Will Kite Pharma (KITE) Stock Surprise Post Q3 Earnings?

Kite Pharma, Inc. (NASDAQ:KITE) will be reporting third-quarter 2016 earnings on Nov 9, before market open. Last quarter, the company delivered a negative earnings surprise of 2.34%.

The company, which started trading from Jun 2014, has a mixed record of earnings surprises. It delivered positive earnings surprises in two of the past four quarter while missed in the other two, bring the average surprise to a positive 8.48%.

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

Factors to Consider

Kite Pharma, a development-stage biopharmaceutical company, is looking to transform the paradigm of treating cancer which involves using the body’s immune system to recognize and destroy cancer cells.

Kite Pharma’s revenues comprise the amortization of deferred collaboration revenues related to the $60 million upfront payment received under its collaboration agreement with Amgen, Inc. (NASDAQ:AMGN) in the first quarter of 2015.

With no approved products in its portfolio, investor focus will primarily be on the company’s cash burn and pipeline updates.

At the time of releasing second-quarter results, Kite had guided toward 2016 net cash burn of $235–$250 million.

KTE-C19, Kite’s lead pipeline candidate, is currently in the pivotal phase of a phase I-II study (ZUMA-1) in patients with refractory diffuse large B cell lymphoma (DLBCL) including primary mediastinal B cell lymphoma (PMBCL) and transformed follicular lymphoma (TFL). All these are types of aggressive non-Hodgkin’s lymphoma (NHL). In Sep 2016, the company announced encouraging top-line results from the phase II part of ZUMA-1 study and expects to file a Biologic license application (BLA) based on this data. Moreover, the primary analysis of 101 patients with chemorefractory aggressive NHL (DLBCL, TFL and PMBCL), which will include about six months of follow-up data, is anticipated in the first quarter of 2017. KTE-C19 studies will be initiated in Europe later this year.

Kite is also evaluating KTE-C19 in a phase II study (ZUMA-2) in patients with relapsed/refractory mantle cell lymphoma (MCL) and in two additional pivotal studies (phase I/II) for acute lymphoblastic leukemia (ALL) - ZUMA-3 for adult ALL and ZUMA-4 for pediatric ALL, with results from all these studies due in 2017. Kite plans to move KTE-C19 into a second series of studies for additional indications and earlier lines of therapy in DLBCL patients in 2017. A phase Ib/II combination study evaluating KTE-C19 plus Genentech’s Tecentriq (atezolizumab) in patients with chemorefractory DLBCL is scheduled to commence soon.

Apart from updates on KTE-C19, investor focus will remain on the company’s progress with its collaboration with several companies including Amgen.

Earnings Whispers

Our proven model does not conclusively show that Kite Pharma is likely to beat on earnings 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 is 0.0% as both the Most Accurate estimate as well as the Zacks Consensus Estimate is pegged at a loss of $1.68. Please check our Earnings ESP Filter that enables you find stocks that are expected to come out with earnings surprises.

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

Stocks to Consider

Here are some companies to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

ARIAD Pharmaceuticals Inc. (NASDAQ:ARIA) is expected to release results on Nov 7. The company has an Earnings ESP of 5.26% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) with an Earnings ESP of +5.46% and a Zacks Rank #3. The company is scheduled to release results on Nov 7.

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