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Analyst Blog

Arena Pharmaceuticals, Inc. (ARNA - Free Report) is scheduled to report third-quarter 2016 results on Nov 7, after the market closes. The company met earnings expectations last quarter. Over the four trailing quarters, it has recorded an average positive surprise of 9.64%. Let’s see how things are shaping up for this quarter.

Factors at Play

The only approved product in Arena’s portfolio is obesity treatment, Belviq, which has so far had an unimpressive performance. Actually, ramping up sales in the U.S. anti-obesity market is challenging due to several factors including the tendency of healthcare providers of treating symptoms of obesity instead of the disease itself, a narrow focus on certain patient types for treatment and historically low third-party insurance coverage.

Nevertheless, during the quarter (Jul 2016), the company gained FDA approval for a once-daily formulation of Belviq (Belviq XR). Belviq sales are expected to pick up once results of the cardiovascular outcomes trial are out and are added to the product label, if positive.

During the upcoming release, investors are expected to focus on the company’s progress with its pipeline and the impact of its streamlining efforts. Interesting candidates in Arena’s pipeline include etrasimod (phase II – ulcerative colitis) and ralinepag (phase II – pulmonary arterial hypertension) among others.

Meanwhile, Arena announced the formation of Beacon Discovery Inc., an independent, privately held drug discovery incubator in Sep 2016. Beacon will focus on the identification and advancement of molecules targeting G-protein coupled receptors.  Beacon plans to engage global pharmaceutical partners to facilitate the discovery and early-stage development of the same.

What Our Model Indicates

Our proven model does not conclusively show that Arena is likely to beat estimates this quarter. That 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 Arena is 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 7 cents.

 Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: Although Arena’s Zacks Rank #3 increases the predictive power of ESP, its 0.00% ESP makes surprise prediction difficult.

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

ARENA PHARMA Price and EPS Surprise

ARENA PHARMA Price and EPS Surprise | ARENA PHARMA Quote

Stocks to Consider

Here are some healthcare companies that you may consider instead, as our model shows that they have the right combination of elements to post an earnings beat this quarter.

ARIAD Pharmaceuticals Inc. (ARIA - Free Report) is scheduled to report results on Nov 7. The company has an Earnings ESP of 5.26% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

ACADIA Pharmaceuticals Inc. (ACAD - Free Report) is scheduled to report results on Nov 7. The company has an Earnings ESP of 5.46% and a Zacks Rank #3

Synergy Pharmaceuticals Inc (SGYP - Free Report) is expected to report results on Nov 14. The company has Earnings ESP of 18.18% and a Zacks Rank #3.

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