Why Endocyte, Inc. Shares Briefly Popped

Endocyte shares jump after the company reports better-than-expected fourth-quarter results, but here's what investors should really have their eyes on.

Feb 24, 2014 at 1:46PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Endocyte (NASDAQ:ECYT), a biopharmaceutical company engaged in the research and development of therapies designed to treat cancer and inflammatory diseases, jumped as much 10% after reporting its fourth-quarter earnings results. The big gains were short-lived with Endocyte up around 4% as of this writing.

So what: For the quarter, Endocyte reported revenue of $17.3 million, of which $14.5 million was tied to amortized up-front license and milestone revenue, and $2.8 million was related to amortized reimbursable expenditures, both from its ongoing collaboration with Merck (NYSE:MRK). This collaborative revenue relates to the ongoing development of vintafolide and will stop being recognized at the end of this year. Research and development expenses rose 29% to $13.5 million while general and administrative expenses jumped 34% to $6.7 million. Overall, Endocyte's net loss widened to $2.9 million, or $0.08 per share, from $0.8 million or $0.02 per share in the year-ago quarter. By comparison, Wall Street anticipated a much heftier $0.15 EPS loss and just $15.8 million in revenue.

Now what: Ultimately, what we saw here today with Endocyte's brief pop is how little investors generally care about a clinical-stage biopharmaceutical company's earnings report. The big figure that shareholders seem to be excited about is the fact that Endocyte anticipates ending fiscal 2014 with $90 million-$110 million in cash, which is more than ample to sustain its R&D pipeline for a number of quarters beyond 2014. Earnings aside, what investors will want to focus on now is the progression of ovarian and lung cancer drug vintafolide, which is currently in a number of studies ranging from phase 1 to phase 3. This experimental therapy remains the most immediate catalyst for Endocyte shares in 2014.

Endocyte shares may be up nicely today, but they'll likely have a hard time keeping up with this top stock in 2014
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Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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Jun 12, 2015 at 5:01PM

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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