A month has gone by since the last earnings report for Aerie Pharmaceuticals (AERI - Free Report) . Shares have lost about 10.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Aerie 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. <p style="text-align: justify;"><strong><u>Aerie Earnings Miss in Q2, Rhopressa Performs Well</u></strong></p><p style="text-align: justify;">Aerie reported second-quarter 2018 loss of $1.14 per share, wider than both the Zacks Consensus Estimate of a loss of $1.02 and the year-ago loss of 63 cents. The wider-than-expected loss was on account of higher operating costs related to the launch of the lead drug.</p><p style="text-align: justify;"><strong>Quarter in Detail</strong></p><p style="text-align: justify;">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. This approval came two months ahead of the scheduled Prescription Drug User Fee Act date of Feb 28, 2018. The drug was launched by the end of April.</p><p style="text-align: justify;">Rhopressa’s revenues came in at $2.4 million, beating the Zacks Consensus Estimate of $1.16 million.</p><p style="text-align: justify;">In the reported quarter, research and development expenses increased 69.5% to $15.6 million. Selling, general and administrative expenses surged to $32.1 million from $11.9 million in the year-ago quarter.</p><p style="text-align: justify;">Also, operating expenses were higher in the reported quarter primarily due to increased activities associated with the expansion of the employee base to support the growth of operations and activities associated with Rhopressa commercialization efforts.</p><p style="text-align: justify;">Aerie is securing formulary contracts to enable commercial coverage in 2018 and Medicare Part D coverage in 2019. As of Aug 1, 2018, Rhopressa’s market access increased to approximately 80% (up from 70% as last reported) of commercial lives including 55% in Tier 3 and 25% in preferred brand Tier 2. Medicare Part D coverage is now 12% (up from 10% as last reported) in Tier 2.</p><p style="text-align: justify;"><strong>Pipeline Updates</strong></p><p style="text-align: justify;">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 Xalatan, was submitted to the FDA in May 2018. The company received the “Day 74” notification from the FDA, earlier than scheduled date. 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.</p><p style="text-align: justify;">Meanwhile, the company initiated a phase III trial, Mercury 3, in the third quarter of 2017 to prepare for a regulatory submission in Europe. The trial is a non-inferiority trial comparing Roclatan with prescribed fixed-dose combination of Ganfort.</p><p style="text-align: justify;">Pre-IND activities are well underway for further development of Aerie’s retina program candidates including AR-13503 (Rho kinase and Protein kinase C inhibitor implant) and AR-1105 (dexamethasone steroid implant).</p><p style="text-align: justify;"><strong>Outlook Reiterated</strong></p><p style="text-align: justify;">Aerie expects Rhopressa’s revenues in the range of $20-$30 million in 2018. Total cash burn is projected in the range of $200-$210 million.</p>
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -52.82% due to these changes.
At this time, Aerie has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Aerie has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.