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Is a Beat in Store for Editas (EDIT) This Earnings Season?

Zacks Equity Research

We expect Editas Medicine, Inc.’s EDIT earnings to beat estimates when it reports first-quarter 2019 results.

Shares of Editas have rallied 18.7% so far this year, outperforming the industry’s 4.2% increase.

Editas’ track record has been mixed so far. The company delivered a positive surprise in two of the last four quarters and missed the consensus mark in the other two. The average beat in the last four quarters is 10.35%. In the last reported quarter, Editas witnessed a negative surprise of 8.33%.

Let’s see, how things are shaping up for the to-be-reported quarter.

Factors to Consider

Editas makes medicines to treat serious diseases, using its proprietary genome editing platform based on CRISPR technology. Its lead pipeline candidate is EDIT-101 that employs CRISPR gene editing to treat Leber congenital amaurosis type 10 (LCA10) — a rare genetic illness that causes blindness. Investor focus during the upcoming earnings call will be on the updates pertaining to EDIT-101.

Editas has a strategic alliance and an option agreement with Allergan AGN under which, the latter reserves its rights to out-license up to five of Editas’ genome editing ocular programs. Both companies plan to initiate patient dosing in the phase I/II dose escalation study on EDIT-101 in the second half of 2019.

Earlier this month, Editas inked a research and cross licensing deal with BlueRock Therapeutics, LP, to combine the respective genome editing and cell-therapy technologies to discover, develop and manufacture novel engineered cell medicines. Both companies will pay royalties to each other on global net product sales.

Editas is also pursuing the development of CRISPR candidates for eye diseases other than LCA10 including Usher Syndrome type 2A (USH2A) and the recurrent ocular Herpes Simplex Virus type 1 (HSV-1). The company also expects to begin IND-enabling activities on an experimental candidate for the treatment of sickle cell disease and beta-thalassemia any time this year. Management may provide a clear timeline on this at the impending conference call.

Moreover, the company has a collaboration and licensing pact with Juno Therapeutics — now part of Celgene CELG — to use the latter’s gene-editing approaches including CRISPR-Cas9 for developing the engineered T cell medicines to tackle cancer.

We expect management to provide more updates and a detailed information on its pre-clinical studies during the upcoming investors’ call.

In January this year, Editas announced Katrine Bosley’s resignation from her role as president and CEO, effective Mar 1, 2019.  Cynthia Collins has been appointed as the company’s interim CEO. However, Editas has initiated a search for a permanent CEO. We expect an update on this development on the imminent conference call.

Why a Likely Positive Surprise?

Our proven model indicates that Editas is likely to beat on earnings this to-be-reported 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: Editas has an Earnings ESP of +38.57%, representing the percentage difference between the Most Accurate Estimate, which stands at a loss of 36 cents and the Zacks Consensus Estimate, pegged at a loss of 59 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Editas has a Zacks Rank #3, which increases the predictive power of ESP. Thus, the combination of a positive ESP and a favorable Zacks Rank makes us reasonably confident about a likely positive surprise.

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.

Editas Medicine, Inc. Price and EPS Surprise

Editas Medicine, Inc. Price and EPS Surprise | Editas Medicine, Inc. Quote

Other Stocks That Warrant a Look

Here is a biotech worth considering with the right combination of elements to beat on earnings this time around:

Aduro Biotech, Inc. ADRO has a Zacks Rank #2 and an Earnings ESP of +82.00%. You can see the complete list of today’s Zacks #1 Rank stocks here.

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