Can Prothena (PRTA) Pull a Surprise This Earnings Season?

Prothena Corporation plcPRTA is scheduled to report fourth-quarter 2016 results on Feb 14 after the market closes .

Prothena's share price has increased 61.7% in the past one year, while the Zacks classified Medical - Biomedical and Genetics industry declined 0.4%.

Last reported quarter, the company recorded a negative earnings surprise of 2.44%. Let's see how things are shaping up for this announcement.

Factors at Play

Prothena's top line primarily comprises collaboration revenues earned through its license, development and commercialization agreements. The company earns collaboration revenues mainly under its license agreement with Roche Holding AG RHHBY for PRX002. PRX002 is currently in phase Ib study in patients with Parkinson's disease.

With no approved product in its portfolio, investor focus should remain on pipeline updates by the company. The company's pipeline candidates include NEOD001 for the treatment of AL amyloidosis, PRX003 for the treatment of inflammatory diseases, including psoriasis and psoriatic arthritis and PRX002 for the treatment of Parkinson's disease and other related synucleinopathies.

Also, the company continues to progress with other candidates in its pipeline. It is developing PRX003 for the treatment of patients with inflammatory diseases, including psoriasis and psoriatic arthritis. Currently, PRX003 is being evaluated in a phase Ib multiple-ascending dose study in patients suffering from psoriasis. Interim and full results from the study are expected in 2017.. But Prothena anticipates initiating clinical development of PRX004 in late 2017 or early 2018.

Currently, the VITAL study on NEOD001 is on track. The company expects to complete enrollmentby the second quarter of 2017. Additionally, the company expects top-line results from this study in early 2018.

Furthure, 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 development.

Surprise History

Prothena's track record has been dismal so far. Over the four trailing quarters, the company's earnings have missed estimates thrice and beat the same on one occasion, bringing the average negative earnings surprise to 11.73%.

What Our Model Indicates

Our proven model does not conclusively show that Prothena is likely to beat estimates 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. Unfortunately, that is not the case here, as you will see below.

Zacks ESP: The Earnings ESP for Prothena is - 13.71%, because the Most Accurate estimate stands at -$1.41, while the Zacks Consensus Estimate is pegged at -1.24. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: Prothena's Zacks Rank #4 (Sell) decreases the predictive power of ESP and its negative ESP of 13.71% makes a 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 to Consider

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

Incyte Corporation INCY has an Earnings ESP of +85.71% and carries a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here .

Acorda Therapeutics, Inc. ACOR has an Earnings ESP of +5.56% and is a Zacks Rank #3 company.

Prothena Corporation PLC Price and EPS Surprise

Prothena Corporation PLC Price and EPS Surprise | Prothena Corporation PLC Quote

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Roche Holding AG (RHHBY): Free Stock Analysis Report

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Prothena Corporation PLC (PRTA): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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