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Aerie (AERI) Down 19.9% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Aerie Pharmaceuticals (AERI - Free Report) . Shares have lost about 19.9% 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 its most recent earnings report in order to get a better handle on the important drivers.

Aerie Q3 Earnings Miss, Rhopressa Gains Traction

Aerie reported third-quarter 2018 loss of $1.73 per share, wider than both the Zacks Consensus Estimate of a loss of $1.33 and the year-ago loss of 71 cents. The wider-than-expected loss was on account of higher operating costs related to the launch of lead drug, Rhopressa.

Quarter in Detail

In December 2017, 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.

Rhopressa’s revenues came in at $7.3 million, beating the Zacks Consensus Estimate by 29.8%.

In the reported quarter, research and development expenses more than doubled to $28.5 million. Selling, general and administrative expenses surged to $39.9 million from $19.8 million in the year-ago quarter.

Also, operating expenses were higher in the reported quarter, primarily due to increased activities associated with the expansion of the employee base to support growth of operations and activities associated with Rhopressa commercialization efforts.

Aerie is securing formulary contracts to enable commercial coverage in 2018 and Medicare Part D coverage in 2019. As of Oct 1, 2018, Rhopressa’s market access increased to approximately 85% (up from 80% as last reported) of commercial lives, including 45% in Tier 3 and 40% in preferred brand Tier 2. Medicare Part D coverage is now 40% in Tier 2.

Pipeline Updates

Aerie’s New Drug Application (NDA) for its second product candidate, Rocklatan (netarsudil/latanoprost ophthalmic solution) 0.02%/0.005%, which is a fixed-dose combination of Rhopressa and Pfizer’s Xalatan, was submitted to the FDA in May 2018. 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 Rocklatan NDA is set for Mar 14, 2019.

In early October 2018, the European Medicines Agency (EMA) accepted for review the Marketing Authorisation Application (MAA) for Rhokiinsa (marketed as Rhopressa in the United States). An opinion on approval is expected in the second half of 2019.

Earlier, 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.

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). Both are expected to enter clinic in 2019.

Outlook Reiterated

Aerie expects Rhopressa’s revenues to be $20-$30 million in 2018.
 

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 -39.09% due to these changes.

VGM Scores

Currently, Aerie has a poor Growth Score of F, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the fifth 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Aerie has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.




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