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What's in the Cards for Arena (ARNA) This Earnings Season?

Arena Pharmaceuticals, Inc. ARNA is scheduled to report third-quarter 2017 earnings on Nov 7, after the market closes.

Year to date, Arena’s shares have soared 96% compared with the industry’s 3.9% increase.

Arena’s earnings performance is a mixed bag. While the company surpassed expectations in two of the last four quarters, it missed estimates in the other two. Overall, the company delivered an average positive surprise of 70.15% in the trailing four quarters.

Last quarter, the company missed expectations with a negative earnings surprise of 13.24%.

Let’s see, how things are shaping up for this announcement.

Factors at Play

The only approved product in Arena’s portfolio is obesity treatment drug, Belviq, which has delivered an unimpressive performance so far. We note that ramping up sales in the U.S. anti-obesity market is challenging due to several factors, including the tendency of health care providers to treat obesity symptoms instead of the disease itself, lesser focus on certain patient types for the treatment and historically, low third-party insurance coverage. The Zacks Consensus Estimate for Belviq is $1.9 million for the third quarter.

Arena has a few candidates in its pipeline on which, we expect an update in the third-quarter conference call. In July, the company announced that a phase II study evaluating its key pipeline candidate, ralinepag, in pulmonary arterial hypertension (‘PAH’), met its primary endpoint. This positive data from the trial paves way for an expedited initiation of a phase III program on the candidate.

Other candidates include etrasimod (phase II for ulcerative colitis with data expected in the fourth quarter of 2017) and APD371 (phase II study for treatment of pain associated with Crohn’s disease). Etrasimod has the potential to be developed for additional indications beyond inflammatory bowel disease.

What Our Model Indicates

Our proven model does not conclusively show that Arena will beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a solid Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But this is not the case here, as you will see below.

Zacks ESP: Arena has an Earnings ESP of 0.00% because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of 69 cents.You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Arena currently carries a Zacks Rank #3, which increases the predictive power of the ESP. However, an Earnings ESP of 0.00% makes surprise prediction difficult.

We caution against the Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some health care stocks worth considering as per our model, these have the right combination of elements to beat estimates this quarter:

Clovis Oncology, Inc. CLVS is scheduled to release results on Nov 1. The company has an Earnings ESP of +2.01% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Agenus Inc. AGEN is scheduled to release results on Nov 7. The company has an Earnings ESP of +8.11% and carries a Zacks Rank of 2 as well.

ACADIA Pharmaceuticals Inc. ACAD is expected to release results on Nov 6. The company has an Earnings ESP of +3.20% and carries a Zacks Rank of 3 as well.

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Arena Pharmaceuticals, Inc. (ARNA): Free Stock Analysis Report
Agenus Inc. (AGEN): Free Stock Analysis Report
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ACADIA Pharmaceuticals Inc. (ACAD): Free Stock Analysis Report
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