AVEO Pharmaceuticals (AVEO) Q3 Earnings: What's In Store?

AVEO Pharmaceuticals, Inc. (NASDAQ:AVEO) is expected to report third-quarter 2016 results this month. The company has an impressive track record for the last four reported quarters. While it has beaten estimates on three occasions, it met expectations in one with an average positive surprise of 57.14%.

In the last reported quarter, AVEO posted a positive surprise of 7.14% results were in line with expectations. Let’s see how things are shaping up for this quarter.

Factors at Play

AVEO, a development-stage biopharmaceutical company, is focused on the development of treatments targeting cancer and other areas of unmet medical need. The company has an interesting pipeline with the most advanced candidate being tivozanib.

Tivozanib is currently under review in the EU for the first-line treatment of renal cell carcinoma (RCC). The regulatory application was submitted by AVEO’s partner, EUSA Pharma.

During the quarter, AVEO initiated a phase I/II study (TiNivo) evaluating tivozanib in combination with Bristol-Myers Squibb Company’s (NYSE:BMY) Opdivo (nivolumab) for the treatment of advanced RCC. The phase I study will evaluate escalating doses of tivozanib, in combination with Opdivo, in patients with advanced RCC. It will be followed by an expansion phase II cohort at the established combination dose.

We note that a pivotal phase III (TIVO-3) study comparing tivozanib to Nexavar (sorafenib) for the third-line treatment of patients with refractory RCC is currently underway.

Apart from tivozanib, AVEO has several early- and mid-stage candidates in its pipeline including ficlatuzumab (phase II completed – non-small cell lung cancer) and AV-203 (phase I completed – advanced solid tumors) among others. The company has collaborations with several companies for the development of its pipeline candidates.

The company depends entirely on collaboration revenues, and milestone and other payments for its top line. Therefore, the top line may vary on a quarterly basis depending mainly on the timing of these payments.

Investors’ focus should remain on tivozanib’s progress and other pipeline-related updates.

AVEO PHARMACEUT Price and EPS Surprise

AVEO PHARMACEUT Price and EPS Surprise | AVEO PHARMACEUT Quote

What Our Model Indicates

Our proven model does not conclusively show that AVEO 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) for this to happen. 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 pegged at 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate stand at a loss of 12 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank:Though AVEO has a favorable Zacks Rank #3 (Hold), an ESP of 0.00% 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.

Stocks That Warrant a Look

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

Allergan plc (NYSE:AGN) has an Earnings ESP of +0.56% and a Zacks Rank #3. The company is scheduled to report third-quarter results on Nov 2.

Infinity Pharmaceuticals, Inc. (NASDAQ:INFI) is scheduled to report third-quarter results on Nov 7. It has an Earnings ESP of +5.81% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

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