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Aduro (ADRO) Stock Down on Wider-than-Expected Q3 Loss

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Aduro BioTech, Inc. reported third-quarter 2016 loss of 54 cents per share, wider than the Zacks Consensus Estimate of a loss of 49 cents. The company had reported earnings of a penny in the year-ago quarter. Aduro’s shares were down almost 8% since the release of its third-quarter 2016 results.

Since Aduro does not have any approved product in its portfolio yet, the company’s top line solely comprises collaboration, license and grant revenues.

Quarterly revenues plunged 80.2% year over year to $3.79 million. The top-line deterioration was mainly due to the full recognition of upfront license fee from Johnson & Johnson’s (JNJ - Free Report) Janssen Biotech, Inc. in 2015. Revenues were also below the Zacks Consensus Estimate of $3.94 million.

We note that Aduro has exclusive research and license agreements with Janssen for the development and commercialization of candidates in the LADD platform, including ADU-741, GVAX for prostate cancer, and ADU-214. Under these agreements, Aduro has granted Janssen exclusive rights to develop and commercialize the LADD candidates for the treatment of prostate and lung cancers.

Research and development expenses escalated 61.2% to $19 million mainly due to licensing fees related to the company’s STING technology platform and additional personnel-related costs including stock-based compensation, partially offset by a decline in contract manufacturing and clinical trial expenses for the pancreatic cancer program.

General and administrative expenses were $8.6 million, up approximately 24% year over year. The increase was primarily due to higher personnel-related costs, including stock-based compensation, and the expansion of its office and laboratory facilities.

In Oct 2016, Aduro announced that studies evaluating its LADD-based agents have been placed on a partial clinical hold and new patient enrollment has been halted. The hold was placed after a blood culture sample taken from an indwelling port of a metastatic pancreatic cancer patient tested positive for Listeria.

Aduro is currently working with the FDA to lift the partial hold so that new patient enrollment in the LADD studies can resume.

We expect investor focus to remain on further updates by the company.

ADURO BIOTECH Price, Consensus and EPS Surprise

 

Zacks Rank & Stocks to Consider

Aduro is a Zacks Rank #3 (Hold) stock. A couple of better-ranked stocks in the health care sector are Exelixis, Inc. (EXEL - Free Report) and Infinity Pharmaceuticals, Inc. . Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Infinity’s loss per share estimates narrowed from $3.84 to $3.79 for 2016 but has remained unchanged for 2017 over the last 60 days. The company has posted a positive surprise in all of the four trailing quarters with an average beat of 67.62%.

Exelixis’ loss per share estimates narrowed from 71 cents to 61 cents for 2016 and from a loss of 16 cents to earnings of 4 cents for 2017 over the last 60 days. The company has posted an average positive surprise of 9.10% over the trailing four quarters. Its share price has surged over 80% year to date.

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