It has been a mixed second-quarter earnings season for the drug/biotech stocks. Most companies beat estimates for earnings while missing the same for sales. However, AstraZeneca AZN, Regeneron REGN, Bristol-Myers, Vertex Pharmaceuticals and AbbVie beat estimates on both counts. As expected, almost all companies witnessed a significant negative impact on their top line due to business disruption and reduced doctor visits in the United States amid COVID-19-related mobility restrictions & limitations. Coronavirus-related stockpiling benefits, which had increased sales of several medicines in the first quarter, reversed in the second quarter and hurt sales. Lower selling, general and administrative costs due to COVID-19 related restrictions on travel and promotional activities gave a boost to earnings.

Per the Earnings Trends report as of Aug 5, 79.6% of the companies in the Medical sector, constituting nearly 84.3% of the sector’s market capitalization, have already reported earnings. While 86% beat earnings estimates, 79.1% beat the same for sales. Earnings are up 4.4% year over year while revenues are up 4%. Overall, second-quarter earnings for the Medical sector, comprising pharma/biotech and medical device companies, are expected to rise 1.9% on 3.4% sales increase

Let’s analyze two small biotech companies that are set to report second-quarter 2020 results on Aug 11.

Vir Biotechnology VIR

Vir Biotechnology missed earnings estimates thrice in the three quarters that it has reported since its IPO in October 2019. Its average three-quarter negative earnings surprise is 201.4%.

Vir Biotechnology has an Earnings ESP of 0.00% and a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. 

Per our proven model, stocks with the combination of a positive Earnings ESP and a Zacks Rank #1, #2 (Buy) or #3 have a good chance of delivering an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The Zacks Consensus Estimate stands at a loss of 62 cents per share.

On the conference call, investors will be keen to know about the progress of Vir Biotechnology’s investigational monoclonal antibodies, VIR-7831 and VIR-7832, which are being developed to treat the coronavirus disease, COVID-19.

Aurinia Pharmaceuticals AUPH

This Victoria, Canada based clinical stage biotech has an Earnings ESP of 0.00% and a Zacks Rank of 3. The Zacks Consensus Estimate for the second quarter is pegged at a loss of 23 cents per share.

In the trailing four quarters, Aurinia beat estimates in only one quarter while missing in the other three with the average negative earnings surprise being 9.24%.

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