Why Is Aerie (AERI) Down 40.5% Since Last Earnings Report?

It has been about a month since the last earnings report for Aerie Pharmaceuticals (AERI). Shares have lost about 40.5% 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 catalysts.

Aerie Q4 Loss Wider Than Expected, Revenues Beat

Aerie reported a loss of 96 cents per share in fourth-quarter 2019, wider than the Zacks Consensus Estimate of a loss of 75 cents. The loss in the year-ago quarter was 92 cents per share.

The company’s first drug Rhopressa (netarsudil ophthalmic solution) has been 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, has been approved to reduce elevated IOP in patients with open-angle glaucoma or ocular hypertension.

Sales from both drugs came in at $24.6 million in the reported quarter, beating the Zacks Consensus Estimate of $20 million and higher than the year-ago quarter’s $14.5 million. Sequentially, revenues were up from $18.5 million in the previous quarter.

Quarter in Detail

Total operating expenses (excluding stock-based compensation expenses) in the quarter were $61.7 million, flaring up from the year-ago quarter’s $56.3 million.

2019 Results

Loss per share came in at $3.40 in 2019 compared with the prior year’s $4.65. Sales came in at $69.9 million, up from the $24.2 million generated in 2018.

Pipeline Update

Aerie acquired Avizorex Pharma S.L. (Avizorex), a Spanish ophthalmic pharmaceutical company, developing therapeutics for the treatment of dry eye disease. Avizorex completed a phase IIa study in dry eye subjects in 2019 with its lead product candidate AVX-012. The company plans to initiate a larger phase IIb study in late 2020.

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 retinal vein occlusion and the study is fully enrolled ahead of schedule. Top-line data from the study is expected this year. A study on AR-13503 (Rho kinase and Protein kinase C inhibitor implant) commenced last August for wet age-related macular degeneration and diabetic macular edema.

The European Commission granted a marketing authorisation to Rhokiinsa 0.02%. The European Medicines Agency (EMA) has accepted for review the marketing authorisation application (MAA) for Roclanda. An opinion from the EMA’s Committee for Medicinal Products for Human Use on the same is expected in late 2020. Top-line data from the Mercury 3 phase III study in Europe is expected in the second half of this year.

2020 Guidance

The company expects full-year 2020 net revenues in the range of $100 million to $110 million.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -5.97% due to these changes.

VGM Scores

Currently, Aerie has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, 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

Aerie has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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