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Juno Therapeutics (JUNO) Q2 Earnings: Surprise in Store?

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Juno Therapeutics Inc.  is expected to report second-quarter 2017 results on Aug 3. Last quarter, the company delivered a negative earnings surprise of 9.09%.

Year to date, Juno’s shares have soared 58.9% while the industry recorded an increase of 12%.

The company’s poor track record so far shows negative surprises in three of the last four quarters. The average negative earnings surprise for the last four quarters is 7.98%.

Factors at Play

With no approved products in its portfolio, Juno does not generate any product revenue yet. Thus, investors’ focus will primarily be on the company’s cash burn and pipeline updates.

Juno is developing cell-based cancer immunotherapies based on CAR and high-affinity TCR technologies. This is a hot therapeutic area with huge commercial potential. Presently, the company’s most advanced pipeline candidates include JCAR017 and JCAR014, which use CAR T-cell technology to target CD19.

JCAR017 is in a phase I study for non-Hodgkin lymphoma (NHL) and in a phase I/II study in pediatric and young adults with acute lymphoblastic leukemia (r/r ALL). A pivotal trial for JCAR017 in r/r DLBCL (diffuse large B-cell lymphoma) is expected to start in 2017. The company plans to bring JCAR017 to the market for NHL as early as 2018 and for multiple indications by the end of 2019.

Encouraging data from an early-stage study evalauting JCAR014, in patients with chronic lymphocytic leukemia (CLL) who failed treatment with ibrutinib, was presented in Dec 2016. Insights from studies of JCAR014 are being applied to the development of JCAR017 for the treatment of B-cell malignancies.

However, the company faced a major setback last year related to the development of its lead pipeline candidate, JCAR015. In Nov 2016, Juno announced that it is discontinuing the development of JCAR015 for r/r ALL due to the toxicity witnessed in a phase II ROCKET study.

We note that at the time of releasing the first-quarter results, Juno has maintained its expectations of cash burn of $270–$300 million for 2017.

Earnings Whispers

Our proven model does not conclusively show that Juno 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) for this to happen. This 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 74 cents.You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Although Juno’s Zacks Rank #2 (Buy) increases the predictive power of ESP, its 0.00% Earnings ESP makes surprise prediction difficult.

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

Stocks That Warrant a Look

Here are some other worth-considering health care stocks which have the right combination of elements per our model, to post an earnings beat this quarter.

Zoetis Inc. (ZTS - Free Report) is scheduled to release results on Aug 8 with an Earnings ESP of +1.89% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tesaro, Inc. (TSRO - Free Report) is scheduled to release results on Aug 8. The company has an Earnings ESP of +16.40% and a Zacks Rank #3.

Esperion Therapeutics, Inc. (ESPR - Free Report) is expected to release results on Aug 3. The company has an Earnings ESP of +17.37% and a Zacks Rank #3.

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