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Is a Beat in Store for Melinta (MLNT) This Earnings Season?

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We expect Melinta Therapeutics, Inc. to beat expectations when it reports second-quarter 2019 results on Aug 7, before market open. In the last reported quarter, the company delivered a positive earnings surprise of 14.29%.

Shares of Melinta have declined 3.2% so far this year against the industry‘s increase of 7.1%.


Melinta’s earnings history is not quite encouraging with the company outpacing estimates in two of the last four quarters and missing the same twice, delivering average negative surprise of 14.28%.

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

Factors to Consider

Last month, Melinta provided preliminary results for the quarter. Sales of the company’s marketed drugs are estimated to be approximately $13.8 million. The estimated numbers indicate sequential growth of 17% and year-over-year growth of approximately 51%.

Please note that the company’s marketed portfolio includes Baxdela, which was launched in February 2018 in the United States for treating acute bacterial skin and skin structure infection. In January 2018, Melinta acquired Infectious Disease Business (“IDB”) from The Medicines Company which added three drugs to its portfolio — Vabomere, Orbactiv and Minocin — approved for infectious diseases. Vabomere and Orbactiv is approved in the United States and Europe while Baxdela in under review in Europe. The company is seeking a label expansion of Baxdela in the United States to include community-acquired bacterial pneumonia (“CABP”). In June, the FDA granted priority review to the supplemental New Drug Application seeking approval of Baxdela in CABP with a decision expected in October.

In the past couple of quarters, revenues were driven by Vabomere and Minocin and we expect the trend to continue in the soon-to-be reported quarter. However, softer sales trend of Baxdela and Orbactiv may partially offset the growth.

The company had initiated several initiatives in the fourth quarter of 2018 to reduce expenses, which led to reduction in selling, general and administrative expenses in the first quarter. Moreover, completion of phase III study on Baxdela for label expansion in CABP and winding down of early research and discovery programs resulted in lower research and development expenses year over year in the first quarter. We expect the declining trend in operating expense to continue in the second quarter. Moreover, the acquisition of IDB had driven operating expense higher in the second quarter of 2018. With no acquisition related costs, operating expense will be lower in the to-be-reported quarter. However, plans to support label expansion of Baxdela may partially offset the decline.

Investor focus will be on the commercial plan for launch of Baxdela in an expanded label upon potential approval and progress of Vabomere in Europe.

Why a Likely Positive Surprise?

Our proven model indicates that Melinta is likely to beat earnings 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.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate (loss of $2.56) and the Zacks Consensus Estimate (loss of $2.57), stands at +0.26%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Melinta has a Zacks Rank #3. The combination of a positive Earnings ESP and a favorable Zacks Rank makes us reasonably confident of an earnings beat.

Conversely, we caution against 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 pharma/biotech stocks that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases.

Regeneron Pharmaceuticals (REGN - Free Report) has an Earnings ESP of +3.64% and a Zacks Rank #3. The company is scheduled to release second-quarter 2019 results on Aug 6. You can see the complete list of today’s Zacks #1 Rank stocks here.

Allergan has an Earnings ESP of +3.87% and a Zacks Rank #3. The company is scheduled to release second-quarter 2019 results on Aug 6.

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