Theravance's Q3 Loss Narrower Than Expected, Revenues Rise Y/Y

Xenon Pharmaceuticals Inc. XENE reported a loss of 81 cents per share for the third quarter of 2024, narrower than the Zacks Consensus Estimate of a loss of 82 cents. The company had incurred a loss of 73 cents per share in the year-ago quarter.

In the reported quarter, Xenon did not generate any revenues. Due to the absence of a marketed product, the company only recognizes periodic collaboration revenues in its top line from its ongoing partnership with Neurocrine Biosciences NBIX for XEN901, now known as NBI-921352. The company did not recognize any revenues in the year-ago quarter as well.

NBI-921352 is a selective Nav1.6 sodium channel inhibitor. Neurocrine is currently evaluating NBI-921352 in a phase II study to treat patients aged 2-21 years with SCN8A developmental and epileptic encephalopathy. Per the terms of the agreement with NBIX, Xenon is eligible to receive certain clinical, regulatory and commercial milestone-based payments, as well as royalties on future sales.

Xenon, in collaboration with Neurocrine, is also currently evaluating the next lead candidate, a Nav1.2/1.6 inhibitor, in pre-clinical studies, aiming to progress into clinical studies in 2025 as a potential treatment for focal onset seizures (FOS).

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XENE’s Q3 Results in Detail

In the third quarter of 2024, research and development (R&D) expenses increased 33% to $57 million compared with $42.9 million in the year-ago period. The uptick was primarily due to increased expenses related to the company’s azetukalner late-stage epilepsy studies, as well as pre-clinical and discovery programs to advance multiple potential drug candidates.

Year to date, shares of XENE have lost 5.8% compared with the industry’s 0.9% decline.

Novavax NVAX incurred a third-quarter 2024 loss of 76 cents per share, narrower than the Zacks Consensus Estimate of a loss of 87 cents. In the year-ago quarter, the company reported a loss of $1.26 per share.

Revenues in the quarter amounted to $85 million, which beat the Zacks Consensus Estimate of $57 million. However, the top line declined 55% on a year-over-year basis.

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More on NVAX’s Earnings

Novavax recorded $38.2 million in product sales compared with $2.2 million in the year-ago quarter. This upside was primarily driven by sales of the company’s protein-based COVID-19 vaccine, also the company’s sole marketed product, in the United States.

While the reported figure beat our model estimates of $23 million, it missed the Zacks Consensus Estimate of $49 million.

Licensing, royalties and other revenues rose 133% year over year to $46.3 million in the quarter, driven by a combination of activities as part of the recently signed agreement with pharma giant Sanofi SNY for its protein-based COVID-19 vaccine and adjuvant sales.

Starting next year, Sanofi will market the company’s COVID-19 vaccine and also use it to develop novel COVID-19-influenza combination vaccines. As part of this deal, the company received a payment of $570 million from SNY, which includes $70 million in equity investment. NVAX is also eligible to receive milestone payments of up to $700 million and royalties on sales of the COVID-19 vaccine from Sanofi.

Management did not record grant revenues during the quarter. The company reported about $165 million in grant revenues in the year-ago period.

NVAX’s Costs & Cash Balance

In the reported quarter, research and development (R&D) expenses totaled $87 million, down 18% year over year. The downside was caused by a reduction in clinical and manufacturing spending during the quarter.

Selling, general and administrative (SG&A) expenses were down 34% year over year to $71 million, primarily due to management's restructuring activities to reduce costs.

As of Sept. 30, 2024, the company had $924 million of cash and cash equivalents compared with $1.1 billion as of June 30, 2024.

NVAX’s Guidance

For 2024

Novavax expects 2024 total revenues to be in the range of $650-$700 million, down from its previously issued guidance of $700-$800 million. This was likely due to lower COVID-19 vaccine uptake in ex-U.S. markets.

This revised guidance includes nearly $475 million in licensing, royalties and other revenues. This includes $450 million of revenue recognition associated with the $500 million upfront payment from the Sanofi agreement and the rest in royalty and other revenues from partner-related activities.

It expects full-year product revenue guidance of $175-$225 million, down from the earlier projection of $275-$375 million.

Post the earnings release, Novavax’s share price fell 6% on Tuesday likely due to the curtailed guidance. Year to date, the stock has surged 76.2% against the industry’s 0.9% decline.

Theravance Biopharma (TBPH) came out with a quarterly loss of $0.06 per share versus the Zacks Consensus Estimate of a loss of $0.10. This compares to loss of $0.01 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of 40%. A quarter ago, it was expected that this biopharmaceutical company would post a loss of $0.09 per share when it actually produced a loss of $0.13, delivering a surprise of -44.44%.

Over the last four quarters, the company has surpassed consensus EPS estimates three times.

Theravance Bio, which belongs to the Zacks Medical - Drugs industry, posted revenues of $16.87 million for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 4.71%. This compares to year-ago revenues of $15.69 million. The company has topped consensus revenue estimates two times over the last four quarters.

The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.

Theravance Bio shares have lost about 19.2% since the beginning of the year versus the S&P 500's gain of 25.8%.

What's Next for Theravance Bio?

While Theravance Bio has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Theravance Bio: favorable. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #2 (Buy) for the stock. So, the shares are expected to outperform the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is -$0.05 on $34.22 million in revenues for the coming quarter and -$0.45 on $79.17 million in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Medical - Drugs is currently in the top 27% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

ProPhase Labs, Inc. (PRPH), another stock in the same industry, has yet to report results for the quarter ended September 2024. The results are expected to be released on November 13.

This company is expected to post quarterly loss of $0.31 per share in its upcoming report, which represents a year-over-year change of -3.3%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days.

ProPhase Labs, Inc.'s revenues are expected to be $2.82 million, down 66.3% from the year-ago quarter.

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