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Is a Beat in Store for Ionis (IONS) This Earnings Season?

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Ionis Pharmaceuticals, Inc. (IONS - Free Report) is scheduled to report second-quarter 2018 results on Aug 7 before the market opens.

Last reported quarter, the company delivered a positive earnings surprise of 90.91%. Its earnings history is a mixed one, having lagged estimates twice in the trailing four quarters while beating the same on two occasions, the average beat being 16.48%.

However, Ionis’ share price has decreased 13.1% so far this year, wider than the industry’s decline of 1.9%.

Let’s see how things are shaping up for this announcement.

Factors at Play

Ionis earns revenues in the form of upfront, milestone and other payments under its partnerships with leading health care companies like Biogen (BIIB - Free Report) . The company partners with Biogen to develop and commercialize Spinraza.

Ionis earns royalties on Spinraza sales from Biogen. Beginning second quarter, the company’s R&D revenues will include a certain amortized portion of $500 million technology access fee and equity premium related to its strategic collaboration with Biogen. In April, Biogen expanded its collaboration with Ionis to identify new gene therapies for the treatment of spinal muscular atrophy (SMA) as well as a broad range of neurological diseases.

Ionis’ two candidates — Tegsedi (inotersen) and Waylivra (volanesorsen) — are under review in the United States and the EU. Tegsedi is being evaluated for the treatment of stage 1/2 polyneuropathy in adult patients with hereditary transthyretin amyloidosis (hATTR) while Waylivra is under evaluation for the treatment of familial chylomicronemia syndrome (FCS). These candidates are expected to receive an approval from the regulatory bodies during the second half 2018.

In July, Tegsedi received a marketing authorization nod from the EU for the given indication. Notably, in April, Ionis out-licensed the worldwide commercialization rights to Tegsedi to its affiliate, Akcea Therapeutics.

Following the approval of Tegsedi by the EU, Ionis is eligible to receive $40 million as milestone payment from Akcea, payable in shares. Ionis will bear 60% of Tegsedi profit/loss whereas the remaining 40% will be shared by Akcea.

However, this approval will not add to the revenues of Ionis in the soon-to-be-reported quarter but is likely to drive revenues in the future quarters.

In January 2018, the FDA accepted the new drug application of Tegseddi on priority review basis. However, in the second quarter, the regulatory agency extended its review timeline for the candidate and has set an action date of Oct 6, 2018.

Ionis is also working closely with Akcea to develop Waylivra. In May, the United States advisory committee voted in support of Waylivra’s approval for the treatment of familial chylomicronemia syndrome. The FDA has set an action date of Aug 30, 2018.

We expect management to discuss the launch plans for Tegsedi and Waylivra on second-quarter earnings call.

In April, Ionis presented top-line findings from a phase I/II trial on its antisense drug candidate, IONIS-HTTRx, at the 70th American Academy of Neurology (AAN) meeting in Los Angeles. Outcomes from this evaluation showed that the candidate significantly reduced disease-causing protein and also improved clinical measures for Huntington's disease.

Earnings Whispers

Our proven model indicates that Ionis is likely to beat earnings estimates this to-be-reported quarter. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen and Ionis exactly has the right mix.

Earnings ESP: Ionis has an Earnings ESP of +2600% since the Most Accurate Estimate stands at a gain of 50 cents while the Zacks Consensus Estimate is pegged at a loss of 2 cents. A positive ESP indicates a likely earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Ionis has a Zacks Rank #3, which increases the predictive power of ESP. Thus, the combination of a positive Earnings ESP and a favorable Zacks Rank makes us reasonably confident about an earnings beat this reporting cycle.

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

Other Stocks That Warrant a Look

Here are some other health care stocks worth considering from the same space with the perfect combination of elements to beat on earnings this time around.

Editas Medicine, Inc. (EDIT - Free Report) has an Earnings ESP of +5.11% and a Zacks Rank #2.  The company is scheduled to release second-quarter results on Aug 6 after the market closes. You can see the complete list of today’s Zacks #1 Rank stocks here.

Aimmune Therapeutics, Inc. (AIMT - Free Report) has an Earnings ESP of +12.38% and a Zacks Rank of 3. The company is expected to release second-quarter results on Aug 14.

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