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What's in Store for Sorrento (SRNE) This Earnings Season?

Investors’ focus will be on the progress of Sorrento Therapeutics, Inc.’s SRNE ZTlido when the company reports first-quarter 2019 results.

The company’s average earnings surprise in the past four quarters is negative 265%.

Shares of Sorrento have increased 49.2% so far this year compared with the industry‘s rise of 2.9%.

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

Things to Watch Out For

Sorrento is a clinical-stage company developing several antibody candidates targeting therapeutics areas in immune-oncology and non-opioid pain management. Ongoing clinical studies on these candidates are expected to drive operating expenses higher in the first quarter.

In March, Sorrento and its partner, Yuhan Corporation, announced the completion of a phase I study on their anti-PD-L1 antibody, IMC-001. Based on positive data from the study, the companies are planning to initiate a phase II study in the second half of 2019 to evaluate IMC-001 in rare cancers.

Sorrento earns revenues from its subsidiary, Scilex Pharmaceuticals, and contract manufacturing, materials and supply agreements with other pharma companies.

Scilex Pharmaceuticals records revenues from the sale of pain drug, ZTlido. The drug has shown strong uptake since its launch in September 2018. We expect the trend to continue in the soon-to-be reported quarter. Moreover, the addition of the drug to the commercial national formularies of Express Scripts makes it accessible to 100 million insured people. This is likely to boost sales of the drug.

In March, Sorrent announced merger of Scilex Pharmaceuticals with Semnur Pharmaceuticals to create a strong portfolio of pain drugs.

Investor attention will be on pipeline updates and commercial initiatives to support uptake of ZTlido on the company’s first-quarter earnings call.

Earnings Whispers

Our proven model does not conclusively show that Sorrentois 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.

Earnings ESP: Sorrento’s Earnings ESP is 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate stand at earnings of 35 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Although Sorrento’s Zacks Rank #3 increases the predictive power of ESP, its 0.00% ESP makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 (Sell) or 5 (Strong Sell) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some biotech stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases.

Horizon Pharma HZNP has an Earnings ESP of +25.00% and a Zacks Rank #3. The company is scheduled to release first-quarter results on May 8. You can see the complete list of today’s Zacks #1 Rank stocks here.

Corbus Pharmaceuticals Holdings, Inc. CRBP has an Earnings ESP of +255.56% and a Zacks Rank #3. The company is scheduled to release first-quarter results on May 9.

Aduro Biotech, Inc. ADRO has an Earnings ESP of +82% and a Zacks Rank #2.

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