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Aerie (AERI) Up 4.7% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

A month has gone by since the last earnings report for Aerie Pharmaceuticals (AERI). Shares have added about 4.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Aerie due for a pullback? 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 Loss Wider, Sales Beat, Guidance Slashed

Aerie reported a loss of 86 cents per share in third-quarter 2019, wider than the Zacks Consensus Estimate of a loss of 84 cents. The loss in the year-ago quarter was $1.73 per share.

The company’s first drug Rhopressa (netarsudil ophthalmic solution) is approved for the reduction of elevated intraocular pressure (IOP) in patients with open-angle glaucoma or ocular hypertension. Aerie’s second drug, Rocklatan, a once-daily, quadruple-action, fixed-dose combination of Rhopressa and Pfizer’s Xalatan, is approved to reduce elevated IOP in patients with open-angle glaucoma or ocular hypertension.

Sales from both drugs came in at $18.5 million in the quarter, beating the Zacks Consensus Estimate of $18 million and increasing from $7.3 million in the year-ago quarter. Sequentially, revenues were up 17.1%.

Quarter in Detail

Total operating expenses (excluding stock-based compensation expenses) in the quarter were $49.2 million, down from $58.5 million in the year-ago quarter.

Pipeline Update

In September, the European Medicines Agency’s Committee for Medicinal Products for Human Use adopted a positive opinion recommending approval of the marketing authorization application for Rhokiinsa (the name for Rhopressa in Europe) 0.02%. A final decision from the European Commission is expected in the fourth quarter of 2019. The phase III trial, Mercury 3, designed to support the commercialization of Rocklatan in Europe, continues to progress.

Aerie’s retina program, evaluating AR-13503 (Rho kinase and Protein kinase C inhibitor implant) and AR-1105 (dexamethasone steroid implant), continues to advance as well.  In March, a phase II study was initiated on AR-1105 for macular edema due to retinal vein occlusion and the study is fully enrolled ahead of schedule. A study on AR-13503 (Rho kinase and Protein kinase C inhibitor implant) commenced in August for wet age-related macular degeneration and diabetic macular edema.

2019 Guidance

Aerie lowered its annual revenue guidance. The company expects full-year 2019 net revenues of $61-$66 million, down from the previous guidance of $70-$80 million, as volumes have been lower than expected
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -6.59% due to these changes.

VGM Scores

Currently, Aerie has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, 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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