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What's in the Cards for Sarepta (SRPT) This Earnings Season?

Zacks Equity Research

Investors are likely to focus on the progress of Sarepta Therapeutics, Inc.’s SRPT muscular dystrophy pipeline when it reports first-quarter 2019 results.

The company’s earnings beat estimates in two of the past four quarters and missed the same twice with the average being negative 18.12%.

Shares of Sarepta have increased 11% so far this year compared with the industry‘s rise of 5%.

In the last reported quarter, Sarepta reported a negative earnings surprise of 28.79%.

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

Factors at Play

Sarepta’s sole marketed drug, Exondys 51, is likely to drive its revenues higher in the first quarter of 2019. The drug has shown a strong uptrend since its launch in 2016 and is the only approved treatment for Duchenne muscular dystrophy (“DMD”) in the United States.

Apart from Exondys 51, the company is developing multiple pipeline candidates, which include exon-skipping and gene therapies, for treating DMD. The company is likely to provide update on the progress of these candidates in clinical studies.

The most advanced pipeline candidate – golodirsen, an exon-skipping candidate – is under review in the United States. In February, the new drug application (“NDA”) seeking approval for golodirsen was granted priority review. The PDUFA date is Aug 19, 2019.

In March, the company announced positive interim data from a late-stage study evaluating another exon-skipping candidate, casimersen. Data showed that treatment with casimersen led to statistically significant mean increase of dystrophin protein production, which leads to improvement in muscle dystrophy, compared to baseline and placebo.

Gene Therapy

Sarepta is also focused on developing gene therapies for the treatment of central nervous system (“CNS”) disorders as well as DMD.

The company has initiated a phase II/III study to evaluate gene therapy, LYS-SAF302, as a treatment for mucopolysaccharidosis Type IIIA, a progressive CNS disorder, along with a partner during the quarter. Moreover, Sarepta acquired Myonexus Therapeutics in February, which added a gene therapy candidate, MYO-101, for treating Limb-girdle muscular dystrophy, (“LGMD”) to the pipeline. The candidate has shown robust protein expression in muscles in an early-stage clinical study.

We expect Sarepta to provide further details on its gene therapy pipeline on its first-quarter earnings call.

With several clinical studies underway, we expect operating expenses to increase in the soon-to-be reported quarter. Moreover, commercial initiatives to support golodirsen potential launch will also drive expenses higher.

Earnings Whispers

Our proven model does not conclusively show that Sarepta is likely to beat 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) to be able to beat estimates. But that is not the case here, as you will see below.

Earnings ESP: Sarepta’s Earnings ESP is 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate stand at a loss of $2.05. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Although Sarepta’s Zacks Rank #3 increases the predictive power of ESP, its 0.00% ESP makes surprise prediction difficult.

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

Sarepta Therapeutics, Inc. Price and Consensus

 

Sarepta Therapeutics, Inc. Price and Consensus | Sarepta Therapeutics, Inc. Quote

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.

Incyte Corporation INCY has an Earnings ESP of +28.57% and a Zacks Rank #3. The company is scheduled to release first-quarter results on Apr 30. You can see the complete list of today’s Zacks #1 Rank stocks here.

Gilead Sciences, Inc. GILD has an Earnings ESP of +1.54% and a Zacks Rank #2. The company is scheduled to release first-quarter results on May 2.

Horizon Pharma HZNP has an Earnings ESP of +25% and a Zacks Rank #3. The company is scheduled to release first-quarter results on May 8.

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