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Intrexon (XON): Will the Stock Pull a Surprise in Q4 Earnings?

Zacks Equity Research

Intrexon Corporation XON is scheduled to report fourth-quarter 2016 results on Mar 1, after the market closes.

Intrexon’sshare price has decreased 9.9% year to date, while the Zacks classified Medical-Medical Services industry gained 4.3%.

In the last reported quarter, the company reported in line earnings. Let’s see how things have shaped up before the announcement.

Factors to Consider

Being a leader in the synthetic biology, Intrexon applies engineering principles to biological systems that enable the rational, design-based control of cellular function for a specific purpose across five key sectors – health, food, energy, environment and consumer.

Intrexon’s top line comprises mainly of collaboration and license fees, product revenues and service revenues.

Intrexon has been quite active on the acquisition front. Some of the recent acquisitions by the company are Oxitec Ltd. (gaining a portfolio of biological insect control solutions), Okanagan Specialty Fruits, Inc. (an agricultural company with a portfolio that includes Arctic apple, the first non-browning apple without the use of any flavor-altering chemical or antioxidant additives, which will be sold as fresh sliced apples in test markets in the U.S. in 2017). Based on current planting contracts, between 2016 and 2018 the company expects to plant over 870,000 trees that at maturity will produce over 30 million pounds of Arctic apples annually.

Intrexon’s expanding portfolio of technologies has enabled the company to develop a robust pipeline of candidates targeting a broad range of diseases. Intrexon is currently developing a couple of candidates in collaboration with Fibrocell – it completed enrolment in a phase I/II study on FCX-007 for the treatment of recessive dystrophic epidermolysis bullosa. The second gene therapy candidate being developed by Fibrocell is FCX-013 for the treatment of linear scleroderma.

Fibrocell expects to submit an investigational new drug (IND) application for FCX-013 in 2017. Another collaborator, Oragenics is developing a treatment for the prevention and treatment of oral mucositis and expects to file an IND update for a phase II study protocol in early 2017.

Intrexon anticipates having up to eleven IND applications and initiations of clinical studies with the company’s existing ECC partners utilizing its technologies by mid-2017, subject to FDA approval.

The company follows a business model under which it commercializes its technologies through exclusive channel collaborations (ECC), licensing agreements and joint ventures with collaborators that have market and product development expertise, as well as sales and marketing capabilities to bring new and improved products and processes to market.

Such agreements provide the company with funds in the form of technology access fees, and milestones and other payments. Moreover, Intrexon has been very active on striking new ECCs and expanding its partnership with the existing ones.

We expect collaboration revenues to continue contributing significantly to the company’s top line in the fourth quarter.

We expect investors to focus on the company’s performance along with other developmental updates.

Surprise History

Intrexon’s performance has been mostly disappointing, with the company missing estimates in two of the four trailing quarters with an average negative earnings surprise of 7.72%.

What Our Model Indicates

Our proven model does not conclusively show that Intrexon is likely to beat estimates this quarter. That 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 surpass estimates. That is not the case here, as you will see below.

Zacks 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 stand at a loss of 23 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Though Intrexon has a favorable Zacks Rank #3, its 0.00% ESP makes surprise prediction difficult.

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

Intrexon Corporation Price and EPS Surprise

Intrexon Corporation Price and EPS Surprise | Intrexon Corporation Quote

Stocks to Consider

Here are some health care stocks that you may want to consider, as our model shows that it has the right combination of elements to post an earnings beat this quarter.

Pacira Pharmaceuticals, Inc. PCRX has an Earnings ESP of +20% and a Zacks Rank #2. The company is scheduled to release results on Mar 1. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Syndax Pharmaceuticals, Inc. SNDX has an Earnings ESP of +18.18% and a Zacks Rank #3. The company is scheduled to release results on Mar 2.

Tesaro, Inc. TSRO has an Earnings ESP of +0.51% and a Zacks Rank #3. The company is scheduled to release results on Feb 28.

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