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What Awaits Aerie Pharmaceuticals (AERI) in Q2 Earnings?

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Aerie Pharmaceuticals, Inc. is scheduled to report second-quarter 2016 results after the market closes on Aug 3.

Aerie’s performance over the last four quarters has been disappointing. The company reported a wider-than-expected loss thrice in the four trailing quarters, with an average negative earnings surprise of 8.07%.

Let’s see how things are shaping up for this announcement.

Rhopressa in Focus

Being a development-stage company, Aerie does not have any approved product in its portfolio yet. Investors are, thus, expected to focus on pipeline updates.

The lead candidate at the company is Rhopressa. The candidate is being evaluated for lowering intraocular pressure (IOP) in patients with open-angle glaucoma and ocular hypertension.

The company is looking to file for an FDA approval of Rhopressa in the third quarter of 2016. It is currently conducting a one-year, safety-only study, Rocket 3, along with a phase III registration study, Rocket 4, in part to gain adequate safety data for regulatory filings in Europe (patient enrollment completed in Jun 2016, 90-day interim top-line efficacy results in the fourth quarter of 2016 with an expected filing in Europe in the second half of 2017). Aerie intends to file a new drug application (NDA) for the candidate in the U.S. in the third quarter of 2016.

Apart from Rhopressa, Aerie is evaluating Roclatan, a once-daily, quadruple-action fixed-dose combination of Rhopressa and Xalatan. Aerie initiated a phase III registration study, Mercury 1, on Roclatan in Sep 2015. The study is fully enrolled and the company expects the 90-day top-line interim efficacy data readout in the third quarter of 2016. Aerie also commenced a phase III study, Mercury 2, in the U.S. Top-line 90 day efficacy data from the study are expected in the first half of 2017.

The company expects cash burn of $75 million in 2016. We expect further updates from the company on its pipeline during the second-quarter call.

AERIE PHARMACT Price and EPS Surprise

AERIE PHARMACT Price and EPS Surprise | AERIE PHARMACT Quote

Earnings Whispers

Our proven model does not conclusively show that Aerie is likely to beat 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. But that is not the case here, as you will see below.

Zacks ESP: The Earnings ESP for Aerie is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 75 cents.

Zacks Rank: Aerie carries a Zacks Rank #3. Although this increases the predictive power of ESP, the company’s 0.00% ESP makes surprise prediction difficult.

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

Stocks to Consider

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

Ironwood Pharmaceuticals (IRWD - Free Report) has an Earnings ESP of 13.33% and a Zacks Rank #2. The company is expected to report earnings on Aug 4.

Exelixis, Inc. (EXEL - Free Report) has an Earnings ESP of 3.70% and a Zacks Rank #3. The company is scheduled to report results on Aug 3.

Impax Laboratories has an Earnings ESP of 3.03% and a Zacks Rank #2. The company is scheduled to report results on Aug 9.

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