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What's in Store for Verastem (VSTM) This Earnings Season?

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Verastem, Inc. (VSTM - Free Report) is expected to report third-quarter 2018 results on Nov 6, 2018.

The company witnessed a mixed earnings performance in the last four quarters. Its metrics missed expectations twice, met the same once and beat estimates on another occasion with an average negative surprise of 22.38%. Last reported quarter, Verastem surpassed the consensus mark with a positive surprise of 14.29%.

Shares of Verastem have soared 66.5% year to date against the industry’s decrease of 19.8%.

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

Factors to Consider

Verastem’s top line mainly comprises license revenues from partners. Its lead drug Copiktra (duvelisib) was approved by the FDA in late September while another candidate, defactinib, is currently being evaluated in early/mid-stage studies.

Copiktra was approved for treating relapsed or refractory chronic lymphocytic leukemia/small lymphocytic lymphoma (CLL/SLL) in adult patients, having received at least two prior therapies. The drug also received an accelerated approval as a monotherapy for addressing relapsed or refractory follicular lymphoma (FL) in adult patients, who have previously undergone at least a couple of systemic therapies.

The FDA nod came on priority review basis ahead of the scheduled action date of Oct 5, 2018 set by the regulatory body. Following the FDA approval, the drug was immediately available in the United States.

However, the drug’s label carries a boxed warning against the serious side effects such as fatal infections, diarrhea or colitis, skin eruptions, pneumonitis and other hazardous diseases associated with its usage.

On third-quarter conference call, investor focus will be on the company’s launch and reimbursement plans for Copiktra.

In September, Verastem out-licensed its development/marketing rights to Copiktra in China to CSPC Pharmaceutical Group. CSPC Pharmaceutical will develop and commercialize Copiktra for treating different types of cancer indications in China.

Defactinib is a targeted inhibitor of the Focal Adhesion Kinase (FAK) signaling pathway. The candidate is currently being evaluated in a phase Ib study in combination with Merck’s (MRK - Free Report) PD-1 inhibitor Keytruda as well as Eli Lilly’s Gemzar for treating patients with advanced pancreatic cancer.

Defactinib is also being evaluated in phase I/II study combined with Keytruda for the treatment of non-small cell lung cancer (NSCLC), mesothelioma or pancreatic cancer. Additionally, the candidate is being studied as a combination therapy for several other cancer indications including solid tumors and carboplatin resistant ovarian cancer.

We expect management to provide more updates and detailed information on defactinib progress in clinical studies during the upcoming conference call.

Earnings Whispers

Our proven model does not conclusively show that Verastem is likely to beat estimates this to-be-reported quarter. This is because a stock needs to have both a positive Earnings ESP and a solid Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.

Earnings ESP: Verastem has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at a loss of 43 cents each. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Verastem currently carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.

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

Verastem, Inc. Price and EPS Surprise

Verastem, Inc. Price and EPS Surprise | Verastem, Inc. Quote

Stocks That Warrant a Look

Here are some biotech stocks that you may want to consider as per our model, these have the right combination of elements to beat on earnings this reporting season.

CRISPR Therapeutics AG (CRSP - Free Report) is expected to release third-quarter results on Nov 14. The company has an Earnings ESP of +3.53% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Spero Therapeutics, Inc. (SPRO - Free Report) has an Earnings ESP of +18.43% and a Zacks Rank #2. The company is expected to report third-quarter results on Dec 13.

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