The third-quarter earnings performance of drug/biotech companies so far has been mostly better than expected.

Among the specialty pharma companies, J&J, Bristol-Myers, Merck, Pfizer, AstraZeneca, AbbVie all beat estimates for both earnings and sales. Lilly beat the Zacks Consensus Estimate for third-quarter earnings but missed the same for sales. Among the big biotech stocks, Amgen, Alexion, Biogen and Regeneron beat estimates on both counts. Vertex beat estimates for earnings but missed the same for sales. Gilead’s earnings missed expectations while sales managed to marginally surpass the same.

The Medical sector comprises pharma/biotech and medical device companies. The Earnings Trends report shows that the companies from this sector, which reported until Nov 6, and constituting nearly 91.6% of the sector’s market capitalization, delivered 7% earnings growth and 7.8% sales growth year over year. The beat ratio was 82.6% for both earnings and revenues.

Overall, new drugs and label expansions of blockbuster drugs drove the top line of most of the big shots backed by higher demand, combating generic plus biosimilar competition for older medicines. However, greater pricing pressure in the United States, increased competition, and negative currency impacts were some other top-line headwinds that the companies faced. Importantly, the better-than-expected results coupled with an optimistic outlook for the fourth quarter led most of the companies to raise their financial guidance for the year, buoying investor optimism on the stocks. A couple of companies like Biogen came up with positive pipeline updates.

Here we have highlighted five small biotech companies, which are expected to deliver positive earnings surprise in their upcoming quarterly earnings announcements.

By means of the Zacks Stock Screener, we have zeroed in on three drug/biotech stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP. These are valuable tools for investors looking for stocks with high potential to outpace estimates in their upcoming announcements. Moreover, stocks with the said combination have 70% chance to deliver a positive surprise. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Our Picks

Sage Therapeutics, Inc. SAGE

This Cambridge, MA based maker of medicines to treat central nervous system disorders has an Earnings ESP of +2.26% and a Zacks Rank of 3. The Zacks Consensus Estimate for the third quarter is pegged at a loss of $3.41 per share. The company is scheduled to release results on Nov 12.

Sage Therapeutics has missed estimates in three of the last four quarters while beating the same in one quarter, with the average being  a negative 7.80%.

Eyenovia, Inc. EYEN

The New York based ophthalmic biotech has an Earnings ESP of +10.51% and a Zacks Rank #2. The company is scheduled to release results on Nov 13. The Zacks Consensus Estimate for the third quarter is pegged at a loss of 40 cents per share. You can see the complete list of today’s Zacks #1 Rank stocks here.

Eyenovia’s earnings performance has been mixed with the company delivering a positive surprise in two of the trailing four quarters while missing in the other two with the average  negative surprise being 8.4%.

Ascendis Pharma A/S ASND

This Denmark based small biotech has an Earnings ESP of +8.03% and a Zacks Rank #2. The company is scheduled to release results on Nov 18. The Zacks Consensus Estimate for the third quarter is pegged at a loss of $1.37 per share. In the last reported quarter Ascendis delivered a negative earnings surprise of 6.06%.

AC Immune SA ACIU

The Swiss biotech has an Earnings ESP of +420% and is #3 Ranked. The company is expected to report results later this month. The Zacks Consensus Estimate for the third quarter is pegged at a loss of 5 cents per share.

AC Immune’s earnings performance has been mixed. Its earnings beat expectations in two of the last four quarters, while missing in the other two with the average negative surprise being 34.68%.

NGM Biopharmaceuticals, Inc. NGM

This San Francisco, CA based biotech has an Earnings ESP of +3.85% and a Zacks Rank #2. The company is expected to report results later this month. The Zacks Consensus Estimate for the third quarter is pegged at a loss of 26 cents per share.

In the last reported quarter, NGM Biopharmaceuticals delivered a positive earnings surprise of 58.06%.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>

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