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What's in the Cards for Adverum (ADVM) This Earnings Season?

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Adverum Biotechnologies, Inc. (ADVM - Free Report) is expected to report third-quarter 2017 results on Nov 14.

The company has a dismal track record as it missed estimates in three of the last four quarters, resulting in an average negative earnings surprise of 11.95%. In the last reported quarter, Adverum beat estimates, delivering a positive surprise of 27.03%.

Also, Adverum’s share price movement year to date indicates that the stock has outperformed the industry. The company’s shares have gained 12.1% compared with the industry’s gain of 2.3%.

Factors to Consider

Adverum is a development-stage biotech company with no approved product in its portfolio.

Adverum’s pipeline consists of gene therapy programs for rare diseases, alpha 1 antitrypsin (A1AT) deficiency, wet AMD and hereditary angioedema ("HAE"). However, all the candidates are in pre-clinical studies.

The company added multiple early-stage candidates including ANN-043 (ADVM-001), ANN-053 (ANN-002) and ANN-003 among others with the acquisition of Annapurna Therapeutics in May 2016.

Based on pre-clinical development results, the company is planning to advance its anti-VEGF gene therapy candidate, ADVM-022. The candidate is being developed for treating wet age-related macular degeneration ("AMD"). Adverum is in the process of filing a pre-investigational new drug (IND), following its meeting with the FDA in the first quarter of 2017. The company is also developing another anti-VEGF gene therapy, ADVM-032.

Adverum expects to initiate a phase I/II study on ADVM-043 for the treatment of A1AT deficiency by the end of this year. The company filed an IND with the FDA and also met the agency in July for a review of the development plan.

Moreover, it is evaluating ADVM-053 to treat HAE and discussed a development plan with the FDA in the first quarter. It is preparing to file an IND.

Adverum extended its collaboration agreement with Regeneron Pharmaceuticals, Inc. (REGN - Free Report) by three years till May 1, 2020. The companies will developeight distinct ocular therapeutic targets, including AVA-311, which is being developed for treating juvenile X-Linked Retinoschisis.

The company has also collaborated with Editas Medicine, Inc. (EDIT - Free Report) for developing treatment for inherited retinal diseases using the latter’s CRISPR-based genome editing technologies.

We expect investor focus to remain on pipeline updates on the third-quarter earnings call.

Earnings Whispers

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 be able to beat estimates. But that is not the case here, as you will see below.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -3.33%. This is because the Most Accurate estimate is at a loss of 31 cents while the Zacks Consensus Estimate stands at a loss of 30 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, we need to have a positive ESP to be confident about an earnings surprise.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are a couple of health care stocks that 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) is scheduled to release results on Nov 7. The company has an Earnings ESP of +3.2% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

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