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Inovio (INO) Q2 Earnings: What Lies Ahead for the Stock?

Inovio Pharmaceuticals, Inc. INO is scheduled to report second-quarter 2017 results on Aug 8 after market close.

This year so far, Inovio’s shares have underperformed the industry. The stock has lost 19.9% during the period, while the industry recorded an increase of 9%.

Inovio’s earnings performance is a mixed bag. The company surpassed expectations in one of the last four quarters, posted in-line results in one and missed estimates in the other two. Overall, the company delivered an average negative surprise of 5.75% in the trailing four quarters.

Last quarter, the company beat estimates with a positive earnings surprise of 8.82%. Let’s see how things are shaping up for this announcement.

Factors to Consider

Given that Inovio does not have any revenue-generating product in its portfolio yet, investors’ focus will remain on pipeline and regulatory updates.

VGX-3100 vaccine is the most advanced candidate in the company’s pipeline. It is being studied for the treatment of HPV-16 and HPV-18 infection and pre-cancerous lesions of the cervix and vulva. In Jun 2017, Inovio initiated a pivotal phase III REVEAL study to evaluate the safety and efficacy of VGX-3100 to treat cervical dysplasia caused by human papillomavirus (HPV).

However, this phase III trial initiation was delayed with the FDA placing a clinical hold on the proposed program in Oct 2016. In Apr 2017, Inovio submitted a complete response to the FDA for the study’s initiation. The issue was eventually resolved as the FDA lifted the clinical hold after reviewing necessary testing and validation data submitted by the company.

Apart from VGX-3100, Inovio has several other candidates in its pipeline in early-to-mid-stage development. Also, the company is working on the development of Ebola, Zika and Middle East respiratory syndrome virus vaccines. In Jun 2017, the company announced that it has completed enrollment of its phase I clinical trial in evaluating its Zika vaccine, GLS-5700.

Inovio is also collaborating with several companies and institutes for developing its pipeline. These partners not only lend expertise to Inovio but also provide the required funding for development of its candidates.

However, with no approved product in its portfolio, Inovio depends largely on collaborations, grants and other payments for revenues as well as development of its pipeline candidates. Therefore, the company’s top line varies on a quarterly basis, depending on the timing of its receipt of collaboration revenues.

Earnings Whispers

Our proven model does not conclusively show that Inovio 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) for this to happen. 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 of a loss of 35 cents and the Zacks Consensus Estimate of a loss of 18 cents, stands at -94.44%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Inovio has a Zacks Rank #2, which increases the predictive power of ESP. However, its negative Earnings ESP leaves our surprise prediction inconclusive.

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

Other Stocks That Warrant a Look

Per our model, here are some other health care stocks with the right combination of elements to come up with an earnings beat this quarter:

Syndax Pharmaceuticals, Inc. SNDX is expected to release results on Aug 8 with an Earnings ESP of +9.88% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Arena Pharmaceuticals, Inc. ARNA is scheduled to release results on Aug 7. The company has an Earnings ESP of +5.88% and a Zacks Rank #2.

Puma Biotechnology, Inc. PBYI is expected to release results on Aug 8. The company has an Earnings ESP of +3.33% and a Zacks Rank #3.

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Arena Pharmaceuticals, Inc. (ARNA): Free Stock Analysis Report
 
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