Will Kite Pharma (KITE) Disappoint this Earnings Season? – Analyst Blog

Kite Pharma, Inc. (KITE) is expected to report fourth-quarter 2014 results on Feb 13. Last quarter, the company posted a negative earnings surprise of 4.35%. Let’s see how things are shaping up for this announcement.

Higher Expenses to Hit Bottom Line

Kite Pharma did not generate any revenue in the third quarter and the situation is not expected to change in the fourth quarter as well. Moreover, the company’s research and development expenses have been rising as it continues to invest in its pipeline.

The company’s lead candidate KTE-C19 is being developed for the treatment of diffuse large B cell lymphoma. Last year Kite Pharma had filed an investigational new drug (IND) application to conduct a phase I/II study on KTE-C19. The candidate enjoys orphan drug designation in the U.S. for the treatment of diffuse large B cell lymphoma.

The company’s general and administrative expenses, which were up last quarter, may rise in this quarter as well. The company’s increasing operating expenses may hurt the bottom line.

Earlier this year, the company announced a strategic research collaboration and license agreement with the health care giant Amgen Inc. (AMGN). Under the deal the companies will develop and commercialize next-generation chimeric antigen receptor T cell immunotherapies using Kite Pharma’s engineered autologous cell therapy platform and Amgen’s cancer targets.

Kite Pharma is expected to receive an upfront payment of $60 million along with R&D funding following the IND filing of the candidates under the agreement. Also, Kite Pharma will be entitled to receive up to $525 million per Amgen’s program depending on the achievement of certain regulatory and commercialization milestones and tiered high single to double-digit royalties on sales and payments for licensing Kite Pharma’s technology.

On the other hand, Kite Pharma will make milestone payments of up to $525 million and tiered single-digit sales royalties per Kite Pharma’s program.

Earnings Whispers?

Our proven model does not conclusively show that Kite Pharma is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below.

Zacks ESP: Earnings ESP for Kite Pharma is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 17 cents per share.

Zacks Rank: Kite Pharma’s Zacks Rank #3 (Hold) when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat.

Acorda Therapeutics, Inc. (ACOR) has an earnings ESP of +40.00% and a Zacks Rank #3. The company is expected to release results on Feb 12.

Actavis (ACT) has an earnings ESP of +4.38% and carries a Zacks Rank #2 (Buy). The company is expected to release its fourth-quarter 2014 results on Feb 18.


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Will Kite Pharma (KITE) Disappoint this Earnings Season? – Analyst Blog
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