Will Endocyte (ECYT) Disappoint This Earnings Season?

Endocyte, Inc. (NASDAQ:ECYT) is expected to report third-quarter 2017 results on Nov 6 after the market closes.

Endocyte recorded a negative surpirise of 12.00% in the last quarter. The company has a mixed track record as it surpassed the Zacks Consensus Estimate in two of the trailing four quarters and missed the same in two quarters . Overall, the company delivered an average positive surprise of 2.45%.

Notably, Endocyte’s share price has increased 78.5% year to date, as against the industry’s decline of 1.3%.

Let's see how things are shaping up for this quarter.

Factors at Play

Endocyte is a development-stage biopharmaceutical company, focused on bringing targeted therapies for the treatment of cancer and inflammatory diseases to market.

In Jun 2017, Endocyte announced plans to reduce its workforce by about 40% in order to better focus its resources on the more valuable opportunities. The company also looks forward to shift its focus on its most promising programs, which include its CAR T-cell small-molecule drug conjugates (SMDCs) adaptor platform, the dual-targeted DNA crosslinker drug EC2629 and the cohort of taxane-exposed patients receiving EC1169.The restructuring will help the company to have increased cash balance at the end of 2017

Although several companies are aggressively working on bringing new cancer treatments to market, demand for improved and targeted therapies makes this a space with high commercial potential. In fact, Endocyte uses its proprietary technology platform to develop various new SMDCs for a range of diseases.

Currently, EC1456 is being evaluated in a small number of patients in an ovarian cancer surgical study.

Endocyte also filed an Investigational New Drug (IND) application with the FDA for EC2629 and is planning to initiate a phase I study in patients selected as positive for the folate receptor in cancers where tumor associated macrophages (TAMs) are known to be prevalent in the tumor micro-environment.

The company is also enrolling patients in the second part of the study of EC1169, which will evaluate radiographic progression free survival in mCRPC patients with PSMA-positive. The enrollment is expected to be completed in the to-be-reported quarter.

However, with no approved product in its portfolio at the moment, Endocyte has to depend heavily on its partners for top-line growth.

The investors can expect some news about the pipeline candidates EC1456 and EC2629 in the third quarter.

Earnings Whispers

Our proven model does not conclusively show earnings beat for Endocyte 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: Endocyte’s has an Earnings ESP of - 45.71% as the Most Accurate estimate is 51 cents while Zacks Consensus Estimate is pegged at a loss of 35 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Endocyte's carries a Zacks Rank #4 (Sell).

As it is we caution against stocks with Zacks Ranks #4 or 5 (Strong Sell) going into an earnings announcement, especially when the company is seeing a negative estimate revision.

Stocks to Consider

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

Clovis Oncology, Inc. (NASDAQ:CLVS) is scheduled to release results on Nov 1, after market close. The company has an Earnings ESP of +2.01% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Agenus Inc. (NASDAQ:AGEN) has an Earnings ESP of +8.11% and a Zacks Rank #2. The company is scheduled to release results on Nov 7.

ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) has an Earnings ESP of +3.20% and a Zacks Rank #3. The company is scheduled to release results on Nov 6.

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