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Will Prothena (PRTA) Disappoint Investors in Q4 Earnings?

Zacks

Prothena Corporation plc PRTA is scheduled to report fourth-quarter 2017 results on Feb 14.

Last quarter, the company reported a narrower-than-expected loss resulting in a positive earnings surprise of 2.84%. Notably, Prothena’s track record has been decent so far. The company reported a narrower-than-expected loss in three of the trailing four quarters, with an average positive surprise of 15.6%.


Prothena’s share price has fallen 52.6% in the last six months, as against the industry’s ’s decline of 3.5%.

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

Pipeline Progress in Focus

Prothena’s top line primarily comprises collaboration revenues earned through its license, development and commercialization agreements. In fact, the company earns collaboration revenues mainly under its license agreement with Roche RHHBY for PRX002.

We expect investors focus to remain on pipeline updates as it has no approved product in its portfolio.

Prothena’s late-stage candidate, NEOD001, is being evaluated in a phase III VITAL Amyloidosis study for the treatment of patients with AL amyloidosis and in a phase IIb PRONTO study for the treatment of patients with AL amyloidosis and persistent cardiac dysfunction. Enrolment was completed in the VITAL study. The original target enrolment of 236 patients was exceeded and 260 patients have been randomized into the study. The company also completed enrolment in the PRONTO study and top-line results from the study are expected following the 12-month study period in second-quarter 2018.

Moreover, Prothena is evaluating PRX002, in collaboration with Roche for the treatment of Parkinson’s disease and other related synucleinopathies. The company initiated a phase II study, PASADENA, in patients suffering from Parkinson`s disease in second-quarter 2017.The initiation triggered a $30-million milestone from Roche to Prothena.

However, Prothena announced disappointing results from a phase Ib multiple ascending dose study of pipeline candidate, PRX003 in psoriasis patients. The primary objectives of the study were achieved. However, advancing PRX003 into mid-stage clinical development required a well-defined relationship between biological activity and meaningful clinical effects and these prerequisites were not met.

Like any other development-stage biotechnology company, Prothena is likely to see an increase in research and development expenses due to higher spending on pipeline.

Earnings Whispers

Our proven model doesn’t conclusively show that Prothena 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 earnings. 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 both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of $1.44. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Prothena currently carries a Zacks Rank #4 (Sell). Note that we caution against a Zacks Ranks #4 or 5 (Strong Sell) stock going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

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.

Exelixis EXEL, which is expected to release fourth-quarter results on Feb 26, has an Earnings ESP of +21.98% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Incyte INCY has an Earnings ESP of +10.64% and a Zacks Rank #3. The company is expected to release fourth-quarter results on Feb 15.

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