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Will ACADIA (ACAD) Pull Off a Surprise this Earnings Season?

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ACADIA Pharmaceuticals Inc. (ACAD - Free Report) is scheduled to report second-quarter 2017 results on Aug 8 after the closing bell.

The company’s track record has been dismal. Evidently, ACADIA missed estimates in two of the trailing four quarters, beat it once and matched the same in the remaining quarter, resulting in an average negative surprise of 10.2%. In the last reported quarter, ACADIA delivered a beat of 1.37%.

ACADIA’s share price has increased 2.4% year to date compared with the industry’s gain of 9%.

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

Factors at Play

ACADIA received approval from the FDA for its first drug, Nuplazid, in Apr 2016. The drug treats hallucinations and delusions associated with Parkinson’s disease (PD) psychosis. In fact, the drug has shown promising growth since its launch, which became available for prescription in the U.S. on May 31, 2016.

This newly launched drug generated revenues of $17.3 million for full-year 2016 and $15.3 million in the first quarter of 2017, reflecting growth of almost 28% sequentially. The company expects sales to grow steadily in 2017 and thereafter. However, the company witnessed good reimbursement and access for Nuplazid.  In the first quarter of 2017, ACADIA expanded its sales force from 133 to 155 representatives in order to broaden and deepen awareness about the drug.

The company had net deferred product revenue of $4.1 million from sales of Nuplazid in the last quarter, which is expected to be recognized in the second quarter.

Meanwhile, the company is also on track with its multiyear plans of developing Nuplazid in indications beyond PD psychosis.

Based on observed antipsychotic effects of Nuplazid (primavanserin) in clinical studies in three major central nervous system (CNS) disorders, the company is studying the drug in five clinical programs for Nuplazid - Alzheimer's disease agitation, Alzheimer’s disease (AD) psychosis, Schizophrenia inadequate response, Schizophrenia negative symptoms and major depressive disorders.

It reported positive top-line results from its phase II exploratory study (-019 Study) of the drug in patients with AD psychosis in Dec 2016. The company has plans to initiate a phase III study in the second half of 2017.

Each one of these indications independently represents the potential to impact the long-term growth of the company, thereby positioning ACADIA to be a leader in the CNS space.

The company has registered an increase research and operating expenses due to increased clinical costs related to studies and to support its commercial activities for Nuplazid. The trend is expected to continue this quarter.

Earnings Whispers

Our proven model does not conclusively show that ACADIA 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) to be able to beat estimates. But that is not the case here, as you will see below.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 71 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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

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

Stocks That Warrant a Look

Here are some 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.

Arena Pharmaceuticals, Inc. (ARNA - Free Report) is scheduled to release results on Aug 7 after the market close. The company has an Earnings ESP of +5.88% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Puma Biotechnology Inc. (PBYI - Free Report) has an Earnings ESP of +3.33% and a Zacks Rank #3. The company is expected to release results on Aug 8.

Syndax Pharmaceuticals, Inc. (SNDX - Free Report) has an Earnings ESP of +9.88% and a Zacks Rank #2. The company is expected to release results on Aug 8.

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