Aerie (AERI) to Report Q2 Earnings: What’s in the Offing?

Aerie Pharmaceuticals, Inc. AERI is expected to report second-quarter 2018 results on Aug 7.

Last quarter, the company reported a narrower-than-expected loss. Aerie’s performance over the last four quarters has been disappointing. The company incurred a narrower-than-expected loss in two of the trailing four quarters, while reporting wider-than-expected loss in the remaining two, with an average negative surprise of 3.30%.

Aerie’s shares have returned 13.4% in the year so far against the industry’s 0.4% decline.

Factors at Play

In December 2017, Aerie's lead drug, Rhopressa, was approved by the FDA for the reduction of elevated intraocular pressure in patients with open-angle glaucoma or ocular hypertension. Glaucoma is one of the largest segments in the global ophthalmic market. According to the National Eye Institute, it is estimated that more than 2.7 million individuals in the United States suffer from glaucoma. This number is expected to reach 4.3 million by 2030.

Hence, the approval is likely to boost Aerie’s top line significantly. Aerie is securing formulary contracts to enable commercial coverage in 2018 and Medicare Part D coverage in 2019. The company expects preferred formulary coverage for the majority of commercial plans by the end of 2018, and preferred formulary coverage for the majority of Medicare Part D plans commencing in 2019. Aerie expects Rhopressa’s revenues to be in the range of $20-$30 million in 2018. We expect management to throw more light on the drug’s launch, during the second-quarter call.

Meanwhile, Aerie’s New Drug Application (NDA) for its second product candidate, Roclatan (netarsudil/latanoprost ophthalmic solution) 0.02%/0.005%, which is a fixed-dose combination of Rhopressa and Pfizer’s PFE Xalatan, was submitted to the FDA in May 2018. Last week, the company received the “Day 74” notification from the FDA, earlier than scheduled. The agency has completed its initial 60-day review of the NDA and determined that the application is sufficiently complete to permit a substantive review. The PDUFA (Prescription Drug User Fee Act) goal date for the completion of the FDA’s review of the Roclatan NDA is set for Mar 14, 2019. The “Day 74” notification indicates that the FDA has not identified any potential review issues and might not need an advisory committee review. Investors will also be focussed on Aerie’s update on the same.

On the other hand, operating expenses are expected to increase in relation to Rhopressa’s launch. Total cash burn for 2018 is projected in the range of $200-$210 million.

Earnings Whispers

Our proven model does not show that Aerie is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen, which is not the case here:

Earnings ESP: The Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -0.33%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Aerie has a Zacks Rank #1, which is favorable. However, we need to have a positive Earnings ESP as well to be confident of an earnings beat.

Note, we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into an earnings announcement, especially when the company is seeing a negative estimate revision.

Stocks to Consider

Here are a few health care stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.

Pacira Pharmaceuticals, Inc. PCRX has an Earnings ESP of +42.86% and currently carries a Zacks Rank #2. The company is scheduled to release second-quarter results on Aug 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Jazz Pharmaceuticals Plc JAZZ has an Earnings ESP of +1.43% and currently carries a Zacks Rank #3. The company is scheduled to release second-quarter results on Aug 7.

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