Q2 Holdings (QTWO) and Arena Pharma (ARNA) Report
Q2 Holdings (QTWO) is trading modestly higher today at all-time highs after reporting a better-than-expected Q2 in which revenue was up 26% to $97.6 million (beating by $2.8 million) and adjusted EPS of POSITIVE-$0.07 beat by $0.09. That earnings beat is significant.Customer and user adds are moving in the right direction still. The company landed four Tier 1 contracts, two for digital banking and two for digital lending, with customers from the West Coast, Midwest, East Coast and Europe. End-of-quarter registered users were up 900,000 to 16.3 million. That’s up 20% year-over-year and up 6% over the previous quarter.
Management says that despite all that’s going on demand from new customers is strong and renewals are holding up very well. They’re taking a measured approach, which seems like the right one to me. In terms of looking forward, revenue growth estimates won’t change much (still in the mid-20% range this year and next) without more clarity on COVID-19 and the economy, but we now see the company firmly in the black this year and that should help the stock price. I don’t see any need to chase the stock today; rather, pick your spots and keep buying, if you like it. BUY
Arena Pharmaceuticals (ARNA) reported last night, though “report” is not the right term – it’s more of a pipeline update. There was no revenue reported in the quarter, EPS loss was -$1.61 and Arena ended the quarter with $1.3 billion in cash, including nearly $302 million raised from the most recent equity offering. Management expects to burn $400 million to $430 million this year.
The pipeline program update is quite cut and dry, with the two biggest potential catalysts still the topline data readout from the ADVISE trial late this year and the topline data from both the ELEVATE UC 52/12 trials expected by the end of next year.
Straight from the press release:
• Etrasimod atopic dermatitis (AD) ADVISE Phase 2b trial enrollment completed with topline data expected Q4 2020
• Etrasimod ELEVATE UC 52 Phase 3 trial in ulcerative colitis (UC) ongoing and on track; ELEVATE UC 12 Phase 3 trial expected to initiate in H2 2020; topline data for both trials expected by year end 2021.
• Etrasimod CULTIVATE Phase 2b dose-ranging trial in Crohn’s disease (CD) initiated and ongoing; confirming plans to help facilitate availability of topline data in 2021; continue to suspend overall program guidance based on expected COVID-19 impact
• Etrasimod eosinophilic esophagitis (EoE) Phase 2b and alopecia areata (AA) Phase 2 planning ongoing; initiation in 2020 dependent on COVID-19 situation in Q3/4
• Olorinab CAPTIVATE Phase 2b trial in abdominal pain associated with irritable bowel syndrome (IBS-C, IBS-D) ongoing; experiencing some COVID-19 related impact on trial enrollment; topline data expected Q1 2021
• APD418 in acute heart failure (AHF) with Fast Track designation; Phase 1 trial has resumed; topline data expected Q4 2020
This remains a developmental-stage biotech company going after sizeable markets and longer-term trials, so patience continues to be the name of the game. Hang in there, guys. Keeping at buy. BUY