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Prime Medicine (PRME) Stock: Buy or Sell Before Q2 Earnings?
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Prime Medicines (PRME - Free Report) has made encouraging pipeline progress of late and investors will focus on related updates when it reports second-quarter 2024 results next month.
The Zacks Consensus Estimate for loss per share in the second quarter is pinned at 40 cents.
Image Source: Zacks Investment Research
Earnings Surprise History
PRME’s earnings beat estimates in one of the trailing four quarters and missed the same in the other three, delivering an average surprise of 12.14%. In the previously reported quarter, the company’s earnings beat estimates by 2.22%.
Image Source: Zacks Investment Research
Earnings Whispers
Per our proven model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.
Earnings ESP for PRME is 0.0%. The company currently carries a Zacks Rank #3. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Factors at Play
PRME does not have any approved product in its portfolio yet, and hence, the focus will be mostly on its pipeline progress when it reports quarterly results.
Prime Medicine is deploying its proprietary gene editing technology, Prime Editing platform, to develop a new class of differentiated one-time curative genetic therapies with a focus on hematology and immunology, liver, lung, ocular and neuromuscular diseases.
Research and Development expenses have likely seen an increase in the second quarter, driven by expenses related to the advancement of the company’s pipeline and platform.
General and Administrative expenses, too, might have increased due to expansion of clinical activities.
The company received a significant boost in April 2024, when the FDA cleared its first investigational new drug application (IND) for PM359, meant for the treatment of chronic granulomatous disease. This is Prime Medicine’s first-ever product candidate from its Prime Editor platform to advance to the clinic.
Additionally, the company continues to advance preclinical studies for its three liver programs. It expects to initiate IND-enabling activities for at least one in 2024, leading to an IND and/or clinical trial application in the second half of 2025 or the first half of 2026.
In the ocular space, PRME plans to nominate a development candidate for the RHO-RP program and initiate IND-enabling activities in 2024. Any new update on these timelines will also be important as the company gears up for its IND activities.
While the IND clearance is a milestone for the company, cash runaway holds the key for PRME and investors will look out for any update on the same. As of Mar 31, 2024, cash, cash equivalents, investments and restricted cash totaled $224.2 million.
Price Performance and Valuation
PRME’s shares have lost 38.7% year to date against the industry’s growth of 0.1%. The stock has also underperformed the sector and the S&P 500.
Image Source: Zacks Investment Research
Going by the price/book ratio, PRME’s shares currently trade at 2.67X, much lower than 4.74 for the industry and the company’s mean of 3.90.
Image Source: Zacks Investment Research
Investment Thesis
The field of genetic therapies is witnessing pathbreaking advances. The recent FDA approval of Vertex (VRTX - Free Report) and CRISPR Therapeutics’ (CRSP - Free Report) CRISPR/Cas9 genome-edited cell therapy, Casgevy, for the treatment of sickle cell disease has put the spotlight on the gene editing space.
Prime Editing is the only gene editing technology that, by itself, can edit, correct, insert and delete deoxyribonucleic acid, or DNA, sequences in any target tissue. Since this technology has transformative potential, the successful development of PM359 should provide a great boost.
Conclusion
Investment in a small company like PRME is risky as the successful development of gene therapies is a complex affair. The company is trading toward its 52-week low at present and the current levels may provide an upside. However, the uncertain cash trajectory is something that investors should look out for. Hence, we would advise potential investors to currently wait and watch how the phase I/II study on PM359 progresses.
They should also keep a track of how PRME manages its cash situation.
For investors owning the stock, staying invested is prudent at present as any positive pipeline update will provide an impetus to the stock.
Image: Bigstock
Prime Medicine (PRME) Stock: Buy or Sell Before Q2 Earnings?
Prime Medicines (PRME - Free Report) has made encouraging pipeline progress of late and investors will focus on related updates when it reports second-quarter 2024 results next month.
The Zacks Consensus Estimate for loss per share in the second quarter is pinned at 40 cents.
Image Source: Zacks Investment Research
Earnings Surprise History
PRME’s earnings beat estimates in one of the trailing four quarters and missed the same in the other three, delivering an average surprise of 12.14%. In the previously reported quarter, the company’s earnings beat estimates by 2.22%.
Image Source: Zacks Investment Research
Earnings Whispers
Per our proven model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.
Earnings ESP for PRME is 0.0%. The company currently carries a Zacks Rank #3. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Factors at Play
PRME does not have any approved product in its portfolio yet, and hence, the focus will be mostly on its pipeline progress when it reports quarterly results.
Prime Medicine is deploying its proprietary gene editing technology, Prime Editing platform, to develop a new class of differentiated one-time curative genetic therapies with a focus on hematology and immunology, liver, lung, ocular and neuromuscular diseases.
Research and Development expenses have likely seen an increase in the second quarter, driven by expenses related to the advancement of the company’s pipeline and platform.
General and Administrative expenses, too, might have increased due to expansion of clinical activities.
The company received a significant boost in April 2024, when the FDA cleared its first investigational new drug application (IND) for PM359, meant for the treatment of chronic granulomatous disease. This is Prime Medicine’s first-ever product candidate from its Prime Editor platform to advance to the clinic.
Additionally, the company continues to advance preclinical studies for its three liver programs. It expects to initiate IND-enabling activities for at least one in 2024, leading to an IND and/or clinical trial application in the second half of 2025 or the first half of 2026.
In the ocular space, PRME plans to nominate a development candidate for the RHO-RP program and initiate IND-enabling activities in 2024. Any new update on these timelines will also be important as the company gears up for its IND activities.
While the IND clearance is a milestone for the company, cash runaway holds the key for PRME and investors will look out for any update on the same. As of Mar 31, 2024, cash, cash equivalents, investments and restricted cash totaled $224.2 million.
Price Performance and Valuation
PRME’s shares have lost 38.7% year to date against the industry’s growth of 0.1%. The stock has also underperformed the sector and the S&P 500.
Image Source: Zacks Investment Research
Going by the price/book ratio, PRME’s shares currently trade at 2.67X, much lower than 4.74 for the industry and the company’s mean of 3.90.
Image Source: Zacks Investment Research
Investment Thesis
The field of genetic therapies is witnessing pathbreaking advances. The recent FDA approval of Vertex (VRTX - Free Report) and CRISPR Therapeutics’ (CRSP - Free Report) CRISPR/Cas9 genome-edited cell therapy, Casgevy, for the treatment of sickle cell disease has put the spotlight on the gene editing space.
Prime Editing is the only gene editing technology that, by itself, can edit, correct, insert and delete deoxyribonucleic acid, or DNA, sequences in any target tissue. Since this technology has transformative potential, the successful development of PM359 should provide a great boost.
Conclusion
Investment in a small company like PRME is risky as the successful development of gene therapies is a complex affair. The company is trading toward its 52-week low at present and the current levels may provide an upside. However, the uncertain cash trajectory is something that investors should look out for. Hence, we would advise potential investors to currently wait and watch how the phase I/II study on PM359 progresses.
They should also keep a track of how PRME manages its cash situation.
For investors owning the stock, staying invested is prudent at present as any positive pipeline update will provide an impetus to the stock.
The company currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.