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Aerie (AERI) Beats on Q2 Earnings & Sales, Lowers Guidance

Zacks Equity Research

Aerie Pharmaceuticals, Inc. AERI reported better-than-expected results for the second quarter of 2019. However, the company lowered its annual revenue guidance. Consequently, shares are down in pre-market trading.

Notably, Aerie’s stock has plunged 40.5% in the year so far against the industry’s growth of 7.5%.

 

The company reported a loss of 80 cents per share in second-quarter 2019, narrower than the Zacks Consensus Estimate of a loss of 87 cents and the year-ago quarter’s loss of $1.14.

In December 2017, Rhopressa (netarsudil ophthalmic solution) was approved by the FDA for the reduction of elevated intraocular pressure (IOP) in patients with open-angle glaucoma or ocular hypertension. The drug was launched toward the end of April 2018. Aerie’s second drug, Rocklatan, a once-daily, quadruple-action, fixed-dose combination of Rhopressa and Pfizer’s PFE Xalatan, was approved by the FDA in March 2019 to reduce elevated IOP in patients with open-angle glaucoma or ocular hypertension.

Sales from both drugs came in at $15.8 million in the quarter, beating the Zacks Consensus Estimate of $15 million and increasing from $2.4 million in the year-ago quarter. Sequentially, revenues were up 46%.

Quarter in Detail

Total operating expenses (excluding stock-based compensation expenses) in the second quarter of 2019 were $50.5 million, up from $47.7 million in the year-ago quarter. Research and development expenses increased to $18.1 million from $15.6 million in the year-ago quarter. Selling, general and administrative expenses increased to $27.4 million from $26 million in the year-ago quarter.

Pipeline Update

Enrollment for the phase II trial on Rhopressa in Japan is now complete ahead of schedule and data are expected by the end of the year.  The phase III trial, Mercury 3, in Europe on Rocklatan continues to progress. The trial is designed to support commercialization in the region. Top-line results are expected in the first half of 2020. 

Aerie expects to obtain approval for Rhokiinsa (the name for Rhopressa) in Europe later in 2019.

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 2019, a phase II study was initiated on AR-1105 for macular edema due to RVO (retinal vein occlusion).

Clinical trials on AR-13503 are expected to begin shortly for wet age-related macular degeneration and diabetic macular edema (DME).

2019 Guidance Lowered

Aerie lowered its annual revenue guidance. The company expects full-year 2019 net revenues of $70- $80 million, down from the previous guidance of $110-$120 million as volumes have been lower than expected.

Our Take

Though Aerie reported better-than-expected results for the second quarter, the slashed guidance was disappointing. The volumes have not picked up as the company projected, as it struggles to get more formulary coverage for both drugs. Rocklatan is in its early stages of gaining formulary placement, while rebates are still higher for Rhopressa. Also, competition is stiff from the likes of Bausch Health's BHC Vyzulta, among others.

The company targets to have majority formulary coverage of Medicare Part D for Rocklatan by the end of 2019.

Zacks Rank & A Key Pick

Aerie currently carries a Zacks Rank #3 (Hold).

A better-ranked stock in the healthcare sector is Roche RHHBY, which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Roche’s earnings per share estimates have increased from $2.41 to $2.50 for 2019 in the past 60 days.

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