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Why Is Radius Health (RDUS) Down 7% Since Last Earnings Report?

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A month has gone by since the last earnings report for Radius Health (RDUS - Free Report) . Shares have lost about 7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Radius Health due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Radius'Q2 Earnings Miss Estimates, Sales Surpass

The company incurred a loss of 95 cents per share in the quarter, wider than the Zacks Consensus Estimate of a loss of 82 cents. The figure was also wider than the year-ago quarter’s loss of 77 cents per share due to higher R&D expenses.

The company reported revenues of $50.1 million, surpassing the Zacks Consensus Estimate of $48 million. The figure increased from the year-ago quarter’s $41 million owing to continued growth in demand and net price improvement. Lead drug Tymlos is approved for the treatment of postmenopausal women with osteoporosis at high risk of fracture.

Quarter in Detail

Research & development expenses for the reported quarter were $44.9 million, flaring up 65% year over year primarily due to a rise in elacestrant project and abaloparatide-patch project costs. General & administrative expenses decreased 5% to $38.2 million.

Pipeline Updates

The company’s pipeline includes abaloparatide injection for potential use in the treatment of men with osteoporosis, abaloparatide patch for potential use in osteoporosis and elacestrant (RAD1901) for potential use in hormone receptor-positive breast cancer.

The wearABLe phase III study with abaloparatide-patch in postmenopausal osteoporosis continues to advance enrollment globally. Completion of enrollment remains on track for the latter part of the third quarter of 2020.

Enrollment in the phase III study, ATOM, which is assessing the efficacy and safety of abaloparatide-SC in men with osteoporosis, is expected to complete shortly.

In July, Radius entered into an exclusive global license agreement for the development and commercialization of elacestrant with Menarini Group. Per the agreement, Menarini Group will be responsible for worldwide commercialization of elacestrant, after the completion of the phase III study. Assuming the study is successful, it will also be responsible for the registration of elacestrant.  Meanwhile, Radius will be responsible for the conduct and completion of the phase III EMERALD study through NDA filing. The EMERALD study is on schedule to complete target recruitment in the fourth quarter of 2020.

Radius expects more than $100 million of expenses associated with this activity to be reimbursed by Menarini Group. As part of the agreement, Radius received an upfront payment of $30 million and is eligible to receive up to $20 million on the achievement of certain development and regulatory milestones and up to $300 million on the achievement of certain sales milestones. Menarini Group will make tiered, low to mid-teen percentage royalty payments to Radius on global net sales.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 26.74% due to these changes.

VGM Scores

At this time, Radius Health has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Radius Health has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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