Whta's In Store For Endocyte (ECYT) This Earnings Season?

Endocyte, Inc. (NASDAQ:ECYT) is expected to report second-quarter 2016 results on Aug 2.

Endocyte has an impressive track record. The company has beaten estimates in three of the last four quarters and met the same in the last quarter, with a positive average earnings surprise of 10.6%. Let’s see how things are shaping up for this announcement.

Factors Influencing This Quarter

Being a development-stage biotech company, Endocyte does not have any approved product in its portfolio. Investors are thus expected to keep an eye on pipeline development at the company.
Endocyte’s pipeline includes vintafolide (non-small cell lung cancer/NSCLC), EC1456 (advanced solid tumors) and EC1169 (recurrent prostate cancer).

In a phase IIb study, vintafolide, in combination with docetaxel, led to higher rates of hematologic and peripheral neuropathy adverse events. Hence, Endocyte has shifted focus to the development of its second-generation folate targeted agent, EC1456, in second-line NSCLC.

Currently, a phase I dose-escalation study on the candidate is underway to determine the maximum-tolerated dose. The company is considering two schedules for the candidate. With the determination of the maximum-tolerated dose, the company will evaluate these schedules in up to 40 second-line NSCLC patients selected by EC20 imaging with all FR-positive disease. It expects single-agent efficacy data in NSCLC on the candidate before 2016 end.

The company is also conducting a phase I dose-escalation study on EC1169 to determine its maximum-tolerated dose. After determining the maximum-tolerated dose of EC1169, the company plans to expand this trial up to 50 advanced prostate cancer patients previously treated with hormone therapy. Endocyte expects single-agent efficacy data in prostate cancer in late 2016 or 2017.

Meanwhile, the company is also working to venture into the immuno-oncology space in collaboration with Purdue University. Additionally, Endocyte announced data showing that a combination of EC1456 and an anti-PD1 antibody led to curative activity in models expressing PD-L1 at the American Association for Cancer Research (AACR) annual meeting.

We expect R&D expenses to be higher as trials for EC1456 and EC1169 will be expanded once their maximum-tolerated doses have been determined.

What Our Model Indicates

Our proven model does not conclusively show that Endocyte 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.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because the Most Accurate estimate is in line with the Zacks Consensus Estimate of a loss of 26 cents.

Zacks Rank: Endocyte’s Zacks Rank #3, when combined with its 0.00% ESP, makes surprise prediction difficult.

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

Stocks That Warrant a Look

Here are some 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.

Ironwood Pharmaceuticals (NASDAQ:IRWD) has an Earnings ESP of 13.30% and a Zacks Rank #2. The company is expected to report earnings on Aug 4.

Exelixis, Inc. (NASDAQ:EXEL) has an Earnings ESP of 3.70% and a Zacks Rank #3. The company is scheduled to report results on Aug 3.

Impax Laboratories (NASDAQ:IPXL) has an Earnings ESP of 3.03% and a Zacks Rank #2. The company is scheduled to report results on Aug 9.