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What's in Store for Adverum (ADVM) this Earnings Season?

Zacks Equity Research

Adverum Biotechnologies, Inc. ADVM is expected to report second-quarter 2016 results on Aug 11.

Adverum has a dismal track record with the company missing estimates in all of the last four quarters, bringing the negative average earnings surprise to 27.5%. Let’s see how things are shaping up for this announcement.

Factors Influencing This Quarter

Being a development-stage biotech company, Adverum does not have any approved product in its portfolio yet. In such a scenario, investors are expected to keep an eye on pipeline development at the company, apart from the usual bottom-line numbers.

Adverum, a gene therapy company, is developing a number of candidates for the treatment of patients suffering from serious eye diseases and rare genetic diseases. Currently, the company has three candidates in development based on its Ocular BioFactory platform – AVA-201, AVA-311 and AVA-101.

The company’s primary focus is on the development of AVA-101 for the treatment of wet AMD. However, Adverum decided not to commence a phase IIb study on AVA-101 in the second half of 2015. The company had conducted a detailed analysis of data from a phase IIa study on AVA-101 and concluded that there was no overall evidence of a complete and/or durable anti-VEGF response in the majority of patients receiving the candidate. Adverum will be conducting additional preclinical studies to investigate AVA-101 for further development of its wet AMD program. We expect Adverum to shed some light on its progress with the candidate during its second-quarter call.

Meanwhile, Adverum has a collaboration agreement with Regeneron Pharmaceuticals, Inc. REGN for the joint development of novel candidates based on the former’s Ocular BioFactory platform. The agreement is an important source of funds for Adverum.

In May 2016, Adverum closed its previously announced transaction with Annapurna Therapeutics and the combined company was renamed Adverum Biotechnologies, Inc. The combined company has approximately 41.2 million shares of common stock outstanding. Original Avalanche stockholders own approximately 62.5% of the combined company, while Annapurna shareholders own approximately 37.5% of the combined company.

The company plans to dose the first patients with ANN-001 for A1AT deficiency by the end of this year and with ANN-002 for hereditary angioedema in 2017. Hence, R&D expenses should be on the rise at the company.

ADVERUM BIOT Price and EPS Surprise

ADVERUM BIOT Price and EPS Surprise | ADVERUM BIOT Quote

What Our Model Indicates

Our proven model does not conclusively show that Adverum 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 beat estimates. But 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%, since the Most Accurate estimate is in line with the Zacks Consensus Estimate of a loss of 38 cents.

Zacks Rank: Adverum’s Zacks Rank #3 increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.

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

Stocks That Warrant a Look

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

Alcobra Ltd. ADHD has an Earnings ESP of +18.20% and a Zacks Rank #3. The company is expected to report results on Aug 11.

AveXis, Inc AVXS has an Earnings ESP of +3.90% and a Zacks Rank #3. The company is scheduled to report second-quarter results on Aug 11.

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REGENERON PHARM (REGN): Free Stock Analysis Report
 
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