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Editas (EDIT) to Report Q4 Earnings: What's in the Cards?

Zacks Equity Research
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Editas Medicine, Inc. EDIT is scheduled to report fourth-quarter and full-year 2018 results on February 28.

The company’s earnings history has been mixed so far, wherein it has surpassed the consensus estimates in two quarters while missing the same in two, recording average beat of 10.9%. In the last reported quarter, Editas delivered a positive earnings surprise of 55.56%.

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 uses CRISPR gene editing to treat Leber congenital amaurosis type 10 (LCA10) — a rare genetic illness that causes blindness. In November, the company announced FDA acceptance of its investigational new drug (“IND”) application to begin clinical studies for EDIT-101. It got a milestone payment from partner Allergan AGN for IND acceptance which should be recognized as revenues in the fourth quarter.

Editas has a strategic alliance and an option agreement with Allergan under which the latter reserves its rights to license up to five of Editas’ genome editing ocular programs. In July 2018, Allergan exercised its option to develop and commercialize EDIT-101 globally while Editas exercised its right to a profit-sharing arrangement with Allergan under which it will co-develop and share equally in the profits and losses from EDIT-101 in the United States. Further, the company has the right to choose to co-develop and co-market another eye-disease program in the United States.

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). Data from pre-clinical studies on these diseases has been positive. Editas also has CRISPR drugs in the pipeline to treat cancer, muscular dystrophy, alpha???1 antitrypsin deficiency and cystic fibrosis.

Moreover, the company has a collaboration and licensing deal with Juno Therapeutics, now part of Celgene CELG, to use gene-editing approaches including CRISPR-Cas9 for developing engineered T cell medicines to treat cancer.

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

In January this year, Editas announced the resignation of Katrine Bosley from her role as president and CEO, effective Mar 1, 2019.  Cynthia Collins has been appointed as interim CEO and should address the fourth quarter call. Meanwhile, Editas has initiated a search for a permanent CEO. We expect an update on the progress in this regard at the conference call.

Earnings Whispers

Our proven model does not conclusively show that Editas will beat on earnings 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. That is not the case here, as you will see below.

Earnings ESP: Its Earnings ESP is 0.00% as both the Zacks Consensus Estimate as well as the Most Accurate Estimate is pegged at a loss of 42 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Editas’ Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings beat.

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

Stocks That Warrant a Look

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

BioDelivery Sciences International, Inc. BDSI has an Earnings ESP of +38.46% and a Zacks Rank #2. The company is scheduled to report results on Mar 14. You can see the complete list of today’s Zacks #1 Rank stocks here.

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