What's In Store For Nivalis (NVLS) This Earnings Season?

Nivalis Therapeutics, Inc. (NASDAQ:NVLS) is expected to report first-quarter 2017 results early next month. Last quarter, the company had a positive surprise of 9.09%.

Year to date, Nivalis’ shares lost 4%, while the Zacks classified Medical-Drugs industry recorded an increase of 2.3%.



Nivalis’ earnings history is a mixed bag. Over the four trailing quarters, the company missed expectations on two occasions and beat the same in the other two with an average positive earnings surprise to 1.51%.

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

Factors at Play

Nivalis, a development-stage pharmaceutical company, is focused on the discovery, development and commercialization of treatments for cystic fibrosis (CF). With no approved product in its portfolio, Nivalis does not generate any revenue yet. As a result, we expect investor focus to be on the company’s progress with its pipeline.

In Apr 2017, Nivalis entered into a definitive merger agreement with privately held biotechnology company, Alpine Immune Sciences. The merger will lead to the development of a combined novel immunotherapy platform focused on both inflammation and immuno-oncology.

The company’s lead product candidate – Cavosonstat (N91115) – is being evaluated for the treatment of patients with CF. We note that in Nov 2016, the company announced discouraging results from a phase II study on Cavosonstat. The study failed to achieve its primary endpoint of lung function improvement and a key secondary endpoint of sweat chloride reduction. Subsequently, the company decided to discontinue any further development of the drug.

Note that the company implemented a workforce reduction in by approximately 84% in Jan 2017. This strategy was adopted to better align resources with the company’s operational needs. Also, the move should result in substantial cost savings.

The company is also evaluating the efficacy and safety of Cavosonstat in combination with Vertex Pharmaceuticals Incorpor’s (NASDAQ:VRTX) Kalydeco (ivacaftor) in a separate phase II trial of 19 adult CF patients. In Feb 2017, the company announced disappointing top-line results from the study, which also missed its primary end points.

Earnings Whispers

Our proven model does not conclusively show that Nivalis 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. However, this is not the case here as you will see below.

Zacks ESP: 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 48 cents.You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Though Nivalis’ Zacks Rank #2 increases the predictive power of the ESP, its 0.00% Earnings ESP makes surprise prediction difficult.

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

Stocks That Warrant a Look

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

Proteostasis Therapeutics, Inc. (NASDAQ:PTI) , which is expected to release results on May 12, has an Earnings ESP of +5.17% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE) is expected to release results on May 8. The company has an Earnings ESP of +0.59% and a Zacks Rank #3.

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