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Epizyme, Inc. (EPZM - Free Report) is expected to report fourth-quarter 2014 results on Feb 26.

The company missed estimates last quarter. On an average, Epizyme beat estimates in three of the last four trailing quarters with an average positive earnings surprise of 75.09%. Let’s see how things are shaping up for this announcement.

Factors Influencing this Quarter

With no products approved for commercialization yet, Epizyme’s top line will comprise of collaboration revenues only. The company will continue to face an increase in operating expenses, particularly due to a rise in investments for pipeline development.

In such a scenario, investor focus should remain on pipeline updates.

EPZ-5676 and EPZ-6438 are the two most interesting candidates in Epizyme’s pipeline. While EPZ-5676 is being studied for the treatment of acute leukemia with genetic alterations of the MLL gene and pediatric MLL-r leukemia, EPZ-6438 is being evaluated for non-Hodgkin lymphoma and solid tumors including INI1-deficient tumors such as synovial sarcoma and malignant rhabdoid tumors. Late last year, the company announced the results from two separate phase I studies on EPZ-5676 and EPZ-6438.

On its third-quarter call, Epizyme said that the company intends to initiate a phase II study on EPZ-6438 jointly with its partner Eisai (ESALY - Free Report) in the first quarter of 2015. A phase I pediatric study on the candidate is also slated to begin in the first half of 2015 for the treatment of INI1-deficient tumors. We expect Epizyme to throw light on the upcoming studies on its fourth-quarter call.

What Our Model Indicates

Our proven model does not conclusively show that Epizyme is likely to beat earnings this quarter. That 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 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%, since the Most Accurate estimate is in line with the Zacks Consensus Estimate of a loss of 52 cents.

Zacks Rank: Epizyme carries a Zacks Rank #3. Though a Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company’s ESP of 0.00% makes a surprise prediction difficult.

However, we caution against stocks with Zacks Ranks #4 and 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 some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

ACADIA Pharmaceuticals Inc. (ACAD - Free Report) has an Earnings ESP of +3.85% and carries a Zacks Rank #2. The company is scheduled to release its fourth-quarter 2014 results on Feb 26.

Amarin Corporation plc (AMRN - Free Report) has an Earnings ESP of +14.29% and carries a Zacks Rank #2. The company is scheduled to release its fourth-quarter 2014 results on Mar 3.

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