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Prothena (PRTA) Q2 Earnings: Is a Disappointment in Store?

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Prothena Corporation plc (PRTA - Free Report) is scheduled to report second-quarter 2018 results on Aug 7.

In the last reported quarter, the company incurred a wider-than-expected loss, resulting in a negative earnings surprise of 2.44%.  Nevertheless, Prothena’s track record has been decent so far. The company reported a narrower-than-expected loss in three of the last four quarters, with an average positive earnings surprise of 15.6%.

Prothena’s shares have lost 63.8% in the year so far compared with the industry’s decline of 2.4%.

 

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

Pipeline Progress in Focus

We expect investors’ focus to remain on pipeline updates as the company has no approved product in its portfolio, yet.

Prothena has discontinued the development of its lead pipeline candidate, NEOD001. The candidate is an antibody, being evaluated for the treatment of AL amyloidosis. A phase IIb study, PRONTO, did not meet its primary or secondary endpoints. Hence, the company decided to discontinue all studies for the development of NEOD001, including the VITAL study and the open label extension studies. The decision came as a major blow to the investors as the company has a very limited number of candidates in its pipeline and NEOD001 was a lead candidate.

As a result, investors will focus on PRX002. Prothena’s top line primarily comprises collaboration revenues earned through its license, development and commercialization agreements. The company earns collaboration revenues mainly under its license agreement with Roche (RHHBY - Free Report) for PRX002. Prothena is evaluating PRX002, for the treatment of Parkinson’s disease and other related synucleinopathies. A phase II study, PASADENA, in patients suffering from Parkinson`s disease, is ongoing.

Alongside, Prothena is also working to advance PRX004 in a phase I study in patients with ATTR amyloidosis. A phase I study was initiated in the second quarter of 2018 and continues to enroll patients. Preliminary data is expected in 2019.

Prothena also entered into a global neuroscience research & development collaboration with Celgene Corporation (CELG - Free Report) to develop new therapies for a broad range of neurodegenerative diseases. The collaboration is focused on three targets implicated in the pathogenesis of several neurodegenerative diseases, inducing tau, TDP-43 and a third that is undisclosed. Per the terms, Prothena received a $100-million upfront payment and a $50-million equity investment from Celgene.

Like any other development-stage biotechnology company, Prothena is likely to see an increase in research and development expenses due to higher spending on pipeline. The company has decided to reduce its workforce by approximately 57% as a result of the discontinuation of the lead candidate, NEOD001. Consequently, Prothena revised its 2018 financial guidance and now expects its 2018 net cash burn from operating and investing activities to range from $40 million to $50 million.

Earnings Whispers

Our proven model doesn’t show that Prothena 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 on earnings. That is not the case here as you will see below.

Earnings 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 $0.88. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Prothena currently carries a Zacks Rank #4 (Sell). As it is, we caution against stocks with Zacks Ranks #4 or 5 (Strong Sell) going into earnings announcement, especially when the company is seeing negative estimate revisions.

Stock to Consider

Here is a better-ranked health care stock that you may want to consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter.

BioDelivery Sciences (BDSI - Free Report) has an Earnings ESP of +3.23% and a Zacks Rank of 2. The company is expected to release second-quarter results on Aug 9. You can see the complete list of today’s Zacks #1 Rank stocks here.

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