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What's in Store for Innoviva (INVA) This Earnings Season?

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We expect royalties from Innoviva, Inc.’s INVA collaborated drugs to have driven revenues in fourth-quarter 2019.

Shares of the company have lost 12.4% in the past year.

Innoviva’s earnings performance has been dismal over the trailing four quarters. The company missed expectations in three of the last four quarters. The trailing four-quarter negative earnings surprise is 15.82%, on average.

In the last reported quarter, Innoviva delivered a negative earnings surprise of 10.0%.

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

Factors at Play

Innoviva has a long-acting beta2 agonist (“LABA”) collaboration agreement with British pharma giant, Glaxo GSK, which is the sole revenue source for the former. Under this agreement, Innoviva records royalties on global sales of certain Glaxo’s Ellipta products — Relvar/Breo, Anoro and Trelegy. Demand for these respiratory drugs is likely to have driven revenues for the company.

Trelegy Ellipta, the most recent among these, has demonstrated a strong growth trend in the first nine months of 2019. We expect strong demand for the drug to have continued in the fourth quarter, driving sales.

Moreover, U.S. sales of Anoro Ellipta returned to growth and ex-U.S. sales were strong in the third quarter. The sales-growth trend is likely to have continued in the soon-to-be reported quarter.

However, the U.S. generic launch of Glaxo’s respiratory drug, Advair, in early 2019 negatively impacted pricing for Relvar/Breo Ellipta in the United States. We expect U.S. sales to have declined in the quarter. Meanwhile, share gains in certain European markets and growth in Japan are likely to have driven sales in ex-U.S. markets for Relvar/Breo Ellipta.

We expect foreign currency translation to have positively impacted ex-U.S. sales of these drugs, thus driving royalties for Innoviva.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Innoviva this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Innoviva’s Earnings ESP is 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate stand at earnings of 60 cents.

Zacks Rank: Innoviva currently carries a Zacks Rank #3.

Stocks That Warrant a Look

Here are some 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, Inc. REGN has an Earnings ESP of +5.39% and a Zacks Rank #3. The company is scheduled to release fourth-quarter results on Feb 6. You can see the complete list of today’s Zacks #1 Rank stocks here.

Horizon Pharma (HZNP - Free Report) has an Earnings ESP of +1.85% and a Zacks Rank #3.

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