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Adverum (ADVM) Q3 Earnings Preview: What's in the Cards?

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Adverum Biotechnologies, Inc (ADVM - Free Report) is expected to report third-quarter 2016 results on Nov 14. In the last reported quarter, Adverum posted a positive surprise of 5.26%.

Adverum has a dismal track record with the company missing estimates in three of the last four quarters, bringing the average negative earnings surprise to 25.5%. Let’s see how things are shaping up for this announcement.

Factors Influencing the Quarter

The Annapurna acquisition (Feb 2016) added a number of early-stage candidates to Adverum’s portfolio including ANN-001 (ADVM-43), ANN-002 and ANN-003 among others. In October, the company revealed expectations of commencing patient enrolment in the phase I/II trials on ADVM-043, a novel gene therapy for Alpha-1 Antitrypsin (A1AT) deficiency (a rare genetic disorder), in the fourth quarter of 2017. Previously, the company had anticipated beginning the trials in the second half of 2016.

To comply with industry standards, the company plans to upgrade the ADVM-043 manufacturing process and transfer the third-party contract manufacturing for the candidate to a large-scale contract manufacturer.

Clinical trials on ANN-002 for the treatment of hereditary angioedema will be initiated in the first half of 2017.

Prior to the Annapurna acquisition, the company was focused on the development of AVA-101 for the treatment of wet age-related macular degeneration (AMD). However, based on a detailed analysis of data from a phase IIa study on AVA-101, it was concluded that there was no overall evidence of a complete and/or durable anti-VEGF response in the majority of patients receiving the candidate. The company thus decided to discontinue the development of AVA-101 and AVA-201 after analyzing positive preclinical data on different anti-VEGF compounds in non-human primate studies.

Meanwhile, Adverum has a collaboration agreement with Regeneron Pharmaceuticals, Inc. (REGN - Free Report) for the joint development of novel candidates based on the former’s Ocular BioFactory platform.

These candidates include AVA-311 for the treatment of juvenile X-linked retinoschisis and AVA-322 and AVA-323 for the treatment of color vision deficiency, also known as red-green color blindness.

It also has a collaboration with Editas Medicine, Inc. for exploring the delivery of genome editing medicines to treat up to five inherited retinal diseases.

These collaborations constitute an important source of funds for Adverum.

ADVERUM BIOT Price and EPS Surprise


What Our Model Indicates

Our proven model does not conclusively show that Adverum 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 beat estimates. But 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 29 cents.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Adverum’s Zacks Rank #3 increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.

We caution against stocks with Zacks Ranks #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revision momentum.

Stocks to Consider

Here are a couple of healthcare companies that you may consider as our model shows that they have the right combination of elements to post an earnings beat this quarter.

Synergy Pharmaceuticals, Inc. (SGYP - Free Report) is expected to report results on Nov 14. The company has Earnings ESP of 18.18% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

AveXis Inc. . is scheduled to report results on Nov 10. The company has an Earnings ESP of 11.43% and a Zacks Rank #2.

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