena (PRTA) This Earnings Season?

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Prothena Corporation plc (PRTA - Free Report) is scheduled to report first-quarter 2018 results on May 8.

Prothena Corporation plc Price, Consensus and EPS Surprise

 

Prothena Corporation plc Price, Consensus and EPS Surprise | Prothena Corporation plc Quote

 

In the last reported quarter, the company incurred a narrower-than-expected loss resulting in a positive earnings surprise of 13.9%.  Notably, Prothena’s track record has been decent so far. The company reported a narrower-than-expected loss in all of the last trailing four quarters, with an average positive earnings surprise of 22.5%.

 

 

 

Prothena’s shares have lost 78.7% in the last six months compared with the industry’s decline of 12.6%.

Let's see how things are shaping up for this announcement.

Pipeline Progress in Focus

Prothena’s top line primarily comprises collaboration revenues earned through its license, development and commercialization agreements. In fact, the company earns collaboration revenues mainly under its license agreement with Roche (RHHBY - Free Report) for PRX002.

We expect investors focus to remain on pipeline updates as the company has no approved product in its portfolio.

Prothena has discontinued the development of its lead pipeline candidate, NEOD001. The candidate, an antibody, was being evaluated for the treatment of AL amyloidosis. A phase IIb study, PRONTO, did not meet its primary or secondary endpoints. Hence, the company asked the independent data monitoring committee (“DMC”) of the phase III VITAL study to review a futility analysis of the ongoing VITAL study. Thereafter, the DMC recommended discontinuation of the VITAL study.

Hence, the company decided to discontinue all studies for the development of NEOD001, including the VITAL study as well as the open label extension studies. The decision came as a major blow to the investors as the company has a very limited number of candidates in its pipeline and NEOD001 was a lead candidate.

Moreover, disappointing results from a phase Ib multiple ascending dose study of pipeline candidate, PRX003 in psoriasis patients was another setback for the company. The primary objectives of the study were achieved. However, advancing PRX003 into mid-stage clinical development required a well-defined relationship between biological activity and meaningful clinical effects and these prerequisites were not met.

As a result, investors will focus on PRX002. Prothena is evaluating PRX002, in collaboration with Roche for the treatment of Parkinson’s disease and other related synucleinopathies. The company initiated a phase II study, PASADENA, in patients suffering from Parkinson`s disease in second-quarter 2017.The initiation triggered a $30-million milestone from Roche to Prothena.

The company has also collaborated with Celgene Corporation to develop new therapies for a broad range of neurodegenerative diseases. The multi-year agreement is focused on three proteins implicated in the pathogenesis of several neurodegenerative diseases, including tau, TDP-43 and an undisclosed target.

Like any other development-stage biotechnology company, Prothena is likely to see an increase in research and development expenses due to higher spending on pipeline.

Earnings Whispers

Our proven model doesn’t show that Prothena 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) to be able to beat on earnings. 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 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of $1.23. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Prothena currently carries a Zacks Rank #3. However, we need to have a positive ESP to be confident of an earnings beat.

Conversely, we caution against Sell-rated stocks (Zacks Ranks #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stock to Consider

Here is one health care stock 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.

GW Pharmaceuticals plc is expected to report quarterly results on May 8. The company has an Earnings ESP of +8.11% and a Zacks Rank #1.   You can see see the complete list of today’s Zacks #1 Rank stocks here.

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