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Why Is Aerie (AERI) Down 10.2% Since Last Earnings Report?

Zacks Equity Research

It has been about a month since the last earnings report for Aerie Pharmaceuticals (AERI). Shares have lost about 10.2% 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 catalysts.

Aerie Q1 Earnings Beat, Rhopressa Misses Estimates

The company reported a loss of 78 cents in first-quarter 2019, narrower than the Zacks Consensus Estimate of a loss of 91 cents and improving from the year-ago loss of 83 cents.

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. The drug was launched at the end of April 2018.

Rhopressa’s revenues came in at $10.9 million in the quarter, missing the Zacks Consensus Estimate of $12.7 million.

Quarter in Detail

Rhopressa revenues reflect a higher proportion of Medicare Part D rebates which are steeper than commercial rebates.

In the reported quarter, research and development expenses increased to $17.9 million from $13 million in the year-ago quarter. Selling, general and administrative expenses surged to $36.3 million from $22.9 million in the year-ago quarter.

Rhopressa now has preferred brand Tier 2 market access for approximately 75% of lives covered under Medicare Part D plans. Rhopressa also has approximately 90% of lives covered under commercial plans, including 55% in preferred brand Tier 2 and 35% in Tier 3.

Pipeline Updates

In March 2019, Aerie announced that the FDA has approved Rocklatan to reduce elevated intraocular pressure (IOP) in patients with open-angle glaucoma or ocular hypertension. Rocklatan is a once-daily, quadruple-action fixed-dose combination of Rhopressa (netarsudil) and Pfizer’s Xalatan (latanoprost).

A phase III trial, Mercury 3, on Rocklatan continues to progress in Europe.

Aerie’s retina programs - AR-13503 (Rho kinase and Protein kinase C inhibitor implant) and AR-1105 (dexamethasone steroid implant) continues to advance as well. The IND (Investigational New Drug application) for AR-13503 (Rho kinase and Protein kinase C inhibitor implant) was accepted by the FDA last month. Clinical trials are expected to begin in the second quarter of 2019 for wet age-related macular degeneration and DME (diabetic macular edema).

In March 2019, a phase II study was initiated on AR-1105 for macular edema due to RVO (retinal vein occlusion). Safety and efficacy data for AR-1105 will be evaluated at six months after dosing.

2019 Guidance

Aerie reiterated its annual guidance. The company expects 2019 net revenues in the range of $110 million to $120 million.
 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -5.65% due to these changes.

VGM Scores

At this time, Aerie has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a grade of F on the value side, putting it in the lowest 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. Notably, Aerie has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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